Fannie Mae-No Politics (FNMA)

[kthomp19]

It's unfortunate that Tim Pagliara's comments don't actually make any sense when taken together. Calculating FnF's earnings as 0.5% of $6T is extremely lazy (as well as incorrect); even with a credit benefit (which will roll off in the next year or two) inflating earnings by $8B per year, FnF haven't gotten close to $30B.

His quote "Everybody has to win, so the 20% of non-government shareholders have to win" also doesn't support the idea of a high common share price because that 20% won't all go to current common shareholders. There is the looming conversion (which Pagliara both doesn't comment on and would benefit greatly from due to his 90% pref weighting), and the amount of dilution the SPO represents (which Calabria has said will be heavy) is not completely in the control of current shareholders; the article's quote "Pagliara and Stark note that the investors who currently own preferred and common shares of Fannie Mae and Freddie Mac are probably the same investors who will be providing the capital they will need when they are reprivatized. Pagliara said this means the pool of capital currently funding the GSEs is the same source of capital they will rely on when they are reprivatized." ignores the fact that FnF are going to need a ton of capital, likely more than current FnF investors have access to.