Fannie Mae-No Politics (FNMA)

[kthomp19]

FHFA can NOT dilute shareholders as a conservator or it would have a decade ago.

False. There was no reason to dilute shareholders a decade ago because FHFA wasn't interested in FnF building capital. Now that this is FHFA's goal, dilution is just about the only way to get there (investors will want to share in profits, i.e. common shares, in exchange for all that capital).

As a regulator it can require higher equity reserves but has no power to dictate how.

Also false. FHFA has to approve any capital restoration plan FnF submit, which essentially gives FHFA the power to dictate how. In addition, while FnF have less core capital than the minimum requirement Calabria will set, he has specific power to dictate the form and amount of any equity raise, by 12 USC 4616(b)(3):

(3) Acquisition of new capital

Require the regulated entity to acquire new capital in a form and amount determined by the Director.

Sweeney was referring to preferred shareholders and she's correct. FHFA has no fiduciary duty to GSE debt holders.

Three strikes, you're out. She was referring to all FnF shareholders. Also, preferred shares are equity and not debt. So I guess it was four strikes.