Fannie Mae-No Politics (FNMA)

[YanksGhost]

Sorry to have to inform you that the Senior shares are NOT a stand alone conveyance of obligation. They are but one element in a contractual agreement... the SPSPA. The "loan" no matter what way your choose to describe it is another element in the contract. A third is the Treasury draw provision that is used as the offset to all capital requirements being suspended during conservatorship. The Liquidation Preference is a function of Seniority vs. JPS shares to protect taxpayers if a default or receivership event is declared. This multi-partite agreement must be considered in totality, not in bits and pieces.

When the bazooka in HERA was activated in SEP, 2008 and Lockhart suspended capital requirements and concurrently imposed the SPSPA, the Senior shares and Liquidation Preference became the first-in-line secured obligation in the liquidation hierarchy, ranking just below secured borrowings.These can only be retired via agreement with the U.S. Treasury or via a court order. Neither event seems likely.

The dream of warrants and Senior shares being voluntarily retired by GOv is a pipedream with enormous appeal to current shareholders seeking a windfall, but it is the most unlikely of all possible outcomes.