Fannie Mae-No Politics (FNMA)

[Commons_Cancelled]

It's a shame that article doesn't get into Capital Structure, which is the key reason most intelligent GSE investors own Jr. Preferreds rather than Commons.

Seeing as how there's a recapitalization on the horizon, Capital Structure is a very important FNMA Fact to be mindful of. Owning Common equity is a sure way to get burned assuming the terms aren't favorable to existing Commons (and they will have ZERO say in any of this since they have no rights while the GSEs are in Conservatorship).

Owning Jr. Preferreds is a way of saying: "Hey, I see there's a recapitalization coming. The GSEs are going to need to flatten the Capital Structure in order to raise ~$100B in capital. In order to flatten the structure, Jr. Preferreds will need to be dealt with. And since the GSEs don't have much capital, the only way to deal with Jr. Preferreds would be to offer them a juicy proposal and have them convert to Commons."

Hopefully that makes sense. That's the thesis and it's not changing unless the Admin changes tunes. In which case, we're all likely getting Cancelled