Fannie Mae (FNMA)

[ashes15]

Let's think about this, if you're converting JPS to commons how is this improving liquidity for the firm? It's just swapping one form of equity for another, right?

As far as CET1 under Basel III, I think your interpretation is slightly off. CET1 covers assets that can be easily liquidated on the market in case of another great recession.

So if your PS become Common, how does it help the GSEs weather another downturn in the market? You're not donating anything onto to their books and they're not receiving cash for it. CET1 is usually restricted stock, cash, and stock held of other companies that can be liquidated quickly as a first-tranche.

Another thing, a huge conversion of PS to Commons under CET1 will actually drive down the market value of any restricted shares on their books due to dilutive factors...which actually reduces their CET1 value. Again, a JPS to common conversion is not only unnecessary it's counterproductive to reaching initial capital requirements.