Fannie Mae-No Politics (FNMA)

[Golfbum22]

From Howard On Mortgage Finance:

jtimothyhoward
MAY 28, 2020 AT 10:08 PM
"Travis– The only negotiations Calabria is going to have will be with plaintiffs (existing shareholders of Fannie and Freddie) in the lawsuits he and Mnuchin need to settle in order to follow through on their pledge to get the companies out of conservatorship, and potential new investors he wants to have buy new Fannie and Freddie shares to complete their recapitalization. It’s not clear to me how having come out with burdensome and potentially crippling capital standards helps him with either. I don’t see existing shareholders taking less to settle the lawsuits in exchange for a more favorable capital rule going forward–their objective is to get out of the companies’ shares on the best terms possible. And Calabria is the one who wants new shareholders to buy equity issues to make his recapitalization plan look successful, and the rules he’s just put out are an obstacle to that. That’s why I’m thinking he’s decided, “I’m going to use the capital standard to reshape Fannie and Freddie the way I think they ought to function, and see if the investment community will accept that.” I don’t think I’d call that a negotiating strategy."