Fannie Mae-No Politics (FNMA)

[kthomp19]

True that, but still does not mean they have the right to step on shareholders rights.

What shareholder rights? FHFA succeeded to all shareholder rights when it appointed itself conservator.

Conversion is not for maintaining the twins to sound and solvent manner, but for re-IPO... but nobody knows 100% if there will be a conversion if this is even needed to increase capital.

If a conversion makes the re-IPO easier (or even possible), which I maintain that it would (by costlessly improving the placement in the capital structure of the new commons, making their shares more valuable), then it really does promote safety and soundness. That makes it a valid act of a conservator, and by 12 USC 4617(f), FHFA couldn't even be sued over it. Well, not successfully.

The conversion also increases CET1 capital by $33B, just as Potty said. This is because the right now the juniors count as $33B towards core capital but $0 towards CET1 capital, whereas after the conversion they would count $33B towards both.

I could understand why there is a possibility of a conversion

Naturally. It has been mentioned as a possibility by both Calabria and Mnuchin, then Calabria decided to include Mnuchin's conversion possibility in FnF's 2019 10-Ks. It would take a staggering level of willful blindness to categorically deny the possibility.

it should not be something that affects anybodies rights, or else it will be an issue.

The conversion offer will almost certainly happen while FnF are in conservatorship. While conservatorship lasts, current common shareholders have no rights anyway, so nothing could affect them.