Fannie Mae-No Politics (FNMA)

[RickNagra]

Great post. I agree with everything you said.

Here is what I think will be a very possible outcome following this week's SCOTUS hearing............
assuming strong push back from SCOTUS on government handling of GSE's.

1) Settlement talks take place between plaintiffs and treasury. Mnuchin using SCOTUS pushback as cover for talks, along with the acknowledgment of losses from prior court rulings and acknowledgment of government money spent on legal fees in unsuccessful prior defenses vs plaintiffs

2) Settlement terms come up to something like this.
PSPA's are deemed paid back and canceled. Portion of additional monies paid back over government funds loaned are redetermined to be core capital to be applied to GSE's, with an offsetting entry to GSE's for prepaid assets. Meaning GSE's get credit from treasury but do not receive a direct payment at this time from treasury. NWS is canceled.

3) This credit will be enough to allow the GSE's to obtain release from conservatorship with consent decree before Jan 20.

4) The warrants will remain in place at this time, subject to future expiration.....useful as a defense against the GSE's being unable to complete CRP on a timely basis.

5) The Capital Restoration Plan supplied by the GSE's will be given 4 to 5 years to complete. The GSE's will propose a CRP mostly reliant on retained earnings, with an option for a capital raise or 2 if necessary in the interim.