Fannie Mae-No Politics (FNMA)

[FnF_Newbie]

I'm new to FnF.

I don't really understand the argument why a retained earnings scenario is bad for the pref? It seems to me that equity value adds to their liquidation prefernce seniority and it's unlikely they would convert for less than par with material equity behind them? I imagine it would become progressively harder to keep the dividents cut off in such a scenario. It may be better for commons but don't see why bad for pref.

I also don't understand why they wouldn't keep the COF-based pref outstanding? The interest rate on that is close to zero and they can't raise something that cheap today. Why would they redeem that and then turn around and raise more expensive equity? Ditto preferred generally. Why redeem preferred at 5% and then replace with common at a higher discount rate?

Help please!