Fannie Mae-No Politics (FNMA)

[JOoa0ky]

It is incorrect to call the JPS conversion if it happens the fulcrum security. In the event of a large capital raise, the majority of equity control will come from fresh capital. The 33B the JPS puts in pales in comparison to the incoming 200B+ raise.

"The fulcrum security is a concept long entrenched in the investment philosophy of TAM and written
about by firm founder Marty Whitman over the years.1
Marty Whitman defines the fulcrum
security as the most senior security that will likely convert into equity ownership in a restructuring.
The fulcrum security is the part of the company’s capital structure which will ultimately control the
company in the event of a reorganization, usually in the form of equity. One of the biggest
challenges with the fulcrum security is that identifying its location in the capital structure ex ante is
far from a trivial feat."

Source:
https://www.valuewalk.com/wp-content/uploads/2014/09/2014_Q3_The-Fulcrum-Security.pdf

SPS $229 billion? According to their 9/30/2020 balance sheets it's $193.4 billion. It's not a concern once Mnuchin writes it down to zero.

$33 billion jps will be used as the fulcrum to raise the commons.

Return of $30 billion in overpayments increases the CET1 capital to $64.4 billion. They are expected to earn $30 billion annually. They don't need to raise much in new equity.

All thanks to the $33 billion in fulcrum security that pays no dividend until the corporations are fully capitalized.

I do love capital structures.