Fannie Mae-No Politics (FNMA)

[kthomp19]

How much do we "owe" the Treasury per the Treasury and I assume our books?

Zero. The seniors are not debt, they are equity. The seniors on the balance sheet actually add to net worth, in that if you just deleted the seniors with no corresponding book entry then net worth would go down by $193B.

Of course, double-entry accounting doesn't work that way. If the seniors disappear due to FnF paying them off in cash (which they aren't allowed to do, just saying this for the sake of argument) then net worth really would decrease by $193B (both assets and equity, which is net worth, would go down by $193B).

Instead if the seniors are cancelled, the retained earnings line (called accumulated deficit now because it's negative) would go up by $193B and net worth would stay the same.

If the seniors are converted to common, the $193B of the seniors would move to common stock and again net worth would stay the same.

Both senior cancellation and conversion to common would add $193B to core capital (making it positive $67B), or any combination of cancellation and conversion.