Fannie Mae-No Politics (FNMA)

[kthomp19]

That's helpful that they are asking for it - but I doubt if the judge will go for it since there are no damages - yet.

Washington Federal wants damages calculated by the drop in share price from the day before to the day of conservatorship. That's the only way to quantify damages to shareholders of publicly traded shares.

Washington Federal claims that the mere issuance of the warrants, among other things, caused those damages. Someone wanting to sue over the exercise of the warrants, by contrast, can only use the price drop from the day before to the day of warrant exercise as a basis for damages. Given that the commons trade under $1 and there are 1.8B outstanding shares, it's easy to see why the DOJ clearly thinks Treasury faces less than $5B liability from any lawsuits filed over the exercise of the warrants (see the January letter agreement).

I don't think a judge would make the leap as exercise of the warrants and the corresponding damages would be entirely speculative.

The fatal flaw suffered by those who threaten lawsuits over the exercise of the warrants is the assumption that recap and release without exercise of the warrants is just as possible as recap and release without exercise.

Instead, Treasury controls both the fate of the seniors, which are currently blocking a capital raise (nobody will buy new shares with the seniors in place), and the warrants. When Treasury exercises the warrants, it won't be possible to argue that the existing common "would have been" worth more without warrant exercise given Treasury's control over the process.

Its a little early to get excited about the warrants, and no cause to worry about the statute of limitation being a future bar for litigation.
Not saying Ps would win, just saying, at the point of exercise (or perhaps announce there firm intent to do so), they would have another dog in the fight.

Ironically, Treasury not exercising the warrants is a terrible outcome for the existing common, because the only reason Treasury would do so is that they believe common shares aren't worth anything at all. Existing common shareholders should be on their hands and knees begging Treasury to exercise the warrants, because that at least would preserve some of their own value.

What about the folks who bought before then?

They have Washington Federal to fall back on. Washington Federal's prayer for relief only wants money damages for shareholders of record as of September 5 2008 (the day before conservatorship).

As to ANO - I follow and value his insights - but I think the issue of when litigation comes into play for the warrants is pretty clear. I still welcome his input. But we are all entitled to our opinion and that is what the Board is for.

I would caution against relying on the opinions of one that has been consistently proven to be blatantly wrong on the facts. Examples include the facts that three different judges have said FHFA and Treasury owe no fiduciary duty to shareholders, and that 4617(f) does not give FHFA "uncontrolled" power.