Fannie Mae-No Politics (FNMA)

[The Man With No Name]

As to #3, because core capital is negative it's a fairy tale to think they can organically recap with retained earnings. Kthomp19 put together a nifty spreadsheet on this...because core capital is negative and the assets keep growing, and the regulatory requirement is a % of assets, it's damn near impossible to close the gap.

See:https://investorshub.advfn.com/boards/read_msg.aspx?message_id=166950648

I made one minor change in the spreadsheet: changing the cap req from 2.5% to 3%, leaving everything else the same.

Guess when FnF hit that cap req? The answer might surprise you: it's never.

You can play around with the assumptions, like a higher earnings base, higher earnings growth rate, lower asset base growth rate, etc. But the above chart shows how precarious it all is.

Hitting any reasonable regulatory capital requirement (whether it's 2.5% or 3%) means the seniors must go, whether it's via cancellation, conversion to common, or some combination of those.

As to #2, the government doesn't care about common holders.

I sort of seeing it like they have a pie of ~$100b to play with, whether it all comes from warrants, senior pfds, or combo of the 2 what's it matter for them?

It matters because if they use a combo of the two they can dilute legacy shareholders more than 79.9% and any additional dilution is more money for them. You hear it over and over that commons may be worth 5-10 bucks (the 20.1% assumption). If that were true, the government can take 90% of that 20.1% if they wish, thus adding say another 15 billion to their take.

As to #1. It really doesn't matter. Collins: The government (treasury) will never 'write a check'. They may write down the seniors $45B in best case scenario but that doesn't get us released and seems like everyone expects treasury just to deem the SPS paid in full anyhow. Others: I think the government is preparing for a release and monetization of their SPS and warrants. The reason I believe this is because it's the only way Treasury gets any more money out of this so why wait. A release MOOTS the JPS contract suit in reality. The lawyers will angle for legal fees. Takings will be moot for the JPS and limited to the fall in common price at recap and release, which if commons went to zero, that's less than $2B....which is chump change in the grand scheme of things.

So past Collins, assuming the government intends to release, Treasury/government's liability is limited to $2B. It actually benefits the government to release at this point.