Fannie Mae-No Politics (FNMA)

[sortman]

This judgement, Fairholme Funds, is all about common stock and affirms what others on this board have been saying, common stock has no standing, and the gov. can wipe out the common without an issue. The JPS’s on the other hand still have taking claims going through the courts. If one case says that the taking claim is legitimate, then the gov. owes at least $33billion to the JPS. There is no way the gov. will pay out $33billion in cash, they will settle. What does a settlement look like? It is not a cram down, look at how they handled Chrysler. The gov. wants $100billion, the JPS want $33billion and they still need to raise capital. The gov. can give the twins a $100billion backstop to be considered tier one capital. The twins would have to pay say 5% annually on this, $5billion, then they would need to raise approximately $75-100 billion to properly capitalize the companies. So, if the twins are worth $250 billion it is divided 40% gov., 45% new capital, you need to add in some appreciation, 13.2% JPS, and the remainder 1.8% to current common, that would put common worth $4.5billion or around $4.50 per share. And there you have a settlement.