Fannie Mae-No Politics (FNMA)

[kthomp19]

The logic doesn’t hold up ..you can say they’re gonna dilute commons with spspa to the ground but your gonna still need buyers obviously no one buys for a total loss…

It does hold up. Diluting existing common shareholders won't get more than a shrug from new investors no matter how heavy that dilution is.

In fact, new investors will want to dilute pre-raise commons (Treasury included) as much as possible. Anything less is just them leaving money on the table.

something else needs to happen with seniors

The existence of a CET1 capital requirement in Thompson's rule means that converting the seniors to anything other than commons doesn't work. It will have to be conversion to common or writedown, or perhaps some of both.

I've suggested converting the seniors to zero-div non-cumulative prefs that convert to common upon sale, to avoid pushdown accounting and majority shareholder problems, but that's still a conversion to common in the end.