Fannie Mae-No Politics (FNMA)

[kthomp19]

So, you're saying the FHFA can grant the Treasury conversion rights.

It wouldn't be a right. It would be an amendment to the contract that would remove the "No Conversion or Exchange Rights" clause, in addition to adding whatever conversion clause they agree to.

If that were to happen the terms of the contract would have to be voided by the FHFA the way the contract is written.

Wrong. The contract specifically states, in Section 10(g)(ii), that FHFA and Treasury can amend the contract however they want as long as they agree.

And why in this world would the FHFA even consider such when the companies have paid $301 billion to the Treasury.

Because this helps the companies get out of conservatorship by increasing their core capital by $193B in an instant, without any cash being transferred.

Why do you want the Shareholders to pay the Treasury two times?

The shareholders haven't paid Treasury a penny.

The companies have paid $301B, and Treasury would get money by selling its converted seniors from outside investors. Neither of those are current FnF shareholders.

The conversion would dilute the common stock next to nothing in value.

Yes, that would be a consequence of the senior-to-common conversion. But neither FHFA nor Treasury has a fiduciary duty to shareholders, as multiple judges have ruled. They have no reason to try and prevent this dilution.

In fact, Treasury has a monetary reason to try and maximize it.