Fannie Mae-No Politics (FNMA)

[NeoSunTzu]

Through exercising the warrants, bringing Fannie and Freddie out of conservatorship with a capital standard that allows them to price their business on an economic basis, and then selling the shares from its warrant conversion, the Biden administration could capture a very large portion of that $220 billion potential value for itself for whatever purposes it wishes, including an affordable housing fund.

The above quote from Mr. Howard's latest blog is somewhat out of context when presented in isolation - as the poster you responded to presents it. In that blog Mr. Howard stated he owns both Fannie commons and JPS, believes the SPS should be considered repaid, then cancelled, that the liquidation preference should be cancelled, and the capital standard lowered to be more reflective of their true business and economic risks. Surely none of us would argue with him on these points, nor question his motives - at least from our shareholder perspective. Furthermore, we likely all would agree as to how unrealistic that appears at this point in time given the actions of the government and the courts, thus far.

The quote about the warrants is near the end of the blog after Mr. Howard concedes that the courts and the "federalist society" types will likely NOT back down - leading to potentially two more decades in c'ship - given even the optimistic scenario of the GSEs strong earnings unabated. The warrants quote seems more to make a logical point that the Biden admin should recognize the value that could be unlocked sooner rather than later while saving face on affordable housing goals and the GSE mission, as opposed to the increasing market share that banks are gaining at the expense of housing policy and affordability goals.