Fannie Mae-No Politics (FNMA)

[LuLeVan]

The official narrative is that Fannie and Freddie were saved from "otherwise inevitable bankruptcy" with the government's $191 billion. In this light, the recovery from 2012 appears to be a consequence of this "selfless" aid. Despite the recovery and profits running again, the government can (and probably will) take the position that FnF would be broke without the aid, and derive from that the justification for a warrant exercise (positive variant for common shareholders) or, even more likely, an SPS to common stock conversion (highly dilutive for common shareholders). Since the SPS swap makes the government more money, and grabbing money is its primary motive for action, it will probably opt for it. The courts are on the government's side, so existing shareholders are effectively powerless.