Fannie Mae-No Politics (FNMA)

[kthomp19]

Kthomp have you considered the doctrine of efficient breach? Just curious. In principle this can give a Board the leverage necessary to force a change in the par value. The action does not run afoul of the fiduciary duty of good faith & loyalty provided it is made in good faith and supported by economics.

So I don’t know that JPS could be bypassed entirely. I think to do that under this doctrine, the Board would need to show convincing justification in economic terms.

Unfortunately, in this case I think it wouldn't even be as difficult as you say. FHFA, and by extension the boards (while FnF are in conservatorship) has no fiduciary duty to shareholders.

The protection against something like this is supposed to be the 2/3 clause in the juniors' contracts, which say that any change to the contract which "materially and adversely affect the interest of the holders of the Preferred Stock" must be approved by 2/3 of the holders. Are you suggesting that this clause can be legally circumvented by the doctrine of efficient breach?