Fannie Mae-No Politics (FNMA)

[kthomp19]

It's hard to attract private capital willing to deal with an unreasonable governmental actor who has Nationalized the Shareholders capital and can see clearly in a short time frame just how abusive and coercive the governmental overreach and theft was.

Then look forward to between 5 and 17 more years of conservatorship.

Also consider the fact that just because you wouldn't invest under such circumstances, that doesn't mean nobody else would.

Because as Regulator FHFA under HERA can command the GSES to artificially inflate credit loan loss reserves and write down $50B DTA'S.

Actually no. FHFA did those things immediately after appointing itself conservator. FHFA doesn't have that kind of power over FnF when they are out of conservatorship and classified as "adequately capitalized" by HERA.

Just horrible behavior from our federal government to destroy these Public Mission/Private Capital enterprises.

I agree about the horrible behavior. I just think that you overestimate the importance that outside investors' will place on such deeds as well as underestimating their greed. A difference of opinion.

And unfortunately for us, the companies themselves are actually doing quite well. There is very little political appetite to change the status quo.

If the UST wants to cash out a 2nd time from the theft of shareholders wealth and wants the best possible price, it would likely sell off the warrants over subsequent time frames as the investor risks of potential future regulatory misdeeds and conservatorships and Nationalization retreats gradually, perhaps after certain milestones are reached.

They would make even more money by converting the seniors to commons, and everything else would be exactly the same.

Isn't that what happened with AIG and weren't they allowed to repay the 'bail out' funds from the federal government?

An unfortunate choice of comparison there. Treasury converted its AIG preferred shares into common stock, ending up with a 92% of the outstanding common shares. That's a lot more than 79.9%.

So you see another public announcement about the dilution solution after it's already done?

Yes, just like the NWS. It's certainly possible that news of it could leak out. If you see the commons drop like a rock on unusually heavy volume (50+M shares) with no corresponding action in the juniors, I would suspect a leak of such news.

Might be a hard sell politically after 10 years of profitability, the nationalization of the GSES, and other coercive and abusive governmental overreach, to pick one investor class over the other.

This would be Treasury picking themselves over everyone else. The juniors would fare far better than the commons, sure, but that's just a structural difference between the share classes. The "we're all in the same boat" argument sank a lot time ago.

So you envision a 'secret sale' to one or more institutional investors and an announcement after the fact?

I can't say I expect one, but it wouldn't surprise me. Treasury took its time selling its AIG stake, though, so it could do the same with FnF. The key part is fixing the common share count, which is one big thing buyers of the converted seniors will care about.