Fannie Mae-No Politics (FNMA)

[Rodney5]

From the Yahoo

Quote: “
ValueGuy
10h ago


Neutral
Just finished reading Mark Calabria's book "Shelter from the Storm". There were only a couple of chapters that addressed the conservatorships, but there are some insights: (1) Calabria favored a SPS cramdown to clear the capital stack. In other words, exercising all warrants and converting all SPS to common equity; (2) He also would have preferred putting the GSE's into receivership rather than conservatorship, but acknowledges this is not really an option anymore; (2) Mnuchin at Treasury didn't want to convert SPS to common equity because it would put UST behind Jr. Preferred shareholders in the capital stack. In other words, he would have converted the SPS to "normal" preferred shares that were "more senior" to the existing Jr. Preferreds (or there would have been forced conversion of Jr. Preferred to common equity).
These were the scenarios being considered by the government. Under no circumstances would SPS be considered "paid in full" thanks to the SCOTUS ruling. These kinds of legal plans don't really change between administrations. If that was the plan from UST, it is still the plan from UST. I would be getting ready for an eventual cramdown of some kind. The only thing that could prohibit this would be if government ownership went above 79.9% and the debt had to go on the balance sheet - if (and its a big "if") this was politically undoable, then the cramdown to common might be avoided.” End of Quote