Fannie Mae-No Politics (FNMA)

[kthomp19]

There is nothing keeping the Treasury from ending this conservatorship by placing the companies in receivership for the payment of the Liquidation Preference; and at the same time sell the companies in the open market by IPO.

Treasury cannot invoke receivership. That's an authority only FHFA has.

The collateral damage to the housing market would be catastrophic though. There is no reason for FHFA to place FnF into receivership, and a whole list of reasons not to.

The Treasury's LP is more than the net worth of the business.

That wouldn't matter in receivership. What would matter is that FnF's net worth is less than the senior pref liquidation preference.

The Shareholders prayer of relief is for the Treasury to cancel the LP and declare the SPS paid in full.

It's very simple:

1) Treasury writes down the liquidation preference: juniors and legacy common both win
2) FnF get placed into receivership: juniors and legacy common both lose
3) Treasury converts the seniors to common: juniors win but legacy common lose

Treasury will never do #1 voluntarily while #3 exists, and #2 makes no sense for anyone. That makes the decision as to whether the juniors or legacy common are better to own right now a no brainer.