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Tuesday, August 29, 2023 6:31:10 PM
FHFA will likely argue paying damages is a restricted distribution until GSEs are capitalized. In the meantime, Treasury can take distributions. Previously in cash, now LP adds to future distributions. After we reach recap levels they will inevitably revert to 10% or NWS. NWS will be a non-starter now. But that 10% on a HUGE LP amount is due to the dollar for dollar increase (sweep) in retained capital that is still going on. Therefore, this has a probability of going to court if the LP is not adjusted down.
Treasury exercising the warrants - I actually expect this to happen. Higher probability IMO than the SPS conversion and higher probability than letting them expire. So between the 3, it's the most likely option. Warrants are not the same as the SPS conversion. The SPS states it is not convertible. However, the government can re-negotiate with itself and make it so while the common voters are incapacitated. Just like the NWS, this would be another breach of FHFA's duty to remain at arm's length when dealing with Treasury.
Additionally, once warrants are exercised it will take a LONG while for Treasury to sell off all those shares to reap the rewards. Will they use some crooked accounting to make it appear the Govt isn't on the hook for ownership and therefore liabilities? Kind of like the SPS LP not on the balance sheet? Maybe, and if so there's probably some legal action there as well.
There's no telling what will happen but with all the crookedness that has happened, I'm expecting more of the same. The only way to shine the light on it is through public outcry/media which has been silent, or the courts. The first court win is the hardest.
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