Fannie Mae-No Politics (FNMA)

[DaJester]

"Treasury would work with FHFA and the administration’s senior economic team to negotiate a recapitalization and release agreement that includes retroactive cancellation of the non-repayment provision of the senior preferred and a recasting of the companies’ remittances under the net worth sweep as repayments of the senior preferred stock (which would pay all of it off for both). Fannie and Freddie, in return, would agree to accept utility-like return targets on their credit guaranty business, benefitting homebuyers. Then, for its part, the administration would acknowledge the criticisms made by commenters on FHFA’s request for input on Fannie and Freddie’s capital and pricing, and strongly encourage (or require) FHFA to remove the excess and unwarranted conservatism in the ERCF, to have it more closely reflect the true risks of Fannie and Freddie’s business."

This is the exact scenario that I think is most likely - SPS & LP gone, warrants remain outstanding, and ERCF thresholds lowered. Stock value (both common & JPS) increases based on anticipation of release which would only be a few years max. I'd prefer that the warrants never get exercised, but as the value grows it would be hard for Treasury to not convert some if not all of them.