Fannie Mae-No Politics (FNMA)

[Donotunderstand]

The purpose of the WTS ?

not sure that is written down anywhere --- the purpose of ... is --- anyone have a link to a public written "reason"

from my look - the GOV took over ("helped") FNMA - and issued itself Senior Preferred Paper and "preference" (as it is senior) over other equity

FNMA really had no say in that or the 10% Senior Dividend this all started with.

The GOV further --- IMO - self awarded the WTS --- because they could

The reason was not collateral - as the Senior equity Paper have liquidation preference over common equity. If bad stuff happened GOV had a claim on corporate assets higher than JPS or common.

The GOV gave themselves these WTS - not if there was trouble (usual reason for collateral or asset backed loans) -- but the opposite - to share in SUCCESS !!!

If we assume the GOV - Paulson - knew or thought maybe - that F and F would come out of the Conservatorship fat and happy - he wanted the GOV to get s ton of this success and not be limited to "payback" .

So where first success would pay back (buy back) the Senior preferred paper - the GOV larger profit (above say 3-4 years of 10%) would be by exercising the WTS and selling the resultant 79.99% of common stock - when the PPS of such stock would be high !!

(i.e. WTS were self granted in case F and F got fat happy and exited --- not as some sort of protection for a negative event. Again - WTS for common stock are shitty collateral compared to the SP preference in liquidation.) This use of WTS - as profit makers - is very common where the "investor" has leverage and the GOV had 100% leverage -- as it took it.