Fannie Mae-No Politics (FNMA)

[kthomp19]

If the future state is that the LP could get so large that the GSEs end up having to provide their NW to Treasury, sure they would by then have the minimum capital, but this essentially puts them in a position where they are effectively nationalized.

They are effectively nationalized right now. No private shareholder can ever derive any benefit from the current situation unless for some reason Treasury allows FnF to pay dividends to private shareholders once FnF are fully capitalized.

JPS and Common will get zero in perpetuity as there may not be any scraps to give.

We will certainly get nothing as long as the status quo persists. Owning FnF shares right now is a lot like placing a bet. The juniors trade like an OTM call spread and the commons trade like an OTM call at the higher strike.

I'm not sure this is a sound strategy on the part of FHFA.

It has worked pretty well so far, unfortunately.