Fannie Mae-No Politics (FNMA)

[kthomp19]

Did some math over the weekend. Based on earnings alone I figured Fmcc should be 8% higher than Fannie. Freddie also has more retained earnings per share than Fannie $69/share vs $63/share Fannie. No idea how Fannie has managed to stay higher, but now that I’ve got a full boat of Freddie shares I don’t mind sharing.

Freddie is much further away from its regulatory capital requirements than Fannie when measured in years of earnings.

For example, Fannie's shortfall to its core capital requirement is $157B as of their recent 10-K. Treasury cancelling or converting the seniors would knock off $121B of that shortfall, leaving $36B. That's a little over 2 years of earnings.

Freddie's shortfall to its core capital requirement is $120B as of their recent 10-K. Treasury cancelling or converting the seniors would knock off $72B of that shortfall, leaving $48B. That's almost 5 years of earnings.

If Freddie is to exit conservatorship at the same time as Fannie, they will have to raise more capital, meaning more dilution for the commons.