Fannie Mae-No Politics (FNMA)

[kthomp19]

1) In what court would the suit be filed, and why? - Could be anywhere, pick one. One or more may get to SCOTUS again.
2) Which law was/would be allegedly violated? - Depends on future FHFA actions. Another breach of implied covenant seems likely. Could also be a takings. Could be a injunction or prospective relief request to prevent share increase.
3) What would the plaintiffs seek as remedy? - Depends on the suit obviously. Damages from profit sweep to LP. Damages from cash sweep after capital threshold is reached. Could be a monetary remedy or a contractual remedy.
4) Given what has happened in all the other court cases, what reason is there to believe this new suit would succeed? Because one has succeeded.
5) How long would it take, in light of the government having fought every other case tooth and nail, for the suit to ultimately succeed? Don't know, but likely less time than the first win.

You keep demanding facts but your own answers are very light on the details. You keep claiming that the LP ratchet is a cause for action, so answer the questions in light of that specific claim. The fact that your answers to #1-3 are so vague means the answers to #4-5 are meaningless.

Still, it's possible to rebut a few of them right off the bat.

3) "Damages from the profit sweep" are limited to the drop in share price; no other amount of damage to the shareholders can be quantified and the LP ratchet causes no harm to the companies.
4) The suit that succeeded was filed against the companies. The only reason FHFA was brought in as a defendant was that they are the ones who signed the NWS on behalf of the companies. No lawsuit against Treasury has succeeded so far.
5) That "first win" took about 10 years: the original suit was filed in 2013.

- When exactly will Treasury convert Senior to Common? I want facts and dates, not useless predictions.
- Who is making the plan? Show me evidence that the AIG model is the one being considered?
- What action suggests the JPS will take a 40-50% haircut. I want facts, not predictions.
- Show me where it says Treasury has a fiduciary duty to taxpayers?
- What proof do you have that Treasury or FHFA will not get sued again in the future? (impossible)

1) The only possible answer to this question is a prediction. How useful it is depends on the opinion of the reader. I expect the senior-to-common conversion to happen in conjunction or just prior to release from conservatorship. Under the current agreements, the numbers would make sense for Fannie in late 2025 or so (only a small capital raise needed), and maybe 2027 for Freddie.
2) The plan would be made by FHFA and Treasury. Who else would do it? Mark Calabria's book shows that a senior-to-common conversion was being considered, and that's what happened with AIG. Calabria also said recently that he thinks a cramdown is the best option, and there is a decent chance he becomes FHFA director again if Trump wins the election this fall.
3) When did I say anything about the juniors accepting a 40-50% haircut? They already turned down a 70% haircut in late 2020.
4) Treasury does not have a fiduciary duty to taxpayers. That should make their actions with AIG even more of a concern to FnF legacy common holders because that lack of duty didn't stop Treasury from maximizing the value of its equity position via a cramdown.
5) Obviously there can be no proof of that, only logical reasoning. FHFA and/or Treasury can get sued at any time and for any reason. But given the track record of the current lawsuits and the fact that the NWS was much more egregiously harmful to the companies than a cramdown would be, I don't see any reason for FHFA or Treasury to fear such lawsuits. When it specifically comes to a senior-to-common cramdown, Treasury clearly didn't fear lawsuits enough in late 2020 to avoid moving forward with that discussion, and if Calabria thought lawsuits were a problem he wouldn't have advocated for that not once (late 2020) but twice (last month's article linked to above).