Fannie Mae-No Politics (FNMA)

[kthomp19]

It is very difficult to successfully sue a government agency. However, this does not mean it is impossible as we have now seen.

FHFA was not successfully sued. The companies were the defendants; FHFA was only brought it because it is the one who made the decision to sign the NWS. FHFA was not held financially liable for anything; it's the companies that will pay the damages.

Thus far, even including the implied covenant trial, nobody has successfully sued FHFA or Treasury with respect to the conservatorships or NWS.

If the FHFA makes another egregiously bad agreement while in bed with Treasury, I expect FHFA will be sued... again.

You mean the companies will be sued again? Because that's the precedent.

Whether it's successful or not, or how long it takes is another story

But this is the most important part. Handicapping the probability of success and the timeline is a critical part of estimating the future price of the common shares, which is the primary purpose of this message board.

Because FHFA doesn't pay a cent does NOT mean they have carte blanche to making additional agreements that violate the GSE covenant with shareholders.

Quite the opposite: if FHFA can sign the NWS, a horrendously bad agreement that mocks attempts to think of something worse, and have the only outcome be that the companies pay less than $1B to shareholders, why would they ever fear the courts again?

They have been put on notice, so if FHFA does it again - the courts may grant a contract remedy instead of or in addition to monetary?

Bad logic. The only "notice" that FHFA has been put on is that the companies will be slapped on the wrist. I can't rule out contract damages in the future, but I can certainly place a very low probability on them given what has already happened.



Here, I will put it bluntly: do you think a senior-to-common exchange negotiated by FHFA and Treasury would be challenged in court? What court, and what would the requested remedy be?