Fannie Mae-No Politics (FNMA)

[kthomp19]

Warrants: there are many saying it would be illegal for the government to exercise them. But I haven’t seen the language of the warrants contract.

There is nothing illegal about the warrants. Those who say they are illegal, or want the warrants to go unexercised for other reasons, are primarily motivated by greed.

Yes. many say the senior preferreds will likely be deemed to have been paid off. But again, the language of that contract doesn’t necessarily require that.

That's correct. The people who say that Treasury should write off the seniors because they recouped more money than they sent out are essentially engaging in wishful thinking. There is no requirement at all for Treasury to do so. Every action Treasury has taken to this point has been to protect its equity position, including the LP ratchets in the 2017/2019/2021 letter agreements. Expecting them to suddenly reverse course and write off $340B worth of LP for nothing in return is illogical by that standard.

But What’s the total dilution if both warrants and sr preferred end up being decided against shareholders? Did someone calculate it’d be 90%

It could be anywhere from 80% (just above the warrants) to 99.9% (if Treasury wants to go max punishment mode), but John Paulson said 90% in one article and 90-95% in a TV interview, while Ackman's scenario has it at 96%. I wouldn't expect it to be less than 90%.