Fannie Mae-No Politics (FNMA)

[kthomp19]

I've said before - it's just easier to type "breach" than "breach of the implied covenant of good faith and fair dealing". You may want me to type it out every time.

"Breach of implied covenant" is fine because it's not ambiguous. Merely saying "breach" is, which is the problem.

If a "reasonable shareholder" expected to get nothing ever simply because the NWS was signed, why on earth would they have brought a lawsuit?

How do you still not get this? A "reasonable shareholder" who bought their shares AFTER the NWS has no expectations for any economic rights ever, because the NWS removed them.

By contrast, the lawsuit in Lamberth's court was brought by shareholders who held their shares before the NWS started. Anyone who bought after that wouldn't have standing anyway. The only reason current shareholders will share in the award rather than past shareholders is that the rights to the damages travel with the shares.

Reasonable shareholder expectations are set by the most recent amendment to the contract before the complained-about action. At the time of the NWS, the most recent amendment to the SPSPAs was the second one that increased the funding commitment amount. On the other hand, for a lawsuit alleging that the LP ratchets violate the implied covenant, the most recent amendment was the NWS itself. Reasonable expectations are very different between those two.

FnF's shares continued to trade in the market after the NWS, but so do shares in bankrupt companies that have no realistic expectation of being in the money in the future. SHLDQ is a good example.

Additionally, the conservatorship is not intended to last forever, as said by various official sources. Therefore, a reasonable shareholder would assume the NWS would end at some point after Treasury has been repaid.

No. The seniors are not and never were repayable. There is no reason to believe Treasury would end the NWS once they were repaid: it in fact did not happen. In addition, Lamberth said that the NWS caused permanent harm. That permanent harm became the reasonable expectation at that point because the NWS became the most recent amendment.

Because you can't NWS a public company.

I guess I have to break out the "king of technicalities" crown again here, but FnF are public companies and also were when the NWS was signed.

That means there is future economic value in the shares.

Wrong. Treasury ending the NWS does NOT mean that economic value has to be restored to the junior pref and legacy common shareholders. As you like to say, there are many ways things can go and we can't foresee all of them. Why, then, do you assume that an end to the NWS must result in a restoration of economic rights to other shareholders?