Fannie Mae-No Politics (FNMA)

[kthomp19]

There is more to investment than being technically correct about a legal theory.

Yes, but being wrong about this one is potentially catastrophic if one's common investment thesis hinges on the idea that lawsuits will prevent Treasury from pursuing a senior pref conversion. conversion.

Nobody had NWS on their bingo card in 2008, and many don't have SWF on their bingo card today. There is no technical reason for many of the steps that have occurred, yet here we are. Human nature, political shenanigans, and optics can lead to less than technically correct outcomes. That's exactly how we got into this situation to begin with, and it's likely to still show up in the resolution. I based my investment on the premise of continued flawed outcomes.

The issue here is that all the surprises so far have been to the detriment of shareholders (original SPSPAs, NWS, Collins ruling), whereas owning the common now is a bet on a positive surprise occurring, one inconsistent with all past government actions.

You still don't understand the word "temporary?" If I remove your rights to drive your car by suspending your license, does that mean no further agreement or action could take anything more away?

Judge Lamberth said the NWS "permanently alienat[ed] shareholders from the profits of the GSEs". That's the opposite of temporary.

The rights will be restored. If you don't believe that, then don't invest in common. Pretty simple.

Investing in the common requires much more than believing rights will be restored. Senior pref conversion would restore the rights of legacy common shareholders, just in a greatly reduced form.