Fannie Mae-No Politics (FNMA)

[InDepthAnalysis]

Fairholme also neatly tied its offer of assistance to the government's conversion of senior preferred shares in American International Group to common shares, which enabled AIG to move past its bailout, with the Treasury and the Federal Reserve both claiming tidy profits .

Such a move could raise the junior preferred shares to par value and would also enable Fannie and Freddie to begin rebuilding their capital levels, since they would no longer be paying all of their earnings to the government. Then, like AIG, the GSEs could repurchase government-held common shares, thus lowering the share count, increasing earnings-per-share, and possibly setting up huge gains for the common stockholders.