Fannie Mae-No Politics (FNMA)

[bmp152]

Thanks for the kind comments Kylie.

To be very honest, I'm not sure what will happen. I can't imagine the government will simply walk away from a chance to cash in on those common shares. Guaranteed money is seldom turned down, but Congress doesn't always act rationally (see: recent shutdown).

What I fear most is that FnF will be kept in financial shackles via perpetual dividend sweeps to the Treasury. These payments in excess of draws could be used to capitalize whichever new mortgage finance system is eventually enacted. We must also remember that starting in 2014, FnF's capital reserves will be depleted by $600M each year until they reach 0. That's bad news for shareholders because what little assets we do have will be depreciating at a rate of ~15% annually.

All of this could change (and I hope it does!) with net zero, followed by public outcry, inability of Congress to agree on reform, and lack of a comprehensive plan that would not create systemic risk or catastrophic failure to the fragile economy.

Again, just my thoughts. I could very well be way off in my thinking.