Fannie Mae-No Politics (FNMA)

[obiterdictum]

If the deal is executed while in the conservatorship, then the federal charters of the companies and their remaining assets will be intact and the common shares will continue to trade and have "fair market value" assigned by the OTC Market Group's market makers and the shareholders purchasing and selling shares in the OCTQB marketplace.

What would the price be at that time of deal execution without input from any other source about something being done to keep the GSEs going?

The news of the deal will leak and the price will plummet to as low as it can go.

That outcome is not hard to imagine under the Berkowitz proposal where the GSEs become run-off companies that are not doing new business and the GSEs are solely in the business of bringing their legacy book of business to an end for final liquidation, the distribution of the liquidation remains to the various types of shareholders, a possible opportunity to buy rights in the new companies, the repeal of their charters and the cessation as companies. This is Step 8 of Berkowitz Proposal. Details of the steps are found in the Discussion Terms Sheet and Questions and Answers.

STEP EIGHT: RUN-OFF

* RUN-OFF COMPANIES LIQUIDATE RETAINED INVESTMENT BOOK AND GUARANTEES IN AN ORDERLY
MANNER
* RUN-OFF COMPANIES DO NOT WRITE NEW BUSINESS IN COMPETITION WITH PRIVATE INSURERS
- Limited exceptions for agreed transitional activities
* NEWCOS AVAILABLE TO ASSIST IN PROMPT WIND-DOWN AS NEEDED
- Transition services
- Insurance of retained securities
* U.S. GOVERNMENT PROFITS
- Return of full senior preferred stock investment, plus fair profit
- 79.9% of surplus equity proceeds from orderly wind-down, expected to be significant
- Fair fees for entity-level support and any interim reinsurance
* AT END OF WIND-DOWN, FEDERAL CHARTERS TERMINATED; FANNIE AND FREDDIE CEASE TO EXIST

COMMON SHAREHOLDER OUTCOMES

What’s in it for common stockholders?
* The preferred stock is removed as a senior claim on the run-off value of Fannie and Freddie
* The run-off of the historical assets is valuable and should generate significantly higher recoveries than litigation, so long as the terms can be arranged fairly
* There may be an opportunity for common stockholders to purchase NewCos common stock, perhaps by allocating to common stockholders a portion of the rights offering or by their providing incremental capital

K. Participation by Common Stockholders
In order to avoid any perceived unfairness to other stakeholders,
the NewCos also would consider making a portion (between 10%
- 20%) of the rights offering available to holders of common stock
in the Enterprises, including the warrants held by the U.S.
Treasury on an as-converted basis. Any rights issued to the U.S.
Treasury would be sold to private investors, thereby providing
parity treatment to the U.S. Treasury while avoiding any
implication that the NewCos are owned, supported, or controlled
by the United States Government.

Source: Fairholme Proposal Documents - Letters, Proposal, Questions and Answers, Discussion Terms Sheet - http://bit.ly/17vLeIg