Please keep in mind that part of the litigation being forwarded in the courts is the "self-dealing" with regard to the process by which these two were taken over.
For example, as to the warrants you speak, they were never negotiated by the company but by the FHFA which, its alleged acted outside its scope and not in the interest of the company in the role it was assigned.
While its been further argued and asserted elsewhere that the warrants are technically worthless by statute, and there is probably merit to it; regardless, the claims of self-dealing are pretty substantial. Consequently, I really think that at some point, folks are going to get in a room and workout a global compromise.
For example, the reforms congress needs to come up with can be accomplished whether or not; they are in "conservatorship". Further, the FHFA's inaction or inability to think on its own, is pretty telling that the treasury / administration / white house is actually incharge.
Compromise will be in order.
What will it look like? I believe something along the lines of a release of conservatorship, exercise of 10-20% of the warrants (cancellation of the remainder); Re-amortizaton of the "interest" net of effects of excess reserves and DTA's and some $$ to low income housing initiatives.
At this point, FHFA will continue to "oversee" f and f. There maybe some restrictions on distributions of retained earnings for dividends for a couple of years to build capital. And, a plan to raise capital in the open markets over the next 2 - 3 years.
This will help f and f become more adequately capitalized. With for example the "government" holding, in trust some of these excess reserves, for which they pay a fee for (interest) which is offset by a back-stop guarantee fee.
What this means... is something where Market Cap for Fannie gets to 250 Billion (common at around $175) and then an equity raise of $75-100 Billion over time. This plus earnings would put capital at $250 Billion.
Why would the government agree to take "less" than the 80% warrants they took? Why would a thief that was caught cop a plea? The government's position is very weak. Its just not going to be pretty for them; and the best way to make it go a way is to fix it fast and not let it fester. Time is said to heel all wounds... its time for the government to put this behind it and close that chapter. Does the government really want to be accused of "profiteering" which is exactly, what they are accusing those of us that invested in F and F - when they were on the ropes?
The other win here for the government... is that this will create 400-450 Billion of Shareholder Market Cap, that will put lots of money into the "money supply" and become an instant "stimulus". The off shoot of that is, the tax "revenue" that will come into the treasury because of this; which will be another $100B or so over time.
So, the government effectively would reap around $180 Billion Profit from F and F. Thir troubles... would go away....
So, the best way to resolve this ... is a compromise.
