Replies to post #377412 on Fannie Mae-No Politics (FNMA)

[big-yank]

Very interesting to me that this article is corroboration of what I recoiled against when I stated concern for the preferred shares simply being retired at par for some alternative form or recap. Now I'll wait for the comments that my conclusion has no basis in fact and I am somehow full of shit.

[JosephS]

Good article. Glen is being pragmatic. New capital is unlikely to buy in the secondary market w/o prior market participants having an expectation of returns. The capital markets are not charities. Investment dollars want return on capital and return of capital. If there is no expectation of a return of either, it is highly unlikely that a capital raise could happen "relatively quickly".

The common and preferred shareholders' interests are aligned. To pretend that they are not is folly. Capital is highly unlikely to be raised over a long time frame(5-10 years) because of the always apparent risks of another decline in housing prices. Think about it. If tax cuts come in that decrease corp tax rate to 15%, buybacks issuing debt are much less attractive because you can only deduct int expense 15% vs 39%. With less debt issuance for "paper gains", you may see an opportunity to issue the pref paper at lower rates as higher yield prefs are called.

To pretend that dividends must be kept "turned off" while waiting multiple years for retaining cash flow to make them safe and sound is not logical. I will wait for the impending attack from common share owners. Investing is both logical and emotional. Not a recco.