Replies to post #416220 on Fannie Mae-No Politics (FNMA)

[imtheshadow]

Sogo, I totally agree with you that expecting the rule of law to be upheld should not be consider speculation or unreasonable. I've tried to persuade rek, but to no avail, so I gave up trying. cheers

[rekcusdo]

Buying after NWS does not automatically mean that the investor assumed that conventional, ages old investment laws would be followed. An investor who bought after the NWS might very well have read all the prospectuses and known that it is illegal for a senior shareholder to take 100% of profits and send zero to juniors and common. He might have expected also that, based on ages old FDIC laws, upon which the relevant GSE conservatorship was founded, would hold true and be controlling. Such an investor might also have believed that the gvt only wanted to accelerate the payback on its original 10% dividend by enacting the NWS because, as we all noticed, the GSEs were becoming profitable again, leading one to imagine that the conservatorship might end soon, what with a Dem controlled WH, where traditionally that party has been more sympathetic to the GSEs' cause. Such an investor might not think it would be realistically possible for the GSEs to be wound down without severe disruption, and that bo private capital would be able to backstop 30yr mortgages, and he might have assumed that the gvt would never be willing to ensure the elimination of the 30yr mortgage.

Sogo, with complete respect, you are confusing "expectation" with "speculation". Investors who thought ANY of what you said above was thinking to the exact contradiction of what the government and conservator said to be true. So, while these investors may have been SPECULATING about what would happen, to say they expected it would just mean that they were being unreasonable.

I'm sorry if this offends people on this board who bought after the NWS. But, there is no judge in all of history that would assign standing who KNEW of a harm before entering into a contract that has been affected by that harm. As I said, that is just like if a house were for sale where it was disclosed a murder happened, and you bought the house and then sued the original owners for the depreciation to the house's value due to the murder.

It just isn't how things work...or even how they should work.

You said basically "they should have reasonably known they'd get screwed" to paraphrase you.

No...this is not what I'm saying. What I'm saying is that they couldn't have been screwed because the screwing already happened. They just went along for the ride in hopes that the screwing would be undone. Great speculation...but not reasonable expectation.