Replies to post #436663 on Fannie Mae-No Politics (FNMA)

[bcde]

"This still leaves accumulated deficits on the balance sheets which would need to go well into positive territory to consider the companies "safe" (fully recapitalized). This is the crux of my disagreement with you: you think that extinguishing the senior preferreds alone (which would be the effect of retroactively revoking the NWS) would be enough to release the companies, while me (and Moelis, and others) believe that a large capital infusion would still be necessary afterwards. That's the point of the equity raises in Moelis. The warrant exercise is an incentive for the government to play ball rather than just keep taking the golden eggs as they have been. "

kthomp19,
It is simple math to understand. It requires elementary knowledge of Math.

Currently FnF have zero capital and owe SPS $187.5B to tsy under NWS.
So there is corresponding asset of $187.5B balancing this liability.

If NWS is canceled retroactively, the terms of original SPSPA will be applicable. FnF have paid back $187.5B plus 10% interest as per original SPSPA. So $187.7 liability should be reduced to 0 and shareholder's funds needs to be increased by $187.5B.

These shareholder's funds of $187.5B are the core capital.