Replies to post #436691 on Fannie Mae-No Politics (FNMA)

[bcde]

"Put a different way: right now the companies have zero capital and "owe" $187.5B."

kthomp1,

Thanks, Please take help of accountants to understand the concepts.

Networth is zero when assets are equal to liabilities.

SPS of $187.5B is a liability. If liability is reduced as paid off then what happens to net worth?

The amount of positive net worth is the capital.

[Donotunderstand]

When the Senior stock was "issued" - there had to be some asset (e.g. reserve) set up to absorb the CASH or line of credit

My assumption based on some prior posters who seem in the know is that $187B was "deposited" with F and F and that such money is there when the SPSA is to be killed

??

[contrarian bull]

have zero capital and "owe" $187.5B. Cancelling the senior preferreds means they would have zero capital and not "owe" anything. It doesn't suddenly cause $187.5B to appear in their bank accounts.

You guys are mis-reading the balance sheets.

Some of these entries are negative, some positive, some on the asset side, some on the liability side.

Bottom line - the Senior Preferred are currently showing as a liability. The NWS takes that into account and has left $187.5B in their net worth all along and to this day.

If that senior preferred liability is removed that asset is still there - giving them suddenly a positive net worth of $187.5B.

It's a little confusing with the double negatives in the balance sheet, but that's the net effect.

Some had asked where that $187.5 billion went - it has been sitting in their balance sheets all along. Of course they don't keep it in cash - they used it to buy mortgage securities and the like... but it's still there.