Replies to post #447319 on Fannie Mae-No Politics (FNMA)

[Latergater]

With trump needing funding for his infrastructure plan, the notion that warrants will not be exercised is ridiculous but not as ridiculous as your statement of the share price being 250 dollars. Best of luck.

[not one red cent ~NORC~]

Return dividends back to shareholders?

Well, if you're going to dream, dream big!

Go Fannie. Go Freddie.

GLTA

[Bostonsesco]

Why may 17th?

[jeddiemack]

JC - Hope you are right. Fear you likely are not.

1. what in the world makes you believe that after 10 years congress / treasury is going to respect the property rights of shareholders, now?

They've fought every decent American thing and done so with pith and vinegar. Because the arguments have been so obvious to any educated person, they are hard to convey in the courts and because of legal footwork - and mis speak, fhfa/treasury have been able to play keep away.

What changes this?

2. to 5. I largely concur with eventually, when something occurs to shake the tree.

6. Your $250 per share is very idealistic. Fair value in my view is less - likely $125+; but

7. Even that - no way it all occurs before May 17.

Like I wrote - 100% wish it does but hope is a horrible investment strategy.

[kthomp19]

1) Congress / Treasury and Courts will respect the rights of common and preferred shareholders of FNMA

You will need to be more specific here. If you just mean liquidation rights and dividend preference over commons for the junior prefs, and voting rights for commons, then I agree. But things like share dilution are not an infringement of rights.

2) These parties will reverse and apply restitution of all excess dividends paid on top of bailout amounts back to all current shareholders

Restitution involves an admission of wrongdoing. And the court cases only really challenge the NWS, which if unwound would let Treasury keep the 10% interest, leaving only a few billion back to FnF.

There is no way that money will go to current shareholders. It would go to the companies, and wouldn't be anywhere near enough for a recap.

3) Warrant will not be exercised, will be worth $0

Be careful what you wish for. Most of the anti-warrant talk on these boards carries the idea that if the warrants are cancelled, shares will be worth 5x what they are now. But no less an authority than (the real) Tim Howard has said that the warrants are just about the only thing that aligns Treasury's incentives with those of current shareholders. Cancelling the warrants would mean that Treasury would not have any reason to protect the common shares as a class.

4) FNMA and Freddie Mac will be released from Conservatorship. There will be no Receivership, thus no winding down of GSEs

Agree here. Phillips said that the conservatorships will end this presidential term, and I don't think any bill that contains receivership will get enough votes in Congress. But I can't put that probability at zero, just low.

5) FNMA will be put back to pre- 2007 conditions, no additional competitors

FnF are far different than they were in 2007. It would take a coordinated effort of Congress and FHFA to put FnF back to those conditions, and neither of those want to get anywhere near it.

Competition is a coinflip to me. If a bill can get passed, competition will probably a necessary compromise to get FnF out of conservatorship.

6) Stocks, common and preferred, will multiple in value. Commons at $250/share

I agree here too, or else I wouldn't own any shares. I don't see any chance of commons going over $20 though. With the drastic reduction in retained portfolios, FnF won't be nearly as profitable in the future as they were 11 years ago. Much of the income they have reported has come from fines/settlements and artificially high guarantee fees.

7) All these events by May 17, 2018

I would expect large-scale action either sooner or later. FnF's coming draw on March 31 will spur a lot of action, and administrative action that comes after a Congressional failure would take past the recess in August.