That is NOT what I stated, so I will simplify it in summary, as follows.
1. The conversation was about the CSP and the possible sharing of an explicit government guarantee between the GSEs and new private entrants into MBS.
2. The utility model proposed by FHFA would eliminate the former GSE monopoly on MBS and shrink their stature into a downsized entrant in a better reserved, lower risk market with less chance of another TBTF crisis.
3. The parallels between AIG and FNMA are significant. Not identical. The bailout amounts, warrants, and many other similarities led to my further observation that AIG to a major extent achieved its release and restoration as a reprivatized, shareholder-owned enterprise by shrinking its business and risk profile by 40-50%
4. I then stated that if Fannie downsized by about 40% in similar fashion, they would go back to around the neighborhood of a $3 T mortgage book, retreating from the $5 T plateau they have reached during conservatorship. Such action would, in my thesis, allow the GSEs to transition quickly through RRR, as did AIG much earlier on.
5. My rough proforma estimate for implementation of the FHFA utility model was an immediate rise of FNMA common S/P to $35-40, restoration of dividends, an immediate rise of junior preferred S/P to or near par and, also with a restoration of dividends.
When I compare that to a common S/P of <$1.5, junior S/P's at about 20% of par and no dividends paid on either, I think this plan offers abundant opportunities for ALL investors. And it can only get better with time.
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