Replies to post #473031 on Fannie Mae-No Politics (FNMA)

[kthomp19]

the only way to make this right is to cut a check, that means reversal of all the ill begotten cashflows to the UST, which would be a major capital raise w/o new issuance or dilution.

Since it's Treasury that would be cutting the check (and they have the lion's share of the power in this whole situation too), you would have to convince them of your definition of "right". I find that possibility quite slim.

Do you consider the 10% interest rate to be "ill gotten"? If so, what interest rate is appropriate? And why would Treasury agree with your definition?

If Treasury's magic check to FnF isn't enough to bring the companies close to the capital levels they will need to be released, where will the money come from with no new share issuance? And why would Treasury agree to provide a backstop while the companies build capital if their senior shares (and the attached dividend rights) are gone?

[Commons_Cancelled]

Both GSEs are right around the 10% moment. So the Treasury doesn't have any ill-gotten gains. If they reversed back to the original agreement, then the GSEs would be owed nothing (or very little) and they would still need to raise ~$100B to become adequately capitalized -- which would be required to exit Conservatorship.

And yes, there will be lots of money lined up regardless of what happened to existing shareholders. Wall Street money could care less as long as there are some reassurances put in place that what happened won't happen again.

[Donotunderstand]

IMO it will never be made right in terms of full pay back

a simple answer - that does not seem on the table - is to issue more stock using the warrants - dilute us to 20% - but all proceeds of such dilutive stock issuance goes to the capital core of F and F

we would have 20% of a company whose share price likely would be about 25-30 as all that capital raise - in their coffers - would mean they were near fully capitalized