Replies to post #473038 on Fannie Mae-No Politics (FNMA)

[Commons_Cancelled]

I would be more concerned about the internal memo stating they plan to convert Sr. Preferred to Common along with the Warrants. That will be a true double-dip and would be devastating to existing Common shareholders equity. So they get the full loan back, plus 10%, plus 79.9% of the GSEs, plus another $100B in Sr. Preferreds that will convert to Commons? Ouch!

Forget about the 10% interest rate, focus on the real Common-killers.

[kthomp19]

Why reward a bad action with compensation?

It's not up to you to define what "good" and "bad" are in this case. If FHFA and Treasury think it was okay then we're going to have to live with it. I'm not aware of any outstanding challenges to the 10% interest rate.

Do you think they needed the bailout in 08?

A thorny question. I think they certainly needed some intervention, but not the concrete life preserver that Treasury tossed them (and that Lockhart forced them to accept).

It's irrelevant in terms of the original question though. If past mistreatment of shareholders is enough to stop anyone from ever investing in FnF again then we are all screwed: the companies will never be able to recapitalize. The mistreatment already happened, and paying a bunch of money to current shareholders is no remedy at all because the shareholder base has turned over so much since then.