Replies to post #491814 on Fannie Mae-No Politics (FNMA)

[Fully Diluted]

kthomp19,

Nice to see you back on board as a fireman. It's good to know there's always someone out there.
I'm curious to see why my calculations are wrong.
But now to your comments:

Why choose insurance? Why not use the banking sector instead, which has an average P/E of around 13?

Fannie Mae is not a bank. The company is a mortgage insurer.

Don't forget that Calabria will have to set the capital requirements early in the process, probably before he starts reducing the companies' footprint.

It does not matter at all when the capital requirements are set. Because Calabria will not say that Fannie needs $110 billion, because the capital requirements relate to risk. The less risky assets Fannie Mae holds, the less capital it needs.

I agree, because the junior holders would never accept a conversion at that rate. Given the current FNMAS:FNMA ratio, they wouldn't convert at anything above $4.75 or so.

The current share prices are irrelevant. A conversion would take place at the earliest as soon as the complete Recap and Release plan is out. The share prices then adjust automatically.