Replies to post #498547 on Fannie Mae-No Politics (FNMA)

[Donotunderstand]

warrants were not collateral

as the investment was an equity investment and NOT a loan (debt)

they were (are) there for gravy

now we watch

[YanksGhost]

There is another aspect to the warrants/collateral conversation found in the "payment in kind clause" in the SPSPA. No collateral neded to be provided i the form of warrants because GOV would be made whole in some way at some time ahead with a senior securitized interest in assets. No collateral is required in such case. Everything the GSEs has is already pledged.

The interesting aspect to this clause is it totally debunks the NWS "rationale" and the egregious bunk about death spiral risks. In any given quarter when the 10% dividend could not be paid, it would simply transfer to an upcoming quarter when it would be cumulatively paid at the contractual rate.