Replies to post #508116 on Fannie Mae-No Politics (FNMA)

[trunkmonk]

2) FHFA and Treasury get out from under the lawsuits, avoiding the risk of an adverse ruling

have they won any yet? lol, I dont think thats even on the table for FHFA.

3) The companies themselves make room in the capital structure to issue new non-cumulative prefs that count towards core capital

make room for more of the same, why bother?

so a conversion would have to be voted on by the holders of every series separately. However, FHFA and Treasury are smart enough that they wouldn't bother making an offer unless it was very attractive and guaranteed to be accepted by all the series.

they are smart enough? or maybe preferreds think they deserve something they dont?

good luck, preferreds are much more of a long shot than commons IMO

[YoYoMa57]

I get all that and still hold commmons and i agree they should convert, where ibhave issue with other pref holder is some say they will be diluted to kingdom come where i just dont see that. Common holder wont get screwed but will gets whats equitable... no one is going to invest 100 billion into a company this closely tied to gov after legacy got raked over the coals and then dick punched as they were about to recover...ackmman seems to be confident the warrants will be used and common still have plenty upsid3

[ano]

Seems farfetched to me for the reason the moment the NWS is announced to be undone, the prefs will immediately trade at par, or close to, and the commons will see this upside too, joseph or mark or the 5th circuit only need to say two words “end NWS” so to determine what the conversion ratio for pref to common is upfront of the undo, is almost impossible, IMHO the most likely outcome will be the prefs receive their missed payments and commons get the upside of price appreciation of the commons and dividends are restored immediately. will the government get away with the above scenario, maybe, it is just so complex that the large investors might be willing settle just for the sake of time, if the deals is worse than above they probably wait another couple of years to see more benefits, with so many loose ends by the government investors smell blood, so it is a business case to every large investor, so they will start new lawsuits again over the actions about to be taken if improper, if they think it is not enough, the investors are right and the government knows this too, so they probably will make an offer that is legitimate “good”, at least hope so for them and us

The NWS itself is complex too, the contract with the 3th amendment is unconstitutional for sure, but if they strike the 3th only the 3 card monte pops up instantly, with an even worse outcome in the end than just ending the sweep

Now for paying damages, if they do not pay for damages caused, all paper they issue in the future will have a lower rating, as obligations are not met in the past, and due to the lower rating, money will be more expensive to them, so future earnings will be lower

Bottom-line: the longer the government waits with ending the sweep the more expensive it becomes for them
And the better the outcome is for prefs and commons, the less problems FnF face in the future.