Replies to post #510736 on Fannie Mae-No Politics (FNMA)

[Doc.007]

Your explanations seems not really For The Gov to undo the Worst Than Mob-Style Conditions they applied at F+F and therefore the Gov Payback of overpaid about 90 Bn to be used for Capitalizing Fannie Mae, not going to be. Worst Than Mob-Style Conditions include that F+F have not been permitted to payback or that payments not been considered as payment, something as criminally never seen worldwide and totally damaging the US Investors Reputation !
At the Big-Picture to solve the US National Depth is F+F only a tool to fix the Investors Reputation as necessary to attract the necessary Cash-Money from The Have Once by the Conservative Capital Sozial Countries as Europe, Etc.

Resulting All Parties with F+F will need to Renegotiate New Contracts, because the existing principally illegal Contracts get Voided !!

This as IMO

[Brooge warrants cancelled]

any thoughts on the WSJ article or the GAO report?

[stockprofitter]

Warrants will be cancelled as that will be a condition and priority to any new private investor bringing money to the table. A new investor will certainly want that as a condition knowing full well there’s an option on the table to dilute his investment by 80%. Don’t believe anyone trying to sell you the “warrants will be excersized”.

Investors are not stupid these days and secondly the warrants are illegal as confirmed in writing by the SEC.

Unless Killarney wins the election in 2020 the warrants are completely dead as this administration wants nothing to do with new and further lawsuits.

TGIF

[kthomp19]

Bare minimum they need enough capital and enough of a guarantee to keep their credit rating or the whole thing fails.

Agreed.

I think the "no guarantee" option can never be applied to FnF as they currently stand, though. They underpin something like 20% of the economy, so the government won't let them fail, just like they didn't in 2008. That's the basis of the implicit guarantee, which I believe will continue.

How much capital? ... Complex always changing formula. Short answer, my best guess, $35 - $135.

I don't the capital standard can be "always changing"; the FHFA director is required by statute to set those. They can rise and fall with risk profile and size of asset base. Your range leaves a lot of room for share price estimates, too. I also don't know if you meant risk-based or minimum capital.

Trump does not have to complete recap and release

This is where I disagree. Mnuchin has expressed a commitment to having FnF released by the end of this presidential term (because he can't guarantee Trump will be elected, and therefore that he will remain as Treasury Secretary, past that point). I believe that the companies must be fully capitalized before they can be released: Treasury has veto power over release because of the SPSPAs, and they have no incentive to allow the companies to be released while they are undercapitalized (because taxpayers would be on the hook in the event of a housing downturn).

Look at it this way, they could forgive the preferred shares, exercise warrants, leave them in conservatorship for 10 years till they have capital.

I suppose it's possible, but it doesn't conform with the administration's stated desire to get FnF out of conservatorship. They don't have 10 years, and they can't guarantee they will have 6. The next 21 months is all they can count on.

This is actually great for commons compared to a plan like Moralis (That plan favors Jr. Preferred and throws Commons enough of a bone to make sure all the FNMA longs are aboard).

I disagree on two things. First, I don't see how 10 more years of conservatorship can be construed as good for commons. Second, the Moelis plan involves commons going to $15 or so (5.5x today's prices) while the prefs get a little above par (due to the partial conversion, so 3.5x today's prices). How does that prefer the juniors?

“screw over past investors” – If they straight up take your current shares.

Would you consider past (by that I think you actually mean current) shareholders to be "screwed" if FHFA just had FnF recap themselves by issuing enough common shares at $5 to be fully capitalized? How about $8? Or $2? (or any other number)

They purposely tried to bankrupt this thing. “hey open market, I have this thing I sold back in the 60’s, I took it back and kept the money, I would now like to sell it to you, don’t worry I wont take it again.”

"They" is Hank Paulson plus Obama and his Treasury secretaries. Obama's adminsitration openly stated its desire to wind FnF down.

Trump's administration, by contrast, wants them out of conservatorship. Why would Trump's administration even be talking about release if they could just keep things the way they are instead?

And there can never be a guarantee that a future administration won't try to nationalize FnF again. If that possibility is enough to keep all private capital away, all current shareholders are screwed.