Replies to post #518171 on Fannie Mae-No Politics (FNMA)

[RickNagra]

Great numbers. They agree quite nicely with my numbers $180-220. Therefore since we have the two best minds here in unison the numbers must be obviously correct.

[kthomp19]

Once again, FNMA earns $12 billion or over $10 per share annually. At a pe ratio of 15, it is easily worth $150.

Only if they are fully recapped and released with no dilution whatsoever. That scenario has a probability of zero.

This does not include the positive equity that we'll see in their balance sheet after the swindle is unwound. Adding this would value each share well over $200.

What "positive equity" are you talking about? Unwinding the NWS involves Treasury sending FnF, at most, $20.7B. That is well short of any reasonable capital standard that Calabria will set. And the Collins plaintiffs asked for that overage to remain with Treasury as a credit against future income taxes, so it wouldn't even count towards FnF's core capital!

The rest of the recap money must come from somewhere, and retained earnings alone makes no sense for three reasons:

1) Treasury would have to provide a line of credit, and they would much prefer a faster recap to remove that risk.
2) Calabria stated that the job of a conservator includes restoring the companies to a sound and solvent status, and that includes meeting all regulatory capital standards. He knows that a conservator's job is not done until then, so he will not release FnF while they are undercapitalized.
3) This administration is only guaranteed to be in power through the end of 2020. Everything must be done by then, or a future administration could undo everything. By then the next president would have the power to remove Calabria at will.

Whoever puts money into the companies to recap them will want a return on that money. By far the easiest way to do that is to issue them common shares. This also conforms to Calabria's stated desire that FnF's capital be mostly common equity.

Why would I, being of sound mind, accept any figure from Moelis or you that is not close to being fair?

It doesn't matter what you do or don't accept. You have no power here. Part of that is the fact that your definition of "fair" is irrelevant.

All your posts are based on the assumption that those in power can do ANYTHING. And it is LEGAL.

Nope, this is 100% FALSE. It is no wonder you keep going on like this, you're arguing against something I never said.

I believe that the NWS is completely, blatantly, and egregiously illegal. It will be undone by the courts. However, I don't think that necessarily means an instant recap. FnF currently have almost no capital, and would still have too little to be released even if the NWS had never happened.

What I did say is that diluting current common shareholders, whether is is the warrants, a secondary offering, or a junior-to-common conversion (or even a senior-to-common conversion) is legal. Dilution protection is not a legal right that common shareholders, of any company, enjoy.

[amelia43]

I am not disagreeing with you. I personally think GSEs are worth much much more than Moelis or even what Ackman projected. But the reality is that you and I are not invited to sit at the negotiating table. The reality is that so far it is a banana republic and the government is doing whatever the hell it wants to do. Some folks might disagree strongly but I am not holding out high hopes on en banc or Sweeney.

Let me ask you this, what exactly are you going to do when you don’t get anywhere close to $150-$200? You will sue (look at the results of law suits so far, not so hot)? You will protest (can’t even recruit 10 people from here)? You will not sell (only hurts your own wallet)? You will post your outrage on this board (yeah so folks like me can reply to you)?

I am not picking on you per se, day in and day out I see posters here talking about never settling for less than the fair price, never let this country become a banana republic,..... we are nothing but paper tigers posting random thoughts on here.