Replies to post #518950 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Moelis fantasy plan

A cute characterization! Maybe we should just shorten this to MFP from now on.

I actually think that Moelis is a fantasy as well, but because I think it is over-optimistic. The recap will need to be done much faster than the end of 2021, so more common shares will need to be issued to offset the lowered amount of retained earnings available.

1. implementation time line
It will take minimum of 5 or more years assuming every thing goes perfectly as planned. This is impossible to assume with so many risks and uncertainties.

This is mostly why I think Moelis, as-is, won't work. The recap must be much, much faster. Certainly done before this presidential term ends, and much more likely done before campaign season kicks off.

2. Raising the $225B
$100 for FnF recap
$125B for UST warrants
Both are impossible for numerous reasons.

1) Raising $100B shouldn't be too hard, for companies that should be worth $200-250B after recap and release. AIG raised $22B, and their market cap was around $60B soon afterward. As a percentage of future expected market cap, $100B really isn't that much more.
2) The money to buy Treasury's warrant shares does not have to be raised by the markets. Treasury wouldn't sell its shares until after release, which is after the recap (secondary offering) is done. So that $125B, or whatever amount one assumes, doesn't count towards the total capital raise amount.

3. Protecting taxpayers Risks
Moelis fantasy plan is highly susceptible to failures right from the start and exposes taxpayers, markets and economy to very high risks because of uncertainties associated with every step in the plan.

Moelis actually minimizes taxpayer risk, at least if its timeline was sped up, by eliminating Treasury's SPSPA funding commitment, and not replacing it with a virtually identical one like your plan does.

This entire statement by you is pure opinion anyway.

4. Trump Administration has another 1.5 years before next elections and all the work needs to be completed within next 6-8 months to full fil campaign promises and to have any positive effect on economy.

Now here we agree. The entire process must be done by the end of the year so as not to run into campaign season.

One can not wait for 5 or more years to release FnF from conservatorship and that assuming Moelis fantasy plan will go perfectly as planned..

Here you contradict yourself. Moelis is not viable because it takes too long, but your plan involves a drawn-out retained earnings-only recap. Your plan is just as susceptible to all the supposed risks you described.

One can keep on write a big essay about what is wrong with Moelis Fantasy plan.

Mine would all be variations on "it just all needs to be done faster". Yours has fared far, far worse.