Replies to post #530135 on Fannie Mae-No Politics (FNMA)

[Donotunderstand]

?
still not on same wave length

re

It is a far gone conclusion that the intention is to nullify current owners sake in these companies

I no longer believe that is in the top 3 goals of FHFA Treasury and WH as it once was

re dilution

1. If Warrants are used without prior CHANGE in purpose of warrant or money received --- such action would send all money to the TREASURY and none of it to F and F or FHFA and would be terrible !!!! I say terrible as none of the money helps create say 50B which is the minimum I see needed from a common equity raise for Fannie alone. Thus it is the worst situation as its 4:1 dilution and nothing gained toward capital
2. If warrants are extinguished (simply killed by Treasury) and there is say a 7-9 B share SPO --- it likely would be priced in the double digits (despite the GOV giving up warrants which scares two posters). That is a legitimate expectation -- call it 12 a share or 4X current trading PPS and what I view as close to a likely ceiling
3. The government could also -exercise the warrants and give that cash raised to F and F. Here is one very interesting idea that I thought of last weekend that could be quite good for us - or similar to killing the warrants and diluting 3-5 to one with SPO

The GOV announces that F and F need x dollars of clean new core capital (100 -200B together). The GOV announces the SPS is dead or paid off. As I understand from other posters that brings core capital to zero of slightly positive.


Then GOV announces it will exercise its warrants on F and F and sell them to the general market --- very similar to an SPO but using warrants as first step. The money collected - 100B or ? - is kept by the Treasury. They are warrants owned by Treasury after all (right or wrong )


NOW THE FUN PART --

GOV say --- the money so collected will all go into a Mortgage Security Trust Fund. Such money would be there first and foremost (and say for at least 36 months) as a back up to F and F financially while F and F build up their own capital via earnings over say 10 years.

This approach could avoid entirely any further dilution from an SPO as this money is the core capital.

At same time - such money - after three years if not needed for core capital can be used (say 15% a year) to reduce deficit which REPS like and also 50-50 split of available money each year --- to fund affordable housing objectives which the DEMS would like

Just thinking out loud

I see very few avenues where we are not diluted 3-5 to one but do not find such dilution a reason to sell but rather ---- if I knew that is where we were headed - I would find a way to buy a couple hundred thousand shares of common