Replies to post #540478 on Fannie Mae-No Politics (FNMA)

[RCChristian]

“
1) NWS over, seniors extinguished, FnF get a $20B credit with Treasury towards future income tax payments or commitment fees. No cash changes hands. “

and the future income tax credit is used to recap. not instant recap but a good gradual is better for commons.

[HoldenWalker99]

If the GSEs immediately reinvested their $122 billion in U.S. Treasuries, no cash would change hands either (or at least be handled within a matter of days).

I don't know why so few people are discussing the alternate remedy. Safe, quick and easy. And U.S. government secures a more significant windfall for taxpayers.

Converting senior preferred would be easy: junior preferred with warrants (like Buffett's BoA deal, https://www.cnbc.com/2017/06/30/warren-buffett-just-made-a-quick-12-billion-on-bank-of-america.html) or common equity.

Maybe I'm biased, but I think that this solution makes a lot of sense and is one of the main reasons that I stay away from common shares.

The plaintiffs asked for one of two remedies, preferring the first:

1) NWS over, seniors extinguished, FnF get a $20B credit with Treasury towards future income tax payments or commitment fees. No cash changes hands.
2) NWS over, FnF get back all money paid beyond the 10% dividend payments (around $122B), seniors remain fully intact ($193B liquidation preference, rights to 10% cash dividends).

Note the last part of the first one: no cash changes hands. That means it doesn't help towards a recap.

[beernance]

>>Treasury converting the seniors to commons

Would cause the Gov ownership to go above 80%.

Thus unlikely to happen.