Replies to post #596338 on Fannie Mae-No Politics (FNMA)

[action8101]

Exactly

[Guido2]

Well said FOFreddie.

[Louie_Louie]

I'm on board with that!,,,

[kthomp19]

With the 10 UST at historical lows now is the time to settle the lawsuits and start the recapitalization process.

Why does the 10 UST being at historical lows matter? I agree that settlement talks need to start pretty soon, but I think it's more about getting as much done as possible by the end of the year. Election timing, not market timing.

If the US Govt can stiff GSE investors then any future leglislative body going forward can stiff future public/private partnership investors by enacting emergency legisltation and allowing governmental entities to brazenly violate basic contract law principles and fundamental tenents of property law and due process.

I have seen this "FHFA/Treasury will never get new investors to invest unless they treat existing shareholders well" argument before, and while it's the kind of thing that makes sense on the surface and gets a lot of likes on message boards, I disagree with it.

The government's misdeeds towards shareholders have already happened. No amount of compensation to current shareholders (who do not necessarily overlap with shareholders in 2008 or 2012) can assure prospective investors that a future administration will not do something similar.

If the government were to try to assuage prospective investors by making payouts to existing shareholders, all that would tell those investors is that if the government screws them in the future, they might have to wait 8-12 years to be made whole. Hardly reassuring, in my opinion.

When it comes to the SPO, the investors have a direct monetary incentive to dilute the existing commons as much as possible.

Upholding the rule of law in public finance is one of the key principles of Alexander Hamilton and I expect Secretary Mcnuchin and President Trump to follow in his footsteps because they have a sophisicated understanding of the capital markets.

It's pretty hard to screw the juniors in a recap and release (and doing so would bring the commons to pennies if not zero), but it's rather easy to heavily dilute the commons while still following all laws. There's a reason that Calabria said the equity raise will heavily dilute the commons, and that's not even taking the warrants into account!