Replies to post #605229 on Fannie Mae-No Politics (FNMA)

[mrfence]

Gabby said you're FOS warrants are cancelled by extinguishing the SPS so wave goodbye to the illiquid preferred Yellow Brick Road :-D

[kthomp19]

Never say never. Although the first choice you laid out appears to be the way we are headed - seniors cancelled but warrants exercised and a credit for about $30B (the middle ground and the quickest and most logical scenario) I would also look behind door #3 and not rule it out.

What exactly is door #3?

The reason there were two scenarios in the first place is because that's what the Collins plaintiffs suggested as ways to unwind the NWS.

I think we all know a ruling could be a couple of years away but the election is not. The administration wants to set the recap and release in place before it may leave and make it hard to reverse. I can't see in any of the scenarios the seniors not being cancelled before the election.

I agree. Getting rid of the seniors is the most important move this administration can take to prevent a new one from derailing recap and release. Reinstating the seniors will be nearly impossible once they are gone.

At that point both the common and juniors should take off.

From whatever level they trade at at that point, sure. But nothing is to say that either class will go higher or even stay the same in the meantime.

But unless there is a settlement in the meantime, the possibility of the return of the $125B would still exist.

If the return of $125B is ordered by a court, it will be several years before Treasury is forced to pay it; Sweeney's cases haven't even gone to trial yet.

If Treasury voluntarily gives up the $125B sooner, they will absolutely monetize the seniors (convert them to common) to make that money back.