Replies to post #628986 on Fannie Mae-No Politics (FNMA)

[kthomp19]

HOW WILL THE US GOVERNMENT CONVINCE PROSPECTIVE INVESTORS WITH THEIR LIMITED CAPITAL TO TRUST THAT THE US GOVERNMENT WILL ACT IN GOOD FAITH AND NOT TREAT THE PRIVATE INVESTORS LIKE GARBAGE LIKE THEY HAVE DURING THE LAST 12 YEARS?

I can tell you one thing: it won't be by handing out gobs of money to people who happen to own shares now.

These new investors will be stepping into the shoes of FnF shareholders before 2008, or before 2012 in regards to the NWS. Not the shareholders in 2020. The only direct shareholder compensation that will move the needle for new investors is payments made to shareholders in 2008 and/or 2012, regardless of whether or not they have sold their shares since then.

In order for this private public relationship to work, what can the US Government do, to placate prospective investors from the US Government becoming a Bad Actor again?

That's certainly an important question, and how it is answered will be crucial in whether FnF can raise capital and in what amounts.

In my opinion, the best reassurance that the government can give new investors is through the upcoming SPSPA amendment and consent decree. Those can actually prevent another SPSPA or NWS from happening if they are structured correctly. A key feature would be to have the companies themselves as signatories to any new agreements, and to not allow FHFA or Treaury (or both working together) to force FnF into a situation they don't want.

But giving money to current shareholders, or even treating them "fairly" (whatever that even means) in the recap, will not give any reassurance to new investors at all. The only thing this would tell them is that if the government tries any of these shenanigans again, these new investors would have to hold their shares for as many as 8 to 12 years and hope for "fair" treatment at that time.

Not to mention that the more dilutive the recap is, the more money new common shareholders will make. They have every incentive to dilute the existing commons as much as possible, and certainly no incentive to give up value in their own shares in the name of "fairness".