Replies to post #629829 on Fannie Mae-No Politics (FNMA)

[kthomp19]

The reality is absolutely NO ONE is going to provide new capital to replenish the Private Capital in a 1st Loss Position AFTER Uncle Sug as a 12 yr "conservator", in CLEAR VIOLATION of the duty to preserve and conserve the assets of their wards (what was the Net Income of the twins in 2013? Oh yeah, approximately $135B, a world record!).

This isn't reality, it's an opinion. One I disagree with when put in absolute terms like this. All it takes is more money and they will invest.

The conversation would go something like this:

Government: "Hey, do you want $150B worth of FnF equity for $100B?"
New investors: "That's a pretty good deal. What about the previous shareholders?"
Government: "The more you dilute them, the more money you make."
New investors: "Alright, that's true. But how can we be sure you won't pull another NWS stunt?"
Government: "Well, you can't. Future administrations can change the rules. But nothing we do for current investors will reassure you anyway. The best we can do it put binding language in a consent decree saying we can't do another NWS."
New investors: "Better, but we're not quite willing to accept yet."
Government: "Make it $200B worth of equity for your $100B."
New investors: "Done."

Do you think people will evaluate the potential behavior of their business partner, and look at their most recent behavior carefully, especially before they start writing a check? I think so!

You really need to get this straight: compensating 2020 shareholders for past government misdeeds will do NOTHING to reassure new investors. All that would tell new investors is that if the government does anything bad in the future, they might have to wait 12 years to get compensated, and that's only if they hold on to their shares the whole time (or sell out and try to buy back in at the right time).

These new investors will be stepping into the shoes of FnF investors from 2008 or 2012, depending on the "misdeeds" in question, not the shoes of 2020 shareholders.

In addition, from the new investors' point of view, the most recent administrative actions (at the time of the capital raise) will be almost completely shareholder-friendly: end of the NWS, settling the lawsuits, elimination of the seniors, release under consent decree, etc.

Everyone, ESPECIALLY the government (who set up this private capital/government partnership to begin with, to keep the $6T OFF the governments balance sheet) NEEDS TO START THINKING ABOUT WAYS TO ENHANCE THE PARTNERSHIP NOT DESTROY IT

The government needs to appease two groups: new investors and the plaintiffs in the various cases. Existing shareholders that are not plaintiffs are left to twist in the wind. That's why I say it's better to play defense than offense here.