Replies to post #670826 on Fannie Mae-No Politics (FNMA)

[RumplePigSkin]

LuleVan - JPS shares are a quagmire. Tim Howard, the very same person who issued the shares you own, called the JPS shares a quagmire.

The Liquidation Preference is on the table to be 0'd out. If that happens game, set, match, Commons win forever. Period. QED. Full Stop.

Why go to such twisted logic and scenarios? This isn't that complicated at this point. The Biden administration seems open to writing off the LP even if SCOTUS doesn't.

Hasn't Berkowitz sold? According to Braford, he has ...

Hasn't HoldenWalker sold? According to Bradford, he has ...

Seems a bit desperate. Wouldn't you balance your GSE portfolio to add commons even from your perspective if there is a chance the NWS is voided and LP goes to 0? Or the whole conservatorship goes down the tubes?

Why did JPS lose 50% value relative to commons shares? Could it be Tim Howard is correct? A quagmire?

[kthomp19]

Therefore I guess there is little chance that SCOTUS will finally solve the problem in a way most shareholders hope for. There will be no real justice, just a compromise.

I appreciate your practical view here. There is far too much discussion of what "should" happen compared to what each of us believes "will" happen. Not only does "justice" have a different definition for every person you ask, those various definitions will have no bearing whatsoever on how the courts rule.

Common shareholder will probably see a dilutive capital raise, and the government might even exercise its warrants to get money for the affordable home programs announced by Brookings Institution.

The two possible valuations of Treasury's equity stake in FnF given in the Brookings Institution paper were $48B and $98B. Those correspond to Scenario 2 in each of Tables 2 and 3 on pages 15 and 17 respectively of this CBO report from last August.

In each of those scenarios, the value of Treasury's warrants is *, which is "between zero and $0.1 billion" according to the note below the table. By contrast, the juniors are worth full par ($35B out of $35B total face value).

In that case, Treasury's 7.2B warrant shares being worth at most $0.1B means each share is worth at most 1.39 cents. That necessarily would be the value of the existing commons as well.

JPS are probably better off because they can't get diluted. (They might get a haircut, though.)

Conservatorship is statutory bankruptcy according to Mark Calabria, the most knowledgeable source in regards to HERA. Getting FnF out of conservatorship will certainly require a restructuring (at the very least to get rid of the seniors), and in a restructuring placement in the capital stack is of supreme importance. If the juniors take any haircut at all the existing commons, including Treasury's warrant shares, go to zero.

Also the Collins plaintiffs own JPS, therefore any settlement might favor JPS. But that's just my guess.

One of the Collins plaintiffs owns common shares; see pages A02, A04, and A06 of this memorandum from 2017. It is unknown if, or to what extent, that plaintiff (or the ones who own juniors) would be willing to sabotage settlement to benefit other shareholders than himself.

[FOFreddie]

Thanks LuLeVan,

Do you think the UST could be enjoined from implementing a cramdown if the SPS is still in place after SCOTUS?

Looking at UST ethics:

https://arc.fiscal.treasury.gov/files/pdf/Treasury-Ethics-Handbook.pdf

It looks like it was a clear violations of Ethics when they sent the confidential information to Barrons in March of 2008. The same UST official who the email was address to was actually chosen to be the new CEO of Wachovia before he resigned his position at UST. I am assuming the FDIC signed off on this. The the then head of the FDIC is now our Chairperson for our BOD.

How can they justify issuing shares at $ 27.50 underwritten by the UST officials old employer just 60 days after the Barrons planted article and now cram down public shareholders?