Preferreds can be converted to commons NOW. Its quite simple, really. Just push "sell" to preferreds, and "buy" to commons, and poof, you have converted them.
Oh, wait, you are not talking about a "conversion", you really mean "preferred favorable conversion", where prefereds are given financial incentives to convert, but you fail to say who or what is gonna pay these financial incentives you recommend to be given to preferreds to convert.
You suggest this financial incentive to be paid to preferreds is funded by common shareholders. In other words, you want a judge to modify the preferred contract (which says they are non voting, non cumulative shares) based on something you call the "capital stack".
The "capital stack" is an order of preference "in the event of liquidation" or, in the instance when there is insufficient dividends to pay both common and preferred dividends "in a single quarter".
Since fannie is not in liquidation, and our government has robbed commons and preferred dividends equally, the capital stack does not apply.
In fact, the "capital stack" preferred prefernce "comes at a cost" to preferreds. This, like other stuff, is not "free". Preferreds are selling at a premium vs commons, a premium many feel is not justified.
The cost of "capital stack" preference, and dividend preference, is dear. Preferreds give up both the right to vote, and being a "hybrid" between bonds and stocks, the preferreds give up much of the growth (pps growth) with their "hard limit" on dividends. With the preference comes a cap on preferred dividends, which cant be raised above the cap..any additional divideds accrue to the commons.
There is no additional practical risk to the commons vs preferreds, because liquidation is not a viable option. And, single quarter dividend preference of preferreds is insignificant.
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