Replies to post #671503 on Fannie Mae-No Politics (FNMA)

[LuLeVan]

The only "real" way to recap FNMA is a win, and the government forced to return the stolen money.

I think it's very likely that the Collins P's will win the APA claim. But they are less likely to win the "constitutional" claim.

Winning APA means that SPS would be deemed paid. But the overpayment from NWS is just $29.5 billion according to Collins. FnF would probably get it as a tax credit. In the unlikely case the amount was repaid in cash, equity of FnF would rise from now $45 billion to just $75 billion. The 3% rule requires $180 billion equity. So to get rid of conservatorship a capital raise (about $105 billion) would be necessary ANYWAY. Despite winning APA.

[LuLeVan]

Couple of wrong assertions and allegations:

Your first hypothesis is "Shareholders will get "nothing" at the Supreme Court, and the government will be permitted to violate the US Constitution's "takings" clause

No. I wrote: "new investors... must be offered a decent or even huge stake in the companies....[Therefore] I expect old commons to get something, but probably much less than generally hoped for."

If "shareholders are not redeemed by Scotus", there is no reason to invest in the GSE twins.... Thus, your entire premise is refuted, because its all "contingent" upon a LOSS at Scotus.

I never wrote this. Actually, I think that Collins P's will almost certainly win the APA claim, while they might also win the constitutional claim (less likely).

I bought my first Fannie Mae commons about two months ago. Later, after reading Glen Bradford and some very knowledgeable comments on the Seeking Alpha site, I sold my commons and bought the JPS (FNMAT, FMCKJ - very cheap, they are up 20% since then). The dispute here whether JPS or commons are the better investment is just ridiculous. We are in the same boat. However, I think that JPS at current prices offer a better risk/reward ratio.

So I'm neither a short seller (retail investors are not permitted to sell short anyway) nor am I "paid" by the government or any hedgefonds. I'm just a shareholder of JPS.

Additionally your "new investors" hypothesis has likewise been refuted, because investors are "not" chickens.

I assume Collins will win the APA claim, and that the SPS later (Texas court) will be deemed paid. But then FnF still don't have enough equity to end the conservatorship. A capital raise therefore is indispensable - unless you wait another 10 years (slow recap with retained earnings).

A private layer of capital is supposed to lose money in certain cirumstances. Hank Paulson and the Bush administration fabricated a bankrupt scenario in 2008, thereby cheating shareholder because there was actually no real need for a bailout. However, the "necessity lie" continues to circulate, and government doesn't seem ready to give up on this. EVEN if they lose Collins, what I think they will.

You want to turn USA into Zimbabwe, and assume we are a third world country which permits private property taking and has no US constitution

No. But for good reason, many people writing here have called the U. S. a banana republic - and they nailed it.

Government successfully robbed shareholders and apparently is not ready to completely give up on its "prey". It only gives back what it is forced to do so by law (Scotus). That's why Brookings Institution is already musing what to do with government's "gain" from its "investment" in FnF.