Replies to post #690834 on Fannie Mae-No Politics (FNMA)

[JosephS]

Well. We will have to see what happens. I don’t think anyone knows what they are talking about at this point.

I guess I will just watch.

[kthomp19]

We’re not asking the court to recharacterize the quarterly transactions under the net worth sweep.

Your post that I responded to said "So, at a minimum, we’re asking the court to order the return of approximately $220.4 billion in cash ($26.9 billion) and write-downs ($193.5 billion).", and the explanation of these numbers started with "If these dividend payments were recharacterized quarterly".

This appears to be inconsistent with your statement in italics above.

We’re asking the court to recognize a taking (i.e., NWS) of private property (i.e., the companies’ capital) for a public purpose (see Collins opinion) without just compensation. If we’re successful, this would lead to a valuation of that taking; my model simply provides a way to do that.

Since Treasury took cash as a result of the NWS, presumably they would be required to return cash (as opposed to liquidation preference).

The only remedy that both unwinds the NWS and conforms to the unchallenged original SPSPAs is for Treasury to return $125B in cash (the amount they received above the 10% dividends) and keep the seniors intact.

It also provides a process for Treasury and FHFA to quickly and fairly retire the senior preferred shares while settling the net worth sweep matter once and for all.

I agree here, I'm just saying that writing down the seniors will have to be voluntarily done by Treasury.

Of course, Treasury converting the seniors to commons instead accomplishes the same goal but actually involves return consideration to Treasury, making that route much, much more likely.