Replies to post #701855 on Fannie Mae-No Politics (FNMA)

[The Man With No Name]

Why would they need to re-org when they build capital just fine from quarter to quarter? You fail to acknowledge this constantly.

This is also never been advertised as a chapter 11, other than a Calbria off the cuff remark like his cucumber poop comments, so why would this be a chap11?

Bradford is right on this point. If you want to wait 30 more years to exit conservatorship, then that's what it will take if no new money is raised/no conversions take place.

Any windfall you think you might get with commons will be reduced to a popcorn fart in 3 decades given the current inflation rates and time value of money. A lot of people on this board will be dead in 30 years.

Just because you don't understand Chapter 11 reorganizations, that doesn't mean an exit from conservatorship won't essentially be the same.

[bradford86]

this isnt a chapter 11. this is conservatorship

they don't need to re-org. they can continue to retain earnings --- but i dont think that this allows them to accomplish administrative priorities effectively

you saying i fail to acknowledge something constantly, ha.. maybe i just don't acknowledge you when you constantly ask the same question and i get tired of answering it over and over and you not learning the difference.

anyway, hopefully my answer in the first two paragraphs satiates your need to be acknowledged for a while

[kthomp19]

Why would they need to re-org when they build capital just fine from quarter to quarter?

Because FnF's core capital right now is negative $126B. Meanwhile, the lowest possible capital standard in HERA is $175B.

That's a gap of three hundred and one billion dollars. If you're hoping for a retained earnings-only recap it will take multiple decades. Therefore if FnF are to be released any time in the next 25+ years, their equity will have to be restructured.

Just to emphasize, this assumes that FHFA makes the capital requirement as low as the law will allow. That means "but what if the capital rule is lowered?" is already taken into account.

At some point you need to realize that "building capital every quarter" is not a yes-or-no matter. The amount is hugely important. The capital requirements keep on rising so it's not a simple matter of dividing the deficit by current earnings (even though if you take that naive approach you still get a earnings-only release date well into the 2030s).

This is also never been advertised as a chapter 11, other than a Calbria off the cuff remark

The director of the FHFA, who helped write HERA no less, said that FnF exiting conservatorship will be like a normal bankrupt company (he used Hertz as an example) exiting bankruptcy. That involves a debt and equity restructuring.

(The debt won't need to be restructured because FnF have positive net worth)

The signs are clear. Ignore them at your peril.