Replies to post #701886 on Fannie Mae-No Politics (FNMA)

[kthomp19]

No one knows what the cap rule will be.

Read the law. 12 USC 4612(a), to be exact:

(a) Enterprises
For purposes of this subchapter, the minimum capital level for each enterprise shall be the sum of—
(1) 2.50 percent of the aggregate on-balance sheet assets of the enterprise, as determined in accordance with generally accepted accounting principles;

While your statement is technically correct, the law tells us the lowest the capital requirement can go. Right now FnF's balance sheet asset base is $7T, so 2.5% of that is $175B. The law doesn't allow for anything less.

I dont know where you get 3 decades from?

2.5% of balance sheet assets (lowest possible capital requirement by law): $175B
FnF's current core capital: -$126B
Earnings: $20B/yr
Asset base rate of increase: 4%
Earnings rate of increase: 2.5%

(The last three numbers are normalized to non-pandemic times)

Work out the math and you'll get around 28 years for core capital to hit 2.5% of balance sheet assets.



This isn't scare-mongering, it's math and the law. Refusal to understand doesn't make it false.

By your definition weather forecasters are scare-mongerers too. Next time they say a hurricane is coming we should just stay put! Who cares what the numbers say!

Anyone not a moron knows it will be way less than 3 decades.

Right, which is exactly why there will be an equity restructuring. i.e., dilution.

The warrants have an expiration. If government tries to extend, I forsee more legal actions.

Quite the vague threat there. The Supreme Court ruled that the NWS was legal, so an extension of the warrant deadline would certainly be legal too. It might trigger a takings claim, but the DOJ clearly thinks that warrant exercise will result in less than $5B of liability to Treasury so an extension of the deadline would result in that amount at most.

Just like building capital, lawsuits are not a yes-or-no thing. You have to take into account the probability of winning and the amount won. The DOJ does, I suggest you do the same.

You don't understand the difference between chapter 11 and conservatorship.

On the contrary, you don't understand the similarities. Calabria, who helped write HERA, does. His firing (for purely political reasons, no less) doesn't change that at all.

You and a very few others keep pushing this as a chapter 11, most here know the difference between that and a conservatorship. Look it up. I posted a definition on both weeks ago.

You're getting caught up in semantics here. It doesn't matter what the equity restructuring is called. When it happens, which will have to happen if FnF are to exit conservatorship before 2049, the existing commons will be heavily diluted.