Replies to post #706765 on Fannie Mae-No Politics (FNMA)

[nats1]

What do you think will happen when it gets readjusted from 4% ~> 2.5%?
- That's a lot of free excess cash.

I think they will adjust it before the SPO to an ultimate 3%. However, the release/SPO is supposed to happen at the minimum core capital level or whatever its called at 2.5% and I think that is the $185B or so figure and that's what the "too far away" is based on. I really believe the Government wants to wrap this up before the election and will not go to the nuclear option of cashing in the seniors. But the organic recap is not really an option for the Government if it wants to cash in. The bigger the cap raise, the more the Government gets so this won't go on forever.

Nats

[Guido2]

4% was established by the coward who hid the stress tests. He's history. The future is stress tests + cushion.

[kthomp19]

So we are forced to raise capital for up to 4% of assets and we will hold 4% retained capital for X number of years. Then at some point in time, someone will wise up and say we only really need 2.5% at best.

Sandra Thompson has already lowered the capital requirement to 3%, but I'll play along.

What do you think will happen when it gets readjusted from 4% ~> 2.5%?
- That's a lot of free excess cash.

I'd bet dollars to donuts that cash goes to Treasury before any shareholder even gets a whiff of it. The political backlash of an enormous special dividend to private shareholders would be quite unpalatable.

[Louie_Louie]

That will be used to pay a super duper giganticus special dividend to JPS holders because Bradford will write an article deeming it so, and at that point, commons will only be a figment of the companies imagination. ;-)