Replies to post #717638 on Fannie Mae-No Politics (FNMA)

[MoneyRobot]

Can you see a scenario where Treasury will take less than 100% of the value for the SPS? The reasoning is that they have the leeway to do so because we are net 0. I know net 0 means jack but net 0 with a +310b in dividend profits already made allows Treasury to lets say knock off 100b of SPS liquidation value or maybe even 150b. Treasury can still say it made 160b + (220-150b)= 230b net profits. If they do that, they can cancel the warrants.

Its probably a fat chance they will knock off 150b. If not 150b or 100b, 75b or any number less than the LV?

Treasury is not out to make money. That is not their mandate and purpose. 230b profit is a win to sell to the public and that will put the cap on and finally end the 2008 financial crisis......

Just a thought.

[LuLeVan]

One thing the "treat past NWS payments as paying down the seniors" argument misses is that if the seniors were to be paid off completely, the funding commitment would disappear. That would send seismic shockwaves through the MBS market, and the SPSPAs don't allow FnF to do this anyway.

Hadn't the government given an implicit guarantee for the MBS in the many years before the conservatorship began? At that time, the SPS did not even exist.

[Mnemonic]

One thing the "treat past NWS payments as paying down the seniors" argument misses is that if the seniors were to be paid off completely, the funding commitment would disappear.

Why would this be the case? My understanding was that the companies never exhausted the original funding commitment, which was whatever the companies drew initially plus $200B. I don't see why the PSPA's need to be eliminated just because the original shares are paid back. Hypothetically the companies could still draw on the remainder of Treasury’s funding commitment, and the liquidation preference would increase dollar for dollar for whatever they take.

Obviously this poses a problem if the NWS resumes after meeting capital requirements, but I think you and I both believe that the likelihood of that is very low. If there are draws between now and release, I'd expect there would have to be some modification to the dividend structure, maybe even reverting back to 10%. Treasury could also negotiate a periodic commitment fee for their support.