Replies to post #743319 on Fannie Mae-No Politics (FNMA)

[familymang]

The bear case is that all litigation is fruitless and the status quo lasts for another 15+years of organic earnings retention, at which point the GSEs are recapitalized (organically) and the NWS simply turns back in line with the last PSPA amendment.

The hope is that any one admin between now and then would like to monetize the GSEs, as no one has access to ANY GSE funds prior to that point in time. A simple NPV will tell you that $200b+ of value today (assuming snr pfd conversion), + a perpetual commitment fee, is more enticing in value than an annual $25b NWS turning on in 15+ years from now that is unaccessible to any admin prior.

[kthomp19]

And I also said "may" for the juniors.

This is the crux of my misunderstanding. Outside of receivership, what mechanism is there to wipe the juniors? All the way to actual zero.

In fact, what mechanism (again outside of receivership) is there to force the juniors to take a haircut? I can see them voluntarily taking a small to medium one to get recap/release done; I'm just referring to a situation where they are forced to.

As long as common holders retain their shares, even if they are diluted to practically worthlessness, they aren't impaired.

Agreed. If the commons are worth anything at all post-restructuring, the juniors should be money good.

A long runway indeed.

That's certainly a risk here. Even if the juniors cannot go all the way to zero outside of receivership, nothing says they can't get close.