Replies to post #743414 on Fannie Mae-No Politics (FNMA)

[HappyAlways]

I have a different view on some points, fyr.

This is not something that one can reasonably expect Treasury to give up with no return consideration.

- It is not "give up". UST simply cannot do anything with the senior Prefs, given the $400B (my estimate) NWS overpayments.

Treasury converted its preferred shares to commons with AIG, diluting the prior owners by 92%, which is more than the 79.9% "cap" some people think Treasury cannot exceed.

- AIG is different. Fannie and Freddie had actually overpaid the SPSPA already.

FnF are in far worse shape right now than AIG was. FnF are hundreds of billions of dollars below their capital requirements; if they were released from conservatorship today they would have to be put right back in due to being "critically undercapitalized" as defined by the law (HERA).

- the Capital Requirement is arbitrary and substantially over-stated. It will change. Banks have well defined capital requirement. Fannie and Freddie are in secondary mortgage business, which is unique for US only. FHFA is to oversee Fannie and Freddie in conservatorship, and is not in a position to impose a Capital Requirement as if it is some official business regulators. I think they have over reached. This may be challenged.

[HappyAlways]

I have a different view on some points, fyr.

This is not something that one can reasonably expect Treasury to give up with no return consideration.

- It is not "give up". UST simply cannot do anything with the senior Prefs, given the $400B (my estimate) NWS overpayments.

Treasury converted its preferred shares to commons with AIG, diluting the prior owners by 92%, which is more than the 79.9% "cap" some people think Treasury cannot exceed.

- AIG is different. Fannie and Freddie had actually overpaid the SPSPA already.

FnF are in far worse shape right now than AIG was. FnF are hundreds of billions of dollars below their capital requirements; if they were released from conservatorship today they would have to be put right back in due to being "critically undercapitalized" as defined by the law (HERA).

- the Capital Requirement is arbitrary and substantially over-stated. It will change. Banks have well defined capital requirement. Fannie and Freddie are in secondary mortgage business, which is unique for US only. FHFA is to oversee Fannie and Freddie in conservatorship, and is not in a position to impose a Capital Requirement as if it is some official business regulators. I think they have over reached. This may be challenged.