Replies to post #744716 on Fannie Mae-No Politics (FNMA)

[Rodney5]

JOoa0ky Quote: "Everyone keeps getting tripped up with the idea that IPO'ing shares are based on the current price... That's what Tim Howard seems to think as well..." End of Quote

No, you are the one getting tripped up. Apparently, you do not understand the meaning of

MARKET CAP:

The companies market capitalization would be about $220 billion.

To get to a Market Cap of $220 billion each company's common shares would have to trade at fair value on the open market. Mr. Howard calculated the companies are worth $220 billion.

Mr. Howard is saying if the Treasury would cancel the LP and deem the SPS paid in full then the Treasury could convert the warrants to common stock at 79.9% and sell their position in the open market.

This is what Mr. Howard said,

Quote: "At what I estimate as their sustainable rate of after-tax retained earnings—about $13 billion per year for Fannie and about $9 billion per year for Freddie" End of Quote

Quote: "As noted earlier, I estimate their combined sustainable earnings to be about $22 billion per year. At a multiple of 10 times earnings—less than half the price-earnings ratio of the S&P 500—their market capitalization would be about $220 billion. Through exercising the warrants, bringing Fannie and Freddie out of conservatorship with a capital standard that allows them to price their business on an economic basis, and then selling the shares from its warrant conversion, the Biden administration could capture a very large portion of that $220 billion potential value for itself for whatever purposes it wishes, including an affordable housing fund." End of Quote

https://howardonmortgagefinance.com/2023/01/04/a-political-problem/#comments

[The Man With No Name]

Man with no name can correct me if I'm wrong...

I don't think you're quite understanding what the restructuring is conceptually.
- Who owns what
- Who is the one selling
- How is capital being raised

I've been dealing with restructurings longer than this has been in conservatorship. That should answer your question.