Replies to post #746080 on Fannie Mae-No Politics (FNMA)

[Govforprofit]

Robert, Have you read any of Barron4664’s recent posts? He seems to be putting forth some good points and you seem to have the knowledge to state if he is onto something. Thanks!

[kthomp19]

Do you think the Constitutional Seperation of Powers Doctrine is a joke?

Because I don't think the SCOTUS does.

I don't think they do either. That doesn't mean they will unwind the NWS.

Also, keep in mind what a NWS unwind entails: $61B cash payment from Treasury to FnF and reduction of the senior pref liquidation preference from $272B to $193B. That's all. FnF's regulatory capital levels would remain hugely negative because the liquidation preference decrease would all happen off balance sheet (meaning only the $61B cash would help), and every quarter that passes makes the $61B go down by $4.6B or so, with the $272B going up by the same amount.

If a court orders the NWS unwound some time in 2027, there would be no cash payment from Treasury at all (the $61B will have been exhausted) and all Treasury would lose is a bunch of off balance sheet liquidation preference. FnF would still need either the seniors to be converted or written down (and why would Treasury write them down for nothing?) or a massive capital raise to hit their capital requirements. That has all the makings of a Pyrrhic victory.

I'll ask it again. Why isn't the NWS a violation of the Major Questions Doctrine?

Hell if I know.

Maybe a federal judge would be a better person to ask, what do you think?

Of course. But you might not like what they have to say. I thought the NWS was a clear APA violation and, failing that, a clear takings. The Supreme Court disagreed on both counts.