Replies to post #746466 on Fannie Mae-No Politics (FNMA)

[LuLeVan]

Let’s all pray it will happen in 2023. Next year has election... Biden...will need to work fast.

If "it" is recap/release, you are implicitly calling for either a warrant exercise with SPS cancellation or for an (even more dilutive) SPS to common conversion. Because without at least one of these "fast" recapitalizations, there would only be the "slow" organic recap resulting from the NWS stop. With the latter, it would take at least another 17 years to reach the required CET1 level (if the government refuses to write off or convert the SPS).

It makes no sense to call for a release in 2023 while ignoring the required capital levels. CET1 is currently negative by more than $100 billion.

Holders of commons must therefore be aware that a fast release in 2023 will necessarily be accompanied by some sort of dilution. They can only pray that the government will limit itself to a warrant exercise and not convert the SPS. Then, however, it's no longer an investment but a gamble (with low probability of success).