Replies to post #749494 on Fannie Mae-No Politics (FNMA)

[NeoSunTzu]

Read the latest Tim Howard comment on his blog. He addresses the uniqueness of this situation and one of the topics or terms ("restructuring") discussed here way too loosely. The response addresses a Fanniegate Hero post that Tim describes as "word jumble" ... you fill find those posts in response to my "gseinvestor" post/thread.

[kthomp19]

How many bankruptcy reorgs did you do where the Conservator took $300B+ in NET PROFITS for itself IN RETURN FOR NOTHING, thus depleting nearly ALL their wards capital?

You keep saying stuff like this, but it's just a logical fallacy. The absence of an analogous case in the past does not affect what's really at issue here: how much the existing common will be diluted in the future.

There have been no "bankruptcies" in the past where the companies ended up being very profitable (remember that they weren't from 2008-2012), where $300B of cash was siphoned out (after $193B cash was put in), etc etc.

But that does not at all prove the point that you think it does. FnF must restructure its balance sheet to hit their lowest (2.5%) capital requirements before 2040. That would mostly be accomplished by Treasury cancelling or converting the seniors (or some combination of both), but a capital raise would also speed up the process.

The reason "bankruptcy" keeps coming up is because the state FnF are in very closely resembles a bankruptcy. The reason "restructuring" keeps coming up is because that is how companies emerge from bankruptcies as going concerns.

Right now, Treasury has not yet exercised its warrants. That means the existing common own 100% of the common shares. The entire purpose of a restructuring is to divide up that stake among stakeholders so that an exit from bankruptcy (or in FnF's case, conservatorship) can be accomplished. Treasury will demand their pound of flesh, that much is apparent by now given its actions. No amount of moralizing talk will convince Treasury to give up the seniors and the warrants (let alone add on $26.9B in cash!). If capital has to be raised then those new investors will also want a piece of the pie. This process is what we should be focusing on.

Or do you mean to say that you think FnF can get out of conservatorship without a restructuring of its equity?