Replies to post #752577 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Kthomp seems to think common are stupid

Because the govt. has stolen all of the value.

No. I said that if chessmaster is right in that outside investors would be stupid to buy post-dilution commons, then it's even more stupid to own pre-dilution commons now.

So either owning commons now is stupid, or chessmaster is wrong.

Newsflash: They haven't as yet.

Yes they have. Existing common shareholders have no voting rights, and the liquidation and dividend rights of both the commons and juniors are buried behind those of the seniors. These things won't be restored until after FnF are recapped and released, which is when all the dilution will occur.

The key difference between the commons and the juniors is that the commons can be diluted and the juniors can't. It's that simple.

It may seem to you and GB that it is a fait accompli that common gets a nickel or $1.

Not a fait accompli, but something with a high enough chance of happening as to significantly influence whether the commons are worth owning now.

Treasury is clearly unwilling, and perhaps even unable, to just write the seniors off for no return consideration. The presence of a CET1 capital requirement means the only other way to clear out the seniors is to have them convert to commons.