Replies to post #756483 on Fannie Mae (FNMA)

[Rodney5]

familymang, Please read what you wrote.

Quote: “ Today UST's Fannie LP is $185b, JPS LP is $19b.
- Fannie is worth approx $175b today (17.5b net income x 10 P/E).” End of Quote

Treasury’s Liquidation Preference calculated value that you gave is more valuable RIGHT NOW than your calculated value of the entire business! Both JPS and Common are wiped out!

[LuLeVan]

Hi familymang,

very interesting calculation.

There is just one slight mistake. You wrote (bold by me):

- That works out to UST getting $216b (92.5% * 200b equity value) in value and fannie JPS getting $15b (7.5% * 200b equity value which is ~80% recovery for fannie JPS).

Correct is (IMHO):

- That works out to UST getting $185b (92.5% * 200b equity value) in value and fannie JPS getting $15b (7.5% * 200b equity value which is ~80% recovery for fannie JPS).

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Total future worth of Fannie in 3 to 4 years would be $200b, of which UST gets $185b, Fannie-JPS get $15b (21% haircut), and commons get almost nothing.

[Wise Man]

Net Worth is NOT what meets the capital requirements.
Another attorney with his calculations. Familymang:

Fannie have a net worth of $64b but needs a minimum leverage requirement of 2.5% ($114b) to exit cship, which means $50b needs to be raised today from outside investors

He hasn't read the definition of Undercapitalized (capital classification) in the FHEFSSA:

the core capital is equal to or exceeds the minimum capital level

But also he hasn't read the capital metrics under the Capital Rule, posted by FnF every quarter in their earnings reports, where we can see that, by statute (FHEFSSA), is the Core Capital the one that meets the Minimum (Leverage) capital requirement, besides the new metrics added up by regulation: CET1 and Tier 1 capital.
The "Available Capital" in the Core Capital stands at $-57 billion (a negative amount) and it has to meet the Minimum Leverage capital requirement of $114 billion. Thus, the Capital Shortfall stands at $171 billion.

Undercapitalized was the threshold for mandatory release from conservatorship in the FHEFSSA conservatorship, before being struck by Pelosi/Calabria's HERA. This is why I have recovered this threshold for the release and other people have lifted it from my comments,

although by law in force today, the release is established in the February 2011 UST-HUD Housing Finance Privatized System "stringent capital requirements", at the request of the Dodd-Frank law, that directed the Treasury to outline "recommendations on ending the conservatorships, no later than January 31, 2011".

Notice that it's the very FHFA is also misleading with this concept, calling the Net Worth "capital reserve" that has to meet the capital requirements, as exposed with the testimony of FHFA's Sandra Thompson last year "shareholders' equity or capital reserves", and this year as we watch in her exchange with representative Blain in the hearing, who stated: "$100 billion versus $300 billion. I'm a former examiner." So, he pretends to meet 300 billion capital requirement with today's $100 billion, when $100 billion isn't capital but Net Worth mentioned before ($103 billion). And $300 billion isn't the capital requirement but the capital shortfall or capital needs together, that increases to $400 billion with the $103 billion offset attached to the $103 billion gifted SPS since December 2017.
This goes beyond not having knowledge of financial concepts that I mentioned yesterday about familymang. We are witnessing a regiment of attorneys and company, hired by the hedge funds to rip off the shareholders with their calculations and judicial diatribe, now about constitutional issues so that they can get damages as substitution for their missed dividends on noncumulative dividend JPS, and where the laws are deprived of their meaning, as exposed in the example of the definition of Undercapitalized in the FHEFSSA, the reason why they plotters talk about HERA and not the correct law FHEFSSA, as amended by HERA.

[NeoSunTzu]

- Fannie have a net worth of $64b but needs a minimum leverage requirement of 2.5% ($114b) to exit cship, which means $50b needs to be raised today from outside investors

Aside from what Wise Man stated this is wrong on a number of other points: 1.) the current letter agreement between UST and FHFA, which can be changed, but has not been, calls for two consecutive quarters of 3% capital to exit c'ship, then going forward 2.) the Calabria capital rule determines the ongoing requirement which is NOT 2.5% and unless the rule is changed will NEVER be only 2.5%. The FHFA website (or UST) where the rule is defined has a base level of 2.5% then a certain percentage of other asset or capital categories which will fluctuate but will NEVER be 0. In fact, the calcuation for FNMA as of the last quarter of last year (I believe) turned out to be 4.4%!! The same quarter for FMCC turned out to be 3.3%. Again, unless the rule is changed it will NEVER be just 2.5%.