Replies to post #756866 on Fannie Mae-No Politics (FNMA)

[Fannie Heyyyyy]

Disabuse...lol. Douche.

[LuLeVan]

Thank you for the clarification. But there remains the following argument against a JPS haircut (and it is based on pure logic):

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172057238

Another argument against an equal conversion/equal haircut on JPS/SPS is that the JPS are senior to commons. If there were a haircut on JPS, commons would become worthless. (This was the case with AIG, where there was a 10% haircut on JPS, and commons became worthless.). Otherwise, the seniority of JPS relative to commons would not be taken into account.

On the other hand, commons becoming worthless is not desired by the government. After all, it wants to monetize its common holdings. Even if treasury held two trillion common shares worth 0 cents after an equal SPS/JPS conversion, the total value of this position would still be zero:

This is because 2 trillion x 0 = 0

By contrast, two trillion shares of common stock x 5 cents yields the desired $100 billion.

KThomp19 wrote several times: If commons were worth even one cent, JPS would be worth par.

[kthomp19]

Let me disabuse of the notion that CBO, or its analyses, will have any role in the resolution, or determination of the agreements that will end the c'ship; it will have NO role.

In turn, let me disabuse you of the notion that the CBO report can be completely disregarded. The CBO has access to much better and more definitive resources than anyone.

Anyone who has any background in scenario analysis knows that increased complexity of the subject or process to be examined necessarily limits the number of scenarios that can be fully analyzed and reported.

If your argument is "there are so many possible scenarios we can't possibly make any predictions" then it is wrong. There are plenty of parameters that are already known. The junior pref contracts cannot be bypassed outside of receivership or liquidation, for example.

Statutorily, it is the UST and FHFA that will have to agree on the final "settlement," which will be based on or influenced by the mortgage industry players, courts, Congress, and the administration that eventually acts - just to name a few.

That sounds about right. You forgot to include junior preferred shareholders in your list, who have veto power over any harmful amendments to their contracts. Legacy common holders do not belong on this list at all.