Replies to post #760378 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Seems like a meaningful "amount" would change if NWS is tossed (retro)

LP goes to 187 (you note) -------------- (What is it today ? About 240?)

As of March 31 2023, the liquidation preference was $182B for Fannie and $110B for Freddie; $292B total. Unwinding the NWS would remove $105B of that.

FnF get 55B from Treasury

Only if the unwind happened today. If it happened three years from now Treasury would not owe FnF a single penny in cash (all relief would be liquidation preference decreases), and if it happened after that it would be FnF who would owe cash to Treasury!

And the more capital and the less F and F owes GOV the better by far for COMMON

Not the existing legacy common.

The more capital FnF build up, the less equity outside investors would get in a recap and thus more is available for current equity holders (Treasury, junior prefs, legacy common). But since Treasury can convert its seniors into commons, it can capture all of the upside that the legacy common would have otherwise gotten.

Owning the commons now is not just a bet on recap and release. It is a parlay that includes recap/release but also requires:

1) Treasury writing down the seniors instead of converting them to commons
2) The juniors not getting a conversion offer that makes them outperform the legacy common anyway
3) An outside capital raise being small enough that it again doesn't have the legacy common underperform the juniors

That's a very tall order. #1 alone is shaky given that the senior-to-conversion almost happened in late 2020.