Replies to post #764462 on Fannie Mae-No Politics (FNMA)

[KenKong]

Hear! Hear!

[LuLeVan]

Government can and will keep a stake for awhile

There are legal limits

JPS are a debt

JPS are equity like commons. After recap/release, JPS will probably be converted into new commons anyway.

The cram down gazillion share recap fulcrum security recap plan has always been futile ever since they said they would begin allowing capital to build.

Recap/release is a one time event. The fact that is has not happened yet does not mean that predictions expecting it are wrong - or will "ever be futile." Recap/release is actually TINA if you want to restore economic value to commons and JPS before 2040.

[kthomp19]

at release government absolutely knows shareholders first priority will be to get them the hell out the door, therefore they will opt for control.

If all the government cares about is control, why bother releasing FnF at all? FHFA has full control right now.

Control is in commons, not JPS.

You do realize that if, for some reason, that the government wants both control and FnF out of conservatorship, that only makes it more likely that they will convert the seniors to commons, right?

They know commons will be the preeminent way to get the shares higher, thereby more capital on hand.

Nope. FnF's capital levels do not depend at all on the per-share price of the common.

Why else has there been a steady move out of JPS?

A large holder decided to sell its stake. It's the exact same situation with the commons about a year ago, when they slid from 74 cents in early June to the mid 40s in mid July before stabilizing around 50 cents.

The cram down gazillion share recap fulcrum security recap plan has always been futile ever since they said they would begin allowing capital to build.

Wrong. Before capital was building there was no reason to convert the seniors to commons because FnF had so little capital that any capital raise bringing them up to a level to exit conservatorship would dilute even the converted seniors to almost nothing.

FnF building capital makes future commons more valuable, which makes a senior-to-common conversion more likely than it was before.

It's not rocket science to figure out from there that no special privileges will be afforded to any share class

Wrong. FHFA and Treasury made an offer to convert the seniors and juniors to common, meaning that the juniors were afforded more privileges than the commons.