Replies to post #777627 on Fannie Mae-No Politics (FNMA)

[navycmdr]

the P's arrogantly think only "they"

will receive All of ANY consideration

ending the 15 year Govt Hostage while

the other Actual OWNERS of the GSEs

will just sit by for EVEN MORE abuse ...

[JOoa0ky]

SPS write off is bad optics.

The taxpayer gaining an additional $20B for housing is good optics.

[LuLeVan]

You are acknowledging that the difference between write-off and SPS conversion is just an extra $20B in the Treasury's pocket?

Yes, and I mentioned this before. I thought a mere $20 billion more might not be worth it (or might scare off subscribers to the new shares), but I read convincing counter-arguments. For the government, "getting more out of their investment" is something to brag about, especially if the money is used to support affordable housing ("buying" votes). No one cares if legacy commons suffer from dilution. That's why the government and the judges still cling to the narrative that FnF were "saved" by the government - or even that they "caused the 2008 meltdown" (a blatant lie). Calabria wrote that the conservatorship is the administrative version of Chapter 11. This all points to a conversion of SPS to commons.

[kthomp19]

That's some serious effort and bad political optics for not a lot of additional gain for Treasury, IMO

You're making the implicit assumption that a conversion is somehow worse in terms of political optics than a writedown. Treasury said the exact opposite three years ago.

Yada yada they can change their mind, whatever. All that shows is that both the probability of a conversion and the probability of a writedown are non-zero.

What's important are the actual values of those probabilities, and with only one data point that speaks against writedown, I don't see how it's rational to put the probability of a writedown over 50%.

And yes, assigning a numerical probability to this is of utmost importance, though naturally being an opinion it will not be the same for every person. Without quantifying the estimate how can one tell if owning the commons at today's prices is a good deal or not?

If they use "waiving" the SPS as a bargaining chip they can likely get shareholder to agree to warrant exercise

Where on earth did you get the idea that shareholders need to agree to warrant exercise?! Neither the juniors nor commons will have any say when it comes to the warrants.

The only circumstance in which Treasury has to negotiate with the junior pref shareholders is in trying to get them to accept a less favorable conversion to common than they would accept if the seniors were written off. And in no circumstance whatsoever will Treasury need to negotiate with common shareholders over anything at all.

and let the commons climb to $20 and JPS to par.

$20 with the warrants exercised? LOL!!!