Replies to post #778027 on Fannie Mae-No Politics (FNMA)

[TightCoil]

301,000,000,000 STARS!
"On the basis of overpayment to the Treasury because NWS might not be legal which now once the trial is certified has precedent."

NWS might not be legal which now once the trial is certified has precedent.
PRECEDENT PRECEDENT

[bradford86]

I am really struggling to read this — i am sorry but i just will have to ask kthompson or someone else to put up a response to this — in the meanwhile i wish you the best

[Guido2]

Anyone who promotes exercise of warrants will get a 💩 from me. Otherwise, you do sound reasonable and intelligent.

[HappyAlways]

Don't think you really understand, when you said "They stopped the sweep in 2021". NWS was not stopped at all. Instead of paying UST, the GSEs are allowed to keep their earnings to strengthen their capital position since 2021. But at the same time, the amount they kept are added into their Liquidation Preference dollar-for-dollar. When things resume normal, Fannie and Freddie are required to pay 10% of their LP as dividend annually. (This is clearly stated in the Amendment Letter). The GSEs repaid $310B upto 2021, yet their loan balance keeps hiking. That's why some call NWS a highway robbery. NWS is a clear case of illegal taking of private property.

[kthomp19]

On the basis of overpayment to the Treasury because NWS might not be legal which now once the trial is certified has precedent.

The jury verdict did not state or imply that the NWS was illegal. The Supreme Court already ruled that the NWS was legal anyway.

They stopped the sweep in 2021, but the "discovery" or the trial that determined the illegality was 2023(might not be certified till 2024).

No. The cash sweep stopped in 2019 (not 2021), and the implied covenant breach happened in 2012 (not 2023-2024).

Regardless, I would be excited to see government agree Senior prefs paid in full from previous payments, cancel Liq pref, and simply exercise warrants as part of the agreement to recap and release.

Sure you would be excited for this, but what do you think the probability is of these events happening? Personally I have it at 25%.

I can see why based on how it has gone the last 15 years you would think the government would never let go of any of it's 3 chokeholds on FF... but what do they stand to gain if they leave investors with nothing?

That depends on whether Treasury writes off the seniors and exercises the warrants or converts the seniors to commons.

In the former case, Treasury's interests are aligned with those of the common shareholders, meaning Treasury would want the common share price to be high. This is Ackman's thesis, and is why he is crossing his fingers that Treasury exercises the warrants (because the alternative is worse for common holders).

In the latter case, Treasury's interests are opposed to those of the common shareholders, meaning Treasury would actually want the (pre-reverse split) common share price to be low.

At that point, nothing would change and they would just hold both of them as they are forever at which point the preferred shares aren't worth anything either.

Agreed.