Replies to post #784998 on Fannie Mae-No Politics (FNMA)

[Wingsjr]

Try reading and comprehending the entire point. This is a political play which makes it time sensitive. The last thing government needs is a lawsuit that will interfere with the timing. A lawsuit delay no matter the outcome is a plus for retail traders. People will pump the stock price with the hope of release and a big payday. Never underestimate the power of FOMO. The key is to not get greedy.

[kthomp19]

Unfortunately the 8-0 Jury saw the 300B swindle and they saw shareholders asking for 1.6B in damages... and they decided that shareholders only deserved 600 million...

This is a great point.

The Net Worth Sweep caused FnF to send almost $300B to Treasury, about $110B more under the NWS than they would have under the original SPSPAs, made them operate on the edge of insolvency in perpetuity (under the terms of the 2012 NWS), and ensured that the publicly traded common and junior preferred shares had zero economic value. The final damages to common shareholders? Zero for FNMA and a few pennies for FMCC. And only a few hundred million out of $33B worth of total stated value for the junior prefs.

In light of that, if Treasury were to be sued over a senior-to-common conversion why on earth would anyone expect to recover more than a pittance in damages? That conversion is far less damaging to the companies than the NWS was, and wouldn't have any more of a negative effect on shareholders either considering that the NWS removed all of their economic value already.

Supreme Court precedent is that in a takings case, what the government gains means nothing, it's only about what the property owner lost, i.e. market value. When it comes to publicly traded stocks like FNMA and FMCC, the market value is clearly known: the last traded price. That represents the most that a shareholder can lose, and therefore represents the most that Treasury could be on the hook for in a takings case. Does anyone out there really think Treasury would avoid converting the seniors to over $100B worth of commons to not have to pay out a couple billion in damages? Please.