Replies to post #793072 on Fannie Mae-No Politics (FNMA)

[DaJester]

"Does that mean if a senior-to-common exchange happens you think it will be too late for anything to be done about it? The same logic would apply to warrant exercise."

Yes, although this doesn't mean lawsuit/s won't be filed after the fact. They just have a near-zero chance of success. What are they waiting for? I don't know, I don't speak for "they".

"they would have to take a $200B writedown of asset value, thereby increasing the national debt by that amount"
Yes, but how did the rogue assets get on the books to begin with? It's kind of like the DTAs, it's all just bookkeeping entries and where they are entered. This is different than actual or future cash flows. There is no tangible taxpayer money lost by halting the future pillage of privately owned companies. It's not their (future) money to lose. It sits there as an accounting entry based on the ongoing conservatorship and resulting dividends.

The money recovered from the initial draws/debits has already been entered on Treasury's books and already exceeded the draws. Unfortunately, it was not used to write down the assets because they built the contract in a way that prevented that logical return of capital. But it was actual cash received by Treasury. A write-down could rectify the accounting to prevent a government windfall - 300bn already received, plus another 300bn to retire the SPS? Just as easily as the conservatorship started with government policy, it can just as easily end. This is mentioned in the footnotes of the report: "Estimated senior preferred values and future draw amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in government policy with respect to the GSEs". The amounts CAN be altered with a pen swipe.

While it's possible the 300+bn worth of SPS gets converted, it's also possible it's less than that. Just my opinion and speculation, so no - I will not share a calculation nor will I file a prospective lawsuit on behalf of "they" in case you were going to ask.