Replies to post #794156 on Fannie Mae-No Politics (FNMA)

[bradford86]

I tend to agree here. The commons are a gamble on write down. Which i think is a bet on warrant monetization to fund housing

[Donotunderstand]

why would capital level increase when SP is removed via conversion to other equity ?

[Freddie bagholder]

did you not sell off and go away? Why are you still lurking here?

[The Man With No Name]

I think you're wrong here. The capital levels (including CET1) increase by $191 billion when the SPS disappear from the balance sheet. It doesn't matter whether the SPS disappear by write-down or by conversion to commons.

The SPS aren't part of regulatory capital, per FnF SEC filings. Converting the SPS to Commons adds the conversion $ amount to CET1 capital.

This has to do with the ERCF, not balance sheet. You don't get the same benefit by making the SPS "disappear", which is never going to happen.