Replies to post #794332 on Fannie Mae-No Politics (FNMA)

[The Man With No Name]

You're dang right I'm sure and there's nothing novel about them. Senior/junior, etc. only denotes seniority in rights. Just because you have an ownership interest, i.e. - SPS, JPS, Commons......that doesn't mean the ownership interest has any value (in the case of negative net worth).

You seem to be confused by the SPS cumulative dividend feature.

[Donotunderstand]

Barron

yes - these are unique !!!

The GOV has called them equity and the money "sent" to F and F is called an investment not a loan
I imagine the GOV books reflect this

At same time - normally Preferred Stock are issued without an expiration date - for last 20 years or so (in prior years most JPS had maturity dates).

I do not think the SP have a maturity date but --- but ---- I do believe the GOV has the right to demand payment as if they matured - a put on F and F (this put might be after x years like 10 years OR OR when F and F have X in capital OR OR before F and F can again return to ---- ====== . Thus while an investment the GOV has a right to demand they be redeemed !!! So that cost to F and F - about 200B in cash sits on them as if it were debt and maybe more like DEBT that is matured --- but redemption is delayed while dividends are paid?

[kthomp19]

You say the SPS are equity. Are you sure?

They are in the equity section of the balance sheet. They have a dividend rate, not an interest rate. What else would they be than equity?

If anything the SPS are more like obligations

Semantics. They are still equity, no matter what else you call them.

Afterall, if the Companies are obligated to pay back the LP that has been accumulating since day one, how can you consider them to be equity?

That repayment obligation only triggers if and when FnF are actually liquidated.

Isnt equity the residual ownership after all debts are paid off?

It's the residual value on the balance sheet after liabilities are subtracted from assets. That doesn't require actual repayment of the debts.

The SPS LP is a debt that is owed to Treasury.

Only upon liquidation.

So what equity do the SPS have in GSEs of a negative net worth of a couple hundred billion?

FnF's net worth is not negative at all. It is positive.