Replies to post #813437 on Fannie Mae-No Politics (FNMA)

[toupeeman2000]

I agree that UST should sell the warrants back to the GSEs, but only at the same price that was paid!

[Ace Trader]

The warrants were only a backstop for the Gov’s $189 billion in case the GSE’s went BK or couldn’t repay them! They should be able to convert them and sell them. I feel they will try to sell some of the SPSA or all. I don’t see how they can cash in the warrants.

[kthomp19]

I read it somewhere a few years ago. The free warrants are just-in-case measure to ensure government is in control if the GSEs go bankrupt.

Either your source or your memory is incorrect. The warrants were designed to both suppress the common stock price and provide additional value to Treasury.

Common shares cannot be collateral because they sit at the bottom of the capital stack.

Maybe UST can sell the warrants back to the GSEs, as an alternative. UST did the same to AIG.

Be careful what you wish for. Treasury exchanged its AIG preferred shares for a 92% stake in the common. The warrants were useless at that point.