Replies to post #2502 on Fannie Mae Preferred S (FNMAS)

[44centsAKAchoccake]

Yes, that's true. Again, I don't see it happening soon, but I do think that could be part of it.

[Joe Stocks]

Wouldn't the executing of warrants raise enough money for govt to get paid back + recapitalize them?

The govt's balance sheet shows it owning warrants for ownership of 79.9% of Fannie and Freddie, and senior preferred stock in the amount of about $188 billion. If the government exercised the warrants no new capital is created for FnF. If they sold the warrants the funds would flow to the treasury; still no capital to FNF.

There is one paragraph in the terms sheet from that fateful day in September 2008;

These agreements are the most effective means of averting systemic risk and contain terms and
conditions to protect the taxpayer. They are more efficient than a one-time equity injection, in that
Treasury will use them only as needed and on terms that the Treasury deems appropriate.

"only as needed" This fits in somewhat with the net investment theory. Once we pay dividends equal to the amounts of senior preferreds issued, could the gov't cancel the Senior preferreds and sell the warrants as it's "profit" due the taxpayers for the use of their funds, and Fnf could start building capital from earnings. Once the net investment is paid back, are the Senior Preferreds no longer needed.

Just thinking out loud after a long day.
I hope some bought those MLP's I mentioned the other day.

OT:

We have been looking at and buying some beaten up MLPs. BPT, CRT, SBR, MVO, and MARPS specifically. My trading partners and I think they may have experienced some tax loss selling that has put some abnormal selling pressure on them. Might be worth a look going into the new year.

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=82952879&txt2find=marps

[skibrian]

sambass...possible, not likely. my theoretical, and unlikely scenario, rests on this...from the freddie investor presentation that 4cents linked to back around christmas time, note last paragraph on page 5:

The Director of the Federal Housing Finance Agency (FHFA) placed Freddie Mac and Fannie Mae in conservatorship on September 6, 2008 in order to restore the balance between the GSEs’ safety and soundness and mission
?FHFA is the Conservator for both GSEs
»The Conservator assumed all powers of the Boards, management and shareholders
»FHFA reconstituted our board of directors and executive management
»FHFA stated that the GSEs will continue business as usual during the conservatorship
?At the time the GSEs were placed into conservatorship, FHFA indicated that the goals of the conservatorship included:
»Restoring confidence in the GSEs
»Enhancing the GSEs’ capacity to fulfill their missions
»Mitigating the systemic risk that has contributed to market instability
?At that time, FHFA indicated that a GSE’s conservatorship will end when the Director determines that FHFA’s plan to restore the GSE to a safe and solvent condition has been completed