Replies to post #2510 on Fannie Mae Preferred S (FNMAS)

[jwnoble3]

I posted this before, but wanted to raise again...

Also, Very interesting on page 8, FMCC the allowance to build a networth reserve starting at $3B (2013), $2.4B (2014), $1.8B (2015)...$0 in 2018. Trying to figure out - why allow the networth reserve until 2018? Isn't this equity? Is TSY leaving an out to allow them to recapitalize and sell off thier stake?

a quick look at all Freddie Jr pref call dates to see if it correlates to the equity networth allowance

Billions callable date
0.246 2001
0.15 2003
0.149 2003
0.396 2003
0.396 2003
0.297 2006
0.248 2009
1.01 2011
0.99 2011
0.34 2011 ~4.222B callable end of 2011 (NOTE - 3B reserve allowed in 2013 + 1.2B FMCC currently has as networth)
5.9 12/31/12 or 2017 (fmckj)
0.5 6/30/12
0.5 3/31/12
0.325 2013
0.322 2013
0.247 2014
0.5 2017
~12.516B Total Jr Prefs

[littledevils90210]

Yes. There wont be any divies taken until they reserve 3 billion in 2013, 2.4 billion and so forth. Most importantly it is not a mandatory 10% which is the killer. IMO, they are giving GSEs a lifeline....go figure..devil

[Joe Stocks]

I believe they would not want to re-capitalize until the 200B in lawsuits are settled with money center banks.

Not a matter of wanting to re-capitalize, more that the US Treasury is not allowing FnF to recapitalize. Technically the US Treasury can put FnF into receivership anytime they are technically insolvent. Issuing them the senior preferreds kept them technically solvent. Without the ability to build capital we walk a thin line. The treasury could pull the senior preferred new issues and wait for a quarter that we again dip below as insolvent, and then put us into receivership. By allowing our equity to drop to zero by 2018 gives them an option to hold us by the nuts. Receivership means they would be required to start liquidation.

I am not saying that I think this will happen. I am just saying that the treasury seems intent on keeping FnF borderline solvent/insolvent to keep their options more in their favor. Also, as a reminder, the $200 billion is the face amount of the mortgages involved. The damages are considerably less, and the final settlement will be too. It will be interesting to see how the treasury treats a settlement. I would love to see them skim the whole thing off as a "dividend". That would bolster the 'net investment theory'. Of course the best outcome would probably be to redeem a similar amount of senior preferreds.

Is TSY leaving an out to allow them to recapitalize and sell off thier stake?

You say something about redeeming the preferreds? With what? FnF have almost no equity. In 2018 they are expected to have NONE per the latest directive.

You know...I hate to always appear to be negative. I do hold out some hope as I wouldn't own the shares otherwise. I only want to express how I look at the current situation and contribute my understanding of the same...and maybe correct some mis-information, or hopefully be corrected on something I said.

[stockanalyze]

treausry can use all the money it can sweep, so expect a court decision in our favor (these courts are political. did you see how mozillo gor cleared, sokol was let go, nothing happened to google..well you may want to think about shorting that casino guy who even went to isreal with romney if you believe role of politics).