Replies to post #4283 on Fannie Mae Preferred S (FNMAS)

[brandemarcus]

Well they might be that stupid. They never went with the zimmer plan (see gse blog-12/15/09, 12/21/09). It's still an additional benefit to keeping the old structure(once net investment is 0) plus the 79.9% that the government has the right to for the warrants. Perhaps the community banks are only located in democratic congressional districts.

[Joe Stocks]

Why would US govt. flush the 79.9% down the toilet? Just to spite the banks and grannies that bought the jr. pfds.?

Simple. They could keep FnF in conservatorship for ever, or as long as they need them. Effectively they already own the 79.9% AND get to keep ALL the profits. Why mess with that? A nice little convenient piggy bank to bolster the US Treasury. All under the guise that they, the US govt, can should do that as the shareholders should not be able to profit from the US government guarantee that they were FORCED to offer to FnF bond holders to save the housing industry after FnF screwed it up.

Now, you and I may not agree with that. I know I don't. However, every action they have taken is leading into that direction. That appears to be the consensus. They want for nothing else FnF gone.

I think we are in for a fight to get our company. Almost ALL (perhaps all) others here appear to think time will provide a very handsome pay day sometime in the future. Me on the other hand think that we should be getting some senior preferreds redeemed now with the profits we are making.

BTW, I still haven't seen a good plan for recapitalizing FnF if they were indeed given back to the shareholders. If the US gov't were to sell their 79.9% those funds would flow back to the US treasury. What would they buyers be buying? A FnF with no equity. The Treasury could walk away from their senior preferreds and it would not do one thing to recaptalize FnF.

Millstein himself said last month that FnF have been effectively been nationalized.

There is one key point to the Millstein plan that needs to be done to recapitalize the new FnF.

3.
Eliminate the dividend on the outstanding Treasury Preferred Stock so the reformed guarantee businesses can use revenues
from the increased g-fees to rebuild their capital base and pave the way for taxpayers to recover their entire investment
•
Initially, the existing Treasury Preferred should be converted into a non-cumulative preferred stock
•
It makes more sense to use earnings to build capital towards a long term solution for our nationalized housing finance problem than for short-term initiatives unrelated to solving the government’s housing problem, such as paying for a two-month extension of the payroll tax deduction with a ten-year tax on the mortgage market

"Eliminate the dividend" on the senior preferreds...

Seeing that we can't even keep a little of the profits to redeem senior preferred or to build capital, and that also we have been ordered to turn over all equity to the Treasury by 2018, does anyone here really think we can have any chance of eliminating the dividend?

chrisanja, Why would US govt. flush the 79.9% down the toilet?

Because they don't need it to take all 100% of profits.