Replies to post #85633 on Fannie Mae-No Politics (FNMA)

[Demar]

"By comparing the wind-down to Sallie Mae's 1990s restructuring, one can then begin to draw parallels and predict outcomes. In 2006, the Treasury released an analysis on the Sallie Mae wind-down, which can be found here."

Sorry, Forgot the link:

http://www.treasury.gov/about/organizational-structure/offices/Documents/SallieMaePrivatizationReport.pdf

[VETERANTRADER]

Looking Good!

By comparing the wind-down to Sallie Mae's 1990s restructuring, one can then begin to draw parallels and predict outcomes. In 2006, the Treasury released an analysis on the Sallie Mae wind-down, which can be found here.

The wind-down of Sallie Mae included the creation of a new private sector holding company. Shareholders of the old Sallie Mae voted to exchange their shares of stock for the new Sallie Mae shares and a reorganization was made effective August 7, 1997.

[obiterdictum]

The hearing was held on April 24, 2013 and there was no discussion of Sallie Mae.

http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=329901

The plan that the author of the article refers to has little to do with Jeb Hensarling or the Sallie Mae wind down and everything to do with Ed DeMarco, Acting Director of the FHFA. See the actual plans and updates and compare it to the one in the Seeking Alpha article that is a mixture of fact and speculation.

Building a New Infrastructure for the Secondary Mortgage Market
http://www.fhfa.gov/webfiles/24572/fhfasecuritizationwhitepaper100412final.pdf

Common Securitization Platform and FHFA’s Strategic Plan
http://www.chicagofed.org/digital_assets/others/events/2013/risk_conference/ugoletti_common_securitization_platform.pdf

A Progress Report on the Common Securitization Infrastructure
http://www.fhfa.gov/webfiles/25144/WhitePaperProgressReport43013.pdf

The only discussion of the future of the GSEs in that April House hearing was that presented by James Millstein, architect of the AIG restructuring.

Millstein proposes that:

The first step is to end the GSEs and to recapitalize and privatize their mortgage guarantee businesses. The highly-levered investment portfolios each firm ran before the crisis--in effect, government-sponsored hedge funds--should continue to be wound down under federal supervision. The public charters that allowed private shareholders to benefit on the backs of taxpayers should be terminated. The private mortgage guarantee businesses should be recapitalized and sold as private "first loss" insurers, with significant capital standing in front of the government's new reinsurance. They will have no special privileges, and no implicit or explicit guarantee of their liabilities. As private companies, they will have no ability to issue government guaranteed debt to fund expansive on-balance-sheet mortgage portfolio investments as they did under the “government sponsorship” model.

In Millstein's plan, Fannie and Freddie are put into receivership, liquidated and dissolved. The GSEs mortgage guarantee businesses are turned into corporations onwed by private investors. In this plan preferred stock is to be converted "to common stock at a valuation that provides Treasury full recovery of net cash investment." The common shareholders if transferred to the new company would greatly benefit. However, the question is will the common shareholders be included in this plan? That is not presented or explained.