Replies to post #12278 on Fannie Mae Preferred S (FNMAS)

[rosen62]

Reality is without GOV cash - FNMA would have had to go Ch 11 and kill equity 100%

I do not think -just my opinion- it is entirely correct to depict the government as "savers" of Fannie and Freddie, even when they -perhaps- needed a rescue. This is false. The government went in *to save themselves* because they realized how big of a problem this was. Just a few months before conservatorship Fannie Mae issued Jrs. at an 8% interest pop (FNMAT) and the raise was done under the recommendation of Paulson. He likely realized no more funding would be coming and decided to protect his chinese friends.

This move not only screwed the buyers of the most recent Jrs. -who followed Paulson's recommendations- but also all shareholders.

It is incorrect to depict shareholders as evils who deserve to be punished and the government as savers of an equity that was worthless. This too can be dealt with in courts. Again, my humble opinion.

NOTE: Just think why the government didn't use a simple -albeit large- loan line. That is what was needed at the time. However, Paulson chose to strangle them with a 10% dividend and no repayment of the Srs. What was that all about? Why not receiving them, then? It appears the government acted in very biased way with an ulterior goal.

[Sam1212]

Reality is without GOV cash - FNMA would have had to go Ch 11 and kill equity 100%

Without govt. intervention, FNMA was trading closed at 7.04 on sept. 5, 2008 with all the risk of running out of cash which you mention prior to conservatorship. After intervention it closed at 0.74 on Sept. 8, 2008 the next day after intervention. So to claim that Govt rescued FNMA (as a privately owned company is false), they saved the housing market NOT fnma. May be it was needed in the light of public good but private shareholders need to be compensated for the harm done to them..