Replies to post #13529 on Fannie Mae Preferred S (FNMAS)

[5bagger]

Rosen - any path is constructive just not

R-ship after 3 or 5 years.

Living, breathing companies with monster profits do not go into r-ship.

Problematic for US govt. is the fact they sold chits in GSEs which legally have two options:

a. Release from c-ship
b. R-ship

The circle continues while the government gets profit sweep and they can therefore never be in sound and solvent financial condition.

The US govt. may wait it out... for Supreme Court. This may be a long, long time, right?

In the interim, the profits will keep pushing up the "well, what if we had kept it at 10%" calculation.

BY THE WAY: I calculate the amount is still quite high at 10%. About 71B for Fannie and 38B for Freddie. This is due to the high rate. 5 years is a good chunk of the "law of 72" doubling; amount will double in 72 divided by the interest rate. Understand?

In the interim, Mel Watt will do stuff. Some good and some bad, probably. But, then again, he can't de-list us (done), do back-door bailouts (done).

He might LOWER g-fees
He might REDUCE loan-limits

I don't expect either, though.

Recap of your points:

1st. Kill the sure path to receivership now in place. (one aspect of the 3rd).

>>> Sure path to r-ship is not a given. There are two options r-ship or c-ship and profit-sweep just keeps the left-pocket bulging without any transfer to (our) right-pocket.

2nd. Aid in recap the companies by applying the DTAs and any excess to the 10% div to pay off Srs. Nullify the warrants.

>>> That's a re-write of 3rd. Reducing pricipal, in any way. This was a major fault in the Sr. Pfd. - they never had a way to move the balance down. Only up.

3rd. Reform by splitting functions and by breaking up the companies into a multi competitive market.

>>> This would be a Congress 'reform' and a merger / breakup would be the perfect solution. Shareholders (with or without warrants) would vote.

4th. Explicit gov. guarantees and other reforms to be executed later.

>>> Explicit is coming one way or other. Co-op, reform, any wat you shake it.