Tim Howard's assessment of Fanniegate Hero's Preferred Share Pablum
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[Edited] Fannie Mae and Freddie Mac now have no pending litigation preventing the conversion of the [Treasury senior preferred] to common and exercising the warrants. The government can do this and move forward with recapitalization and release where JPS [junior preferred stock] dividends turn on to settle their pending litigation or convert to common. No pending legal challenges would object to this outcome.
Sorry that the judges did not stand up for your rights, but there is still a path forward. Biden admin can lock in its perspective on housing finance reform and allocate the proceeds that the Trump admin unlocked when it stopped the sweep (began retaining earnings).
Common have no security as there is no pending litigation against the net worth sweep anymore.
While you’ve asked me to address the “merit of the poster’s position,” I can’t tell what that position is. . . . nor do I know what “perspective on housing reform” FH thinks the Biden administration would be “locking in” by taking the actions (converting the senior preferred to common and restoring the dividends on the junior preferred) he recommends. There’s too much that’s incorrect or incomplete, and too little that’s concrete, in the Fanniegate Hero comment for me to be able to evaluate it. . . .
. . . My personal view, as expressed in the current post, is that it would be in the best interests of the Biden administration to switch from the fiction-based policies of past administrations toward Fannie and Freddie to fact-based policies going forward. Were this administration to do that, it would cancel the net worth sweep and Treasury’s liquidation preference—and not convert the senior preferred to common—have FHFA re-do the Calabria standard to make it truly risk-based, with a 2.5 percent minimum, then exercise Treasury’s warrants for future sale at a share price that reflects the earnings power of two companies . . .
