Fannie And Freddie Recapitalization Plan
Seeking Alpha - January 21, 2015 - January 21, 2015
Seeking Alpha, By Glen Bradford
Doctor Clifford Rossi has proposed a capitalization transaction to revive Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). Together they are often referred to as the Government Sponsored Entities (GSEs). If we combine this proposal with Bill Ackman’s analysis of recurring earnings, Fannie and Freddie can be released immediately fully capitalized. Let’s get to it. I’m going to employ napkin math, just for the sake of making this easy to follow for people who are like myself in so far as wanting to see the easy way.
Fannie Mae and Freddie Mac are two private businesses traded on public exchanges that are currently in a subordinated position whereby they transfer over 100% of their annual profits to the United States Treasury via a net worth sweep amendment where the net worth of the businesses is structured to be depleted to zero across the next 3 years per the terms of the Third Amendment at which point they enter receivership and the shares become worthless.
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