The only reason why the current common stock exists is because the government didn't want to be forced to consolidate the GSE MBS as US sovereign debt. Forcing the companies to go through a real bankruptcy, with a suspension of P&I payments on the MBS would have crashed the banking system.
If F&F were "normal" companies, the current common stock would have been wiped out. The existing shareholders should get nothing (or maybe discounted warrants) to buy the IPO'd stock.
As a current Fannie and Freddie borrower for Multifamily, I like this thoughtful approach. A rapid fire IPO would create immense instability in the housing markets.
Well done. As a former GSE employee (20 years) who survived the GFC - this is a thoughtful and well-reasoned approach. Though I think you understated the risk of the pure IPO play.
There are so many things that can go wrong with a pure IPO strategy and the execution risk is extremely high. There are (quite literally) a trillion reasons why that risk makes no sense to take - especially when the best case scenario is a post-conservatorship environment that stabilizes the long term governance and financial foundation of the housing finance system AND where consumers get the same 30 yr FRM they get today and the MBS market works the same as it did yesterday.
The only reason why the current common stock exists is because the government didn't want to be forced to consolidate the GSE MBS as US sovereign debt. Forcing the companies to go through a real bankruptcy, with a suspension of P&I payments on the MBS would have crashed the banking system.
If F&F were "normal" companies, the current common stock would have been wiped out. The existing shareholders should get nothing (or maybe discounted warrants) to buy the IPO'd stock.
As a current Fannie and Freddie borrower for Multifamily, I like this thoughtful approach. A rapid fire IPO would create immense instability in the housing markets.
Well done. As a former GSE employee (20 years) who survived the GFC - this is a thoughtful and well-reasoned approach. Though I think you understated the risk of the pure IPO play.
There are so many things that can go wrong with a pure IPO strategy and the execution risk is extremely high. There are (quite literally) a trillion reasons why that risk makes no sense to take - especially when the best case scenario is a post-conservatorship environment that stabilizes the long term governance and financial foundation of the housing finance system AND where consumers get the same 30 yr FRM they get today and the MBS market works the same as it did yesterday.