WASHINGTON, D.C. – Last Thursday, a plan to save Fannie Mae and Freddie Mac proposed by billionaire hedge fund investor John Paulson and developed by investment bank Moelis & Co., an advisor to Paulson & Co. presents breakthrough solutions to ending the Net Worth Sweep funding Obamacare, including winding down the Treasury’s preferred stock position, recapitalizing the GSEs, and protecting current stockholders.
The purpose of this article is to highlight key features of the Moelis plan to demonstrate how precisely the plan is intended to move forward to save Fannie and Freddie, recapitalize the two GSEs, benefit current shareholders and the taxpayers, while preserving the 30-year fixed-rate mortgage to buttress middle class homeownership today and for future generations of Americans.
The Moelis “Blueprint” envisions that shares of Fannie Mae (closing Monday, June 5, 2017 at $2.57 per share) and Freddie Mac (closing at $2.46 per share) could see stock value appreciation to somewhere between an estimated $9.62 – $13.15 per share in 2020, as the Treasury exits and the GSEs recapitalize.
Key to the Blueprint is that the Net Worth Sweep (NWS) would end now, with Treasury agreeing that the government’s preferred stock position under the 2008 Preferred Stock Purchase Agreement (SPSA) is virtually paid, with only $6 billion remaining to pay off the $187.5 billion with a 10 percent coupon that the government invested in 2008, thereby retiring today virtually all the preferred stock owned by Treasury.
Finally, the plan envisions the Treasury will exercise its warrants for 79.9 percent ownership of the GSEs such that the Treasury common…Read More & View Video