The Set Up
There are two strands of analysis that Fannie and Freddie shareholders may employ to determine whether the Net Worth Sweep ("NWS") will be invalidated and the $193 billion of Fannie and Freddie senior preferred stock held by the Treasury ("Senior Preferred") will be eliminated. Such invalidation would significantly improve the values of Fannie's (FNMA) and Freddie's (FMCC) common and junior preferred stock from current levels.
The first strand is to look to the current administration's plan to release Fannie and Freddie from conservatorship, by recapitalizing them in the equity capital markets. As