Carney: Legal victory of little use to GSE owners

|By:, SA News Editor

Assume, says John Carney, Bill Ackman and other investment managers win their legal battle against the government over Fannie Mae (OTCQB:FNMA -1%) and Freddie Mac (OTCQB:FMCC -0.8%). At that point, we go back to the bailout agreements under which both would still be obligated to pay a 10% dividend. Also, both would need to pay a commitment fee of, say, one-half to one percent, an amount they would struggle to be able  to afford.

The result is the two would have an even tougher time building a capital buffer, meaning a time frame of years before their earnings power could accrue to holders of either the preferred or common stock.

Previously: Carney: Fannie and Freddie investors should surrender