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To: clochard who wrote (174667)6/23/2002 5:05:00 AM
From: LLCF  Read Replies (2) | Respond to of 436258
 
<And when the doodoo hits the fan, its bonds will drop in value, allowing FNM to buy them back at a discount, thus removing their only liability simply and cleanly. >

And how is that different that any other company???? More likely the FED will be buying them! So it doesn't 'collapse', but where would the stock be at that point... $10?

BTW:

<IMHO FNM is different than most. It can "lose" money when people default, but at the same time the defaulted property remains a real asset, unlike the "assets" of the likes of Worldcom.>

You mean property is better than equipment?? I'll give you that, but in a depression you think they will be able to sell it???

DAK



To: clochard who wrote (174667)6/23/2002 8:37:26 AM
From: Square_Dealings  Read Replies (3) | Respond to of 436258
 
Not sure I understand how FNM would come out ahead in a rising default environment. FNM has total debt/equity = 52 +

If I loan you 500k to buy a house and the home value falls to 250k and you walk on the loan, I am out 250k.

I understand the bondholders will be screwed, but with debt of $4 trillion+ where does FNM come up with the money to buy back these bonds?

M.


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