So, H/T to Peter Chapman for digging this one up…..
From the Dept of Treasury 2019 budget pg 962:
Treasury received $25B in FY’ 2017 from the GSE and only estimate they will receive $6B in FY’ 2018. Then they estimate a bump in FY’ 2019 back up to $18B.
Now there is no explanation for the changes in the amounts but it seems pretty clear Treasury is not expecting much more from the GSE’s this year but then they expect a huge bump in 2019. That simply means we get the try and figure out the most likely scenario. My thoughts are that Treasury is going to get a small dividend in Q2 and then nothing for the rest of the year seemingly while whatever is going to happen to the GSE’s is settled so they can maintain equity.
2019 is the wild card. $18B in stock sales from “equity transactions”. If we assume the GSE’s are out of conservatorship by the end of 2018 then we can also assume the Senior Preferred stock the government holds will not be drawing the 100% dividend it is now. There is no way to reform them and have any private capital back them is the government gets all the profits from the GSE’s.
If all that is true then the $18B they expect to get must be from stock sales, right? That must mean the government will exercise its warrants and then sell off the stock over time like the AIG scenario.
That also means common holders won’t be extinguished and if they aren’t, preferred holders will get par.
On the surface, this looks really encouraging….