Fannie Mae and Freddie Mac’s existing shareholders shouldn’t expect a huge payday after the mortgage giants raise capital from new investors as part of a plan to free them from U.S. control, the companies’ chief regulator said yesterday, according to Bloomberg News. “The shareholders will be heavily diluted when we raise capital,” Federal Housing Finance Agency Director Mark Calabria said. “So at the end of the day I am not focused on whether there’s a windfall, because I don’t think there’s really going to be that big of a windfall.” He noted that the shareholders haven’t had a dividend in more than a decade. Calabria reiterated his view that investors should have been wiped out after Fannie and Freddie were seized by regulators during the 2008 financial crisis, and said that current shareholders could be wiped out in the future “were we to find ourselves in the situation where they’re insolvent again.” He said that when the time comes for the companies to go to the public markets to raise capital, it could result in the “largest equity offering ever.” FHFA is working with investment bank Houlihan Lokey to figure out specifics such as whether Fannie and Freddie would go to market at the same time or sequentially, he said.
