This is my second recent article on GSE capital reform. Part of my long-term buy-side coverage of Fannie Mae ($FNMA) and Freddie Mac ($FMCC). My prior article walked through the ERCF revision thesis and stipulated that regulatory dominoes have been set off by Trump’s March 2026 executive order and the Fed’s banking capital proposals. This article focuses on the $373 billion guerilla in the room: Treasury’s Senior Preferred Stock (SPS). I believe it will get resolved in a manner that is favorable to shareholders. But there are significant risks (as many JPS holders have correctly pointed out over the years) and investors should be clear-eyed about this.
A quick recap
The SPS is one of the most contentious and confusing aspects of the investment case for Fannie Mae and Freddie Mac.
In September 2008, Treasury put Fannie and Freddie into conservatorship and signed the Preferred Stock Purchase Agreements. In return for an unlimited backstop, it received non-voting senior preferred stock …
