hardincap

its pretty much a tracker position for them. $4m total market value in a $14-15+bn portfolio

the main win would be denying the govt cover from the anti injunction clause, which was the govt's primary defense in the delaware case. this will let the delaware case proceed on substantive law it could also embolden sweeney to rule in favor of the motion to compel, if she hasnt done so by then

another interesting quote by g: "then comes the Third Amendment, and it's now concrete, we’re going to wind down these GSEs, but we're not going to pull the receivership trigger, which would, of course, have required, we're expecting the liquidation preferences of the Plaintiffs." he reads "winding down" as receiver action, and yet considers nws to be "entirely lawful" in slow wind down scenario? i think this may have been what prompted olson to switch to the "shell game" narrative in his closing fwiw, carney thinks theres "decent chance" of remand for full admin record

"there is another point where he agrees with olson that you can never get to safe and sound with nws, which is what conservator duty is." that part confuses and troubles me the most. how can g believe that and also believe "one of the things one could turn up [from admin records] is an entirely lawful explanation [of the nws]... because liquidation at that scale was not practical, and that only by winding it down to a practical scale could they ever appoint themselves receiver" Olson made a grave mistake by replying "I suppose its possible".. instead of pointing out that you can only wind down to practical scale as a receiver not conservator

another bearish exchange: JUDGE MILLETT: Well, a fiduciary to whom, because this statute is different, it doesn't say a fiduciary to stockholders, it's a fiduciary serving the best interests of the entity or the agency. MR. OLSON: No, I submit that that reference,which is under incidental powers in the statute itself, doesn't provide a conservator to act in its own best interests, or in the interests of -- JUDGE MILLETT: Well, what does it mean? What does it mean if it doesn't say they can't take something in the interests of the agency? MR. OLSON: Well, that would swallow up all the responsibilities that conservators have had for centuries -- JUDGE GINSBURG: Well, it does, this is a statute that reads out the fiduciary duty by that provision. -- JUDGE MILLETT: Okay. Just to be clear, so if your -- just to make sure I understand this, your position is if they made this determination that we can't, they're just never going to get to a point of consistent profits then they can't conserve it anymore, that once they've made that judgment they have to go to receivership -- MR. OLSON: Yes... JUDGE GINSBURG: So, throughout this period and when the Third Amendment was entered into as I recall the combined portfolios of the two GSEs was roughly $5 trillion, is that right? Yes. So, suppose that a supplemented record would reveal that the Treasury and the FHFA were of the view that there's no way to liquidate a $5 trillion portfolio, all of the possible purchasers of pieces of this portfolio could not muster $5 trillion, so we're going to have to wind it down till we get to a stage where it's practical to liquidate, and that will happen assuming they don't make profits that no one expects them to make, that will happen with this sweep, at least that way it'll happen within a few years and then we'll be able to liquidate. ... JUDGE GINSBURG: And so, if we fully explore that, if you get an opportunity fully to explore that I'm saying isn't it possible that one of the things one could turn up is an entirely lawful explanation? Because liquidation at that scale was not practical, and that only by winding it down to a practical scale could they ever appoint themselves receiver here m and g seem to believe that the nws could constitute conservator action if they believed both companies were going to hemorrhage capital and/or the portfolio was just too big to liquidate. G cites 10Qs as supporting evidence for this, as it basically said "we have no future" these exchanges make it difficult for me to believe the judges will order reversal on apa

Millstein has been out of the picture for a while now hasn't he? He seems to have dropped off the radar. I wonder what his position on the legal matters is.. If I recall correctly he's no longer a shareholder

@merkeht are you speculating damage control/scapegoating in anticipation of a possible ruling favoring Ps?

yeah, seems like noise to me. what does it matter? wont change how judges rule one bit

okay, that part worried me too until hume pointed out the internal projections docs that seemed to surprise him

@steve_berk i still dont understand how you get 25% odds of affirmance. you say youre basing that off low % of reversal on contract and apa, but it doesnt logically follow that affirmance should be high. affirmance would mean the anti injunction bar holds... i find it difficult to imagine ginsburg & brown reaching that conclusion

@cherzeca i agree none of the judges seemed inclined to affirm lamberth. if they affirm i would be quite shocked. but i would be equally shocked if they vote for reversal instead of remand on the apa claim, just given the skepticism and general confusion judges displayed towards the Ps arguments. breach of k claim seems more clear cut--hume did a really impressive job--but the fact that judges seemed so disengaged to this argument gives me significant pause.

I've been rereading the transcript and I find myself more pessimistic (though not yet pessimistic overall) about the judges ruling in favor of the Ps. There were a few very subtle "bearish" indicators that were hard to pick up on the audio: MR. OLSON: -- into a sound and solvent situation if every nickel of profit you make is given to someone else. You cannot possibly, yet -- ahead. JUDGE GINSBURG: No, that's clearly true. Go ... JUDGE GINSBURG: But they could avoid further spiraling down, right? Here Ginsburg was actually bolstering Millett's argument that nws could be appropriate conservator action if they thought they were spiraling down. JUDGE GINSBURG: I don't know why we should go any further than that. MR. OLSON: Well, perhaps. I think that you have enough, and I'll, I think I've taxed your patience, Judge Brown, so I will sit down. JUDGE GINSBURG: That's not what I meant, but I, but -- These are in addition to the fact that I dont think Olson had a strong reply to Brown's question of could they have morphed from conservator to receiver. Or have become a receiver and not given proper notice. Millett in general sounded even more skeptical and biased towards the government than I had thought before, and she didn't give any indication that she was satisfied or agreed with Olson's rebuttals. @merkhet @cherzeca curious what you guys think. have you guys gotten a chance to reread the transcript after maybe the emotional high of the moment has worn down?

@cherzeca apparently stansberry research put out a piece over the wkend recommending fnma as a buy

carney is relentless. whats his motivation? http://blogs.wsj.com/moneybeat/2016/05/05/the-myth-of-the-fannie-and-freddie-third-amendment/?mod=yahoo_hs

thanks for adding color. i wish this would move faster but i understand things are far more complex than they appear on the surface

Yea, I'm not sure what the hold up is at this point... Doesn't seem like a good sign for it to take this long, when lifting seal decision came so quickly

great quote... I would not rule out reversal, but believe it more likely that the Perry Capital case will be remanded to Lamberth’s court, with instructions to develop a complete administrative record. Remand would allow the net worth sweep to remain in place for a while longer, but it still would not be a good development for the government. It would mean that in both the District Court and Judge Sweeney’s Federal Court of Claims, judges will have opined that facts matter. And if facts matter, what Treasury and FHFA did with Fannie and Freddie in 2012 with the sweep, and currently are doing with the companies in their management of them in conservatorship, at some point will be judged to be illegal. The only question is when. im not sure how much weight to put in this comment. he is an expert in fannie mae's financials but the legal cases are an entirely different matter--he admits as much and caveats his comments accordingly. his inside knowledge of the internal politics of the gses, as well as his conviction that fannie mae is irreplaceable, however, are very helpful

this is what spooks me about investing in fnma. if the fate of the nws rests largely on the personal whims of the judges rather than an objective analysis of the law (if that is even possible), where is the margin of safety? berk claims the mos rests on the fact that fnma is irreplaceable, but for shareholders to do well, the nws has to end somehow (and this doesnt necessarily follow from fnma being irreplaceable?). the only two ways the nws ends is a) judges rule for the Ps or b) govnt releases fnma on its own accord

wouldnt granting the mtd be inconsistent with b)?

does this necessarily imply that thapur will dismiss the govnt's mtd?

+1 appreciate you pointing these things out.. our biases are something to really be on guard about agreed. but my thought process with millett is not whether she will agree with G&B, but whether she is going to vote for affirming lamberth; i would think that she wont agree with G&B unless it is simply for remand. i say that because i did not hear millett to intimate that the facts (such as motivation) relating to conservator decision was irrelevant, which is where lamberth was...and i sure dont believe G&B will vote for affirmance btw, what is the difference between bias and conviction...other than bias means you are wrong, and conviction means you are right...:>) as long as brown and ginsberg vote for remand, we should get remand, correct? 2/3 wins

+1 appreciate you pointing these things out.. our biases are something to really be on guard about

everyone knows this is unsustainable, and watt has gotten increasingly vocal about it. i think its safe to say fnma eventually exits conservatorship one way or another

Is it clear that nws constitutes a liquidation though? Doesn't the breach of k claim depend on this? In fact millett at one point states that liquidation hasn't started. And Stern was adamant the hasn't been any liquidation

but even if it was "just a failure of notice", there's no debate that its cost investors billions. Goes back to, what's the remedy?