fakemoneyguy

Does anyone have plausible left tail scenarios for the JPS? I see political momentum (McKernan confirmation, bankers bake-off), and the messaging is that he government wants a mark-to-market on its position (80% common + SPS), so I don't think a share issuance with priority above the SPS is feasible. JPS get 0'd in a receivership, but if the goal is to not create uncertainty in the mortgage markets (to keep spreads unch'd), a receivership works against that goal. If there is a window to tap the public markets, and that window is missed it is still mid teens IRR to exit at the end of Trump's term on the higher coup FNMA JPS. Other than further escalation with China (which I fade because Trump is a pacifist), I don't see plausible scenarios where JPS are donuts. Trying to think through position sizing more than anything else

McKernan was confirmed yesterday as Under Secretary for Domestic Finance at Treasury: https://home.treasury.gov/news/press-releases/sb0274. Another leg of the parlay de-risked.

@orthopa you think it is that simple? If Paulson dies tomorrow (crystallizes "key man" risk), are you a seller? https://wtop.com/inauguration/2025/01/billionaires-tech-titans-presidents-a-guide-to-who-stood-where-at-trumps-inauguration/ Paulson sat next to Adelson and Wiles in the inauguration ceremony (inner circle seating) so it might be https://www.wsj.com/politics/trump-inauguration-who-attended-seating-chart-47cb48bf?mod=e2tw But Tim Cook sat inner circle at Trump's inauguration too. AAPL's supply chain is Chinese, and Trump has been decoupling from Chinese supply chains since he was elected.

@TwoCitiesCapital you are right that the litigation uncertainty adds some overhang. Perhaps the cap table is structured where a sliver of equity is used as currency in settlements? I think only Fairholme v. FHFA and Rop v. FHFA are still outstanding (though there will be incremental litigation as part of the recapitalization). Nov-25 timing is almost impossible you would think if litigation risk cannot be structured around as part of the capital raise It took me months to appreciate that it is a priority for the Administration. I can't place my finger on exactly why. It is NOT to save the "retirement savings of hardworking Americans" per Trump's letter to Rand Paul, and probably skews more in the "one time windfall" "monetization of the balance sheet" direction. But Trump is posting about it on Truth Social, Bessent is now speaking to it directly instead of dancing around it, bankers are involved (which means fees are involved which means incentives are aligned to jam through a capital raise) etc. Re: consideration % of par, if jr pfds don't accept, low coups will probably trade to HSD% yields, which is south of par, in some cases considerably so. If I was structuring the recap, I'd probably keep the low coups outstanding and take out the high coups.

Because the FHFA and Treasury both sit inside the Executive ""ring fence", and those 2 parties can amend the PSPAs at will, and the PSPAs are the documents that set a lot of the "rules" like needing the lawsuits to get ironed out before raising capital...I would take the stance to look at the situation much more flexibly. All of the rules set by the PSPAs are not actually governing the sequence of events because they can be amended whenever to achieve the Administration's objectives. Bessent's power stems from Trump, so "the Administration's objectives" can be boiled down to "what Trump wants". HERA is the only set of rules in this situation that is statutory, so actually "exist". Future timeline: -Sep-25: McKernan Senate confirmation -late Sep/early Oct-25: Treasury chooses lead left bank on capital raise (per Bessent on Fox News this week) -Oct-25: Treasury + FHFA publish recapitalization strawman(s), architects of which are Jeff Wrase, McKernan at Treasury, and Calabria at OMB. Each has a high level of political know-how (Calabria drafted HERA!) The Nov-25 timeline is tight for a capital raise, but the Trump Admin acts swiftly on priorities. Still don't know if it happens by then, but think it happens before year end '26. Don't think you can be in the common at this pricing (Intel example excellent), but think recapitalization structure uncertainty reduction happens fall'25 which is why i am camping in the jr pfds Does anyone have a view on consideration to the jr pfds in different recap scenarios (ie low coups equitize at a discount vs. high coups do not)?

Afternoon gents, few q's from me: 1. Who is Jeff Wrase's daddy? specifically, who spent political capital to get Trump to appoint him to the NEC, who does Wrase owe, and how does that change odds/structuring of conservatorship exit 2. How do you structure an exit without touching Congress? The '24 TCCA stream of $6.3bn is statutory (created via Congress) obligation right? 3. Trump wants this done because i) deregulation ii) one-time windfall to plug deficit hole iii) optics of being a great deal maker? Where does this issue sit in the (easily distracted) Trump Administration's priority waterfall? 4. If the political will exists from Trump, it is a priority and there is a group working on it, an exit path ringfenced within the Executive Branch (circumventing Congress) is practical/feasible, and equity capital continues to build at FNMA and FMCC...what breaks a long FNMA jr pfds trade?