Sunrider

Sessions also Russia tainted as per FT this morning - this is getting to become a problem-why are these people too unaware in the first instance and then even more daft in the second to lie about it or not to disclose... Yes, basically. Except it's the breach of implied covenant for the dividends and not the breach of K for liquidation preference. I hold preferred shares purely because of the political / rational solution which seems inevitable. But am I reading you correctly that you believe the appeals decision in aggregate was a net positive for pref holders? No, not a net positive. One claim, the APA claim, was shot down. The other claim, the breach claim, was allowed to go through. So one negative and one positive. But not a net positive.

Isn't this curable simply by changing the basis on which the director is appointed?chris/Merkhet?

I think this just means that the court either has received a request for a rehearing or en-banc hearing or it expects such to come. Chris/Merkhet? C.

Chris Shouldn't that argument tip you back towards common (compared to your statement the other day that you're rebalancing towards pref)?

It seems to be me that he basically changed the topic on the GSE question? The little he did say is basically just "Nothing will happen soon."

...except that isn't what happened. Haha - but we're now in Trump times where alt-facts rule (and that holds not only for those alt facts you agree with!) ;) The one thing I do want to throw into the debate: If there is one thing that seems to have always happened is that one can find investors in pretty much anything, depending on price. You kind of have to assume a global market strike of the vast majority of capital if you assume that the government can't wipe out common and junior and turn around and say 'Dear market, here is this great insurance business and I'm going to sell you new equity at a price that allows you to make 20% for the next x years with comparatively little risk'. The fact that the risk is that the government does again what it did in the past will be ignored. Just as people keep investing in debt of countries that default and in equity of companies run by people previously convicted of fraud or associated with it. I think we should not take too much comfort from the idea of what a rational person should do - investors en masse just aren't made that way.

That may be so - with my limited understanding of the US legal system, my worry is that this is up to the Supreme Court, which chooses what to get involved with and doesn't. Is there another mechanism to get a decision on the constitutionality of a law? Thank you. C. Berkowitz has said previously (and I paraphrase), "It's pretty simple. Either HERA doesn't grant them the power to do whatever they want unchecked, or HERA is unconstitutional." So, I'd have to assume the next step is to challenge the constitutionality of HERA.

Ignoring politics for a moment (remember until the Trump / Munchkin surprise we all assumed that eventually the law would take its course), I have two questions for the legal brain trust here: (1) Philosophical: As a layman this judgement basically reads as though the judges confirmed that congress can make laws that are not subject to judicial review, or that give government actors the power to do things that are beyond judicial review. Am I missing something? This seem inimical to the fundamental tenets of a constitutional democracy with a separation of powers? (2) Practical: Chris notes that the order confirms indirectly that a taking and breach of contract has taken place. Does this benefit the Fairholme case, which I believe basically ask for compensation for a takings and a breach of contract? Chris - incidentally, you thought that a remand (well, different kind of remand) would benefit common, which is why you were leaning that way - are you now switching to preferred? Thank you. C.

Chris/Merkhet How does all of this influence the Steele cases? It would seem to me that the Delaware corporate law cases are pretty much independent as the argument is simply that the 100% dividend is not permissible ab initio and thus power to make it so can't be created through subsequent legislation on top of the underlying state corporate law? Thanks!

Indeed. Wonder what the lawyers on the board think a court would make of that? Reversal would add a trump (no pun intended) card to Mnuchin's hand: he could invoke the non-severability clause (6.12) in the SPSPA and unwind the entire thing. This has been mentioned on this board before. Mnuchin might need the reversal first so he has the unilateral authority he needs. It would have to be rare for the defendants in a case to suddenly argue in favor of the plaintiffs though. Would Brown/Ginsburg/Millett get suspicious and pore over the case even more, or just go along with it and be glad they don't have to deal with it anymore?

Haha ... i.e. What you should expect in Any admin? Whether one side or the other? I just hope this gets resolved before trump gets impeached for giving state secrets to Russia, taking money, or something like that. on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials on feb 9, counsel for usg agreed to remove "protected information" designations pretty inconsistent, no? sessions was confirmed feb 8 interesting, hardincap. let's see how this plays out. i would think DOJ becomes less adversarial, but that may be wishful I'm left wondering if Session's DOJ will soon lead the Perry panel toward a reversal. Sounds crazy, yes. But a ruling against the government would: 1. provide political cover against the "hedge fund giveaway narrative", 2. blunt congressional opposition, 3. speed along a settlement, 4. allow a jump ahead toward recapitalization negotiations. This whole issue is complicated by the looming cut in the corporate tax rate, which would reduce the GSE's DTA valuation and force a government draw. A quick resolution of the mortgage giants would avoid this scenario, and a Perry reversal would move things along. All true and not that crazy especially regarding #2, but who knows. One of my hopes is that there are seriously damaging docs in terms of gov case, as well as, seriously damning docs regarding the Obama admin. internal deliberations, i.e. hypocrisy, lies, deceit. I think there is such bad blood now between Trump and dems. that he will take advantage of any opportunity to expose/damage their credibility.

That's very interesting. Thank you for pointing that out. I had read those docs but didn't recall seeing that. Page A-6, Section 7(b) (partial): It appears a forced conversion would be inconsistent with the first sentence in section 3(d). And we already know that the major preferred holders are willing to fight for their contractual rights in court, so a "we're going to do this anyway, see you in court" stance by the government is unlikely.

No I don't need to be spoon-fed an opinion as I'm usually not short of them myself. I also disagree with myself on a regular basis - I find it quite healthy and stimulating. Your posts are not beneath me, it just that I have a hard time deciphering what it is that they actually say. Granted, English is not my first language, so this may be entirely down to my ineptitude. Yet, I did take the time out of my day to point that out because I appreciate the level of conversation happening on this board. Parsad and the members have done an admirable job of keeping these fora constructive and pretty civilised, with most conversations taking place in the threads they should be in. This is not 'my' board. Yet, purely to help you find an outlet for what appears to be a lot of words twirling around your head, I'd say that you may find the Yahoo Finance boards to be a better echo chamber into which to discharge what's on your mind - the audience is likely more receptive and engaging on ad-hominem attacks there than it is here. S.

Or a great marketer. I'm sorry LC, but anyone who criticizes the President of the United States to his business partners and then doesn't want the public to get wind of it is a coward who is unfit to be called an American citizen, in my opinion. Every American is granted the right to the freedom of speech but he's crossing a line if he thinks he can shit talk the President behind his back and then still expect to receive his share of the economic rewards of the President's tax plan, which is no doubt the true reason he doesn't want his letter published and out in the open. Americans know that enemies of the President are unpatriotic and he probably doesn't want his business to be crushed by the regulators because of his absurd political beliefs. What's wrong with talking shit behind the President's back? Isn't he and others entitled to their own opinions? You can't criticize the President and still be patriotic? I'm not defending Klarman and taking stand against the President. One more point, his letters were always hard to come...It's a not new policy because of this administration... +1 (The president is not, fortunately, all there is to the US. He's just a guy who has been elected to discharge the duties of the office of the POTUS. As with all holders of public office, let's hope he does his job well and carries out his duties with respect to the laws and constitution of the country as well as the system of checks and balances that has been put in place for a reason. Wisdom appears to be too much to hope for with this particular guy, but we should all wish that he finds that in the not so distant future. Oh, and it's not 'his' tax cut. At the very least is that of his administration and the lawmakers who vote for it. More comprehensively, it is that of the entire society, which chooses, through its representatives, to enter into that particular trade-off between tax, spending, debt, growth, etc.)

Trump will make your country less safe, irrespective of how many planes he will claim to punch out of the sky. Sadly, for someone living in a big country, without much actual (not Fox/CNN/choose your poison of choice) exposure to the rest of the world, it is hard to imagine that things look, feel, run differently elsewhere to what one knows and that relationships between nations cannot be conducted as a series of independent deals (or at least not very successfully or sustainably). Now, back to the topic at hand: What is your message actually telling us with respect to the GSEs? As I said before, I REALLY struggle to extract meaning from your verbal dump. :o Thanks. I have absolutely no idea what any of this means but damn, I have GOT to buy some FNMAS.

Can we please, largely, stay on the topic at hand in this thread? :o We've done rather well in most of the 570 pages in this regard so far! ;D

i agree. i would be giving 7 to get 1 all day long, until 12/31/17 Indeed. Shame these brokers don't allow you to bet the other way. If anyone knows of one, please let me know. Thanks C.

Pauly, excuse my lack of english mastery..But this is what I picked up from your new(er) diatribe: "hey obama, as an aside you're an ahole."... With which I fully agree. Again. ... and with due respect, precisely because it takes so much time to read stream-of-consciousness ramblings and synthesise messages from them, I've started to skip straight over Pauly's posts. That's not to say that I'm not interested in what you have to say - as I am sure are many others - but you may get your points across better if you put them more succinctly and in complete sentences. ;) Thank you. C

Chris (and the other legal minds here): You indicated at some point that the standard/process was one of a review for a clear error in law (as is indeed noted in the order) and not a de-novo review. Reading this, in many ways it feels exactly like the judges looked at the documents and formed their own opinion on how relevant they are to the case before Sweeney - without the background and, it would appear, on fairly rough-and-ready rules such as 'does it mention the PSPA or the sweep?'. If a doctor were to diagnose patients in this way, she would be sued for malpractice. - What recourse does one have in a case like this? - Sweeney appeared to be annoyed with government delays before, so one would presume the 50 documents get released quickly. What then? Do the plaintiffs have to ask her to rule on release of the remaining 10,944? On what basis, given that an in-camera is clearly not feasible and given the fact that the sample proved (in a statistic sense) that the government is applying the privileges too broadly? Thank you. C.

Parsad Whilst I respect you enormously and have no doubts about your integrity - I'm offended by the statement you made at the bottom. You have no idea what you're talking about. Having grown up on the wrong side of the iron curtain, I can tell you that any such regime is not 'more or less' the same as Western style democracy. In China, I very much doubt you can speak your mind (look at what's going on in HK with people not wishing to come under the party rule thumb) ... at least not if your views or beliefs are contrary to that of the ruling party. In China, if the government wants to take your land - it will. And will give a fig about your rights or compensating you. This does not happen in Italy, Spain, Germany, the UK, France, the US, Canada, etc. Etc. So I seriously think that was an inconsiderate and ill considered remark. C. Cardboard, have you been to China in the last few years? It's nothing like you are saying or imagining. They've embraced capitalism in such a way, that it would make Adam Smith blush. I saw as many people suffering there, as I do in Canada or the United States...and the prosperity was equal as well. In terms of the deception, control, restriction of freedoms and rights, etc, it's probably no better or worse than any Western democracy. I would say that such behavior will become part of this new U.S. administration rather quickly as well...both driving the capitalist engine and censoring the press, freedoms, rights and deception is already part of their manifesto. Cheers!

I thought we had been through this question of whether all current shareholders benefit from damages awarded about two hundred pages ago on this thread (probably in the context of whether current shareholders have standing) :) Chris - one question though - the clause he cites from the SPSA seems an interesting find. However, even if this implies what he thinks it does, it's hard to see for even the Trump Treasury to just reverse everything, including warrants, and walk away from $b of value. Your take on this clause? Thank you. C.

Is there actually a retail broker that allows you to margin common or pref? keeping it real with glen bradford? I think he was margin called based on reported holdings Well not sure how all in to be with this thing

Not sure if I understand the question correctly (or that my answer is right): 1. NWS reversed basically means that cash is returned to GSEs, so BS now has a cash position and the equity position also gets bumped (as they swept their retained earnings) 2. You then begin to adjust, reducing the liability accrued for pref div for the first year and the cash, then you reduce the senior pref by the amount you would've had available in that year beyond paying the senior pref div 3. Repeat 2 until you've gone through all the money 'swept' back to the GSEs in (1) Of course, there may be a shortcut to this if there is an outcome in which warrant prices get adjusted, junior pref is converted, etc. ??? C. Got it - this is helpful, thanks. Just to humor my final understanding - how would the capital structure be modified from an accounting perspective (I just want to have the full picture in numbers under this scenario). You would reduce the Sr Pref Equity position obviously, but what would the corresponding entry be? If you reduce the St Pref surely that causes your residual equity balance to go down so the other side of the entry would only bring it back to where it is now?

Right, though since the face value is what it is, I would expect pref holders to not accept common at a discount ... especially after all the contract rhetoric that Berkowitz has used. Views?

Hi All Perhaps it's more helpful to distinguish between longer term value in a steady-state income scenario (with senior prefs gone) and the likely reaction of share prices to various events. I think that is what Chris has been getting at ... if there's a favourable court outcome and the NWS is reversed, it's likely that the market will shortcut past the complexities of looking at how capital might be restored straight to 'holly crap, this is now worth something, I better get in'. The common is liquid and probably more easily understood (by average market joe) than the prefs, so they'll (hopefully) pop. In the longer term, the common can only be worth anything if the prefs are also worth something (ignoring votes attached to shares). So it does matter how the GSEs are restored to capital health. Nothing wrong with 10x on prefs on conversion to common (as long as I can elect to receive cash instead :) - that's the whole point and the title of this thread. And why not? That's precisely Fairholme's point: they represent a contract and before GSE are able to give value to anyone else, they need to honour that contract. C.