rros

yes, likely. but not until the legislative route fails in either late 2019 or 2020. it's legislative or bust for the next 12+ months imo. this is complex and really important stuff, in their view it needs to go through congress rather than a few figures building a (reversible) solution administratively. they should tweak/end the NWS now though. Tweak only leads to comfort and more status quo. End, instead, plays out of the comfort zone.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close. Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely. they might not have a choice. It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress. What's left is carving out some $ for affordable housing to get the Dems on board. And where does that plan leave legacy shareholders? the current market cap of all common and jr preferred shareholders is maybe around $10bn? that is very small relative to the role the minority shareholders have played the last 10 years, the current earnings profile and future valuation of the 2 companies. all we need is a true American leader, a politician or judge, who has the power to do the right thing. I am not sure how to interpret this. But I can't think of aligning with MBA is going to make "shareholders great again".

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close. Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely. they might not have a choice. It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress. What's left is carving out some $ for affordable housing to get the Dems on board. And where does that plan leave legacy shareholders?

Increasing the buffer to 15 bn will only solidify the status quo. The larger the buffer, the lower the urgency for a comprehensive fix. The way to push legislation and reach a final solution is to remove the sweep and recapitalize. Odds are both lobby groups and legislators will move fast to contain what they will hate the most: a release.

Thank you. -> explicit guarantee fully paid paid for and on budget - > charters removed (requires Congress) - > seeks level-playing field through sizing (meaning, imo, shrinking FF).

Although Marsha Blackburn could be a much better congress person for FF shareholders, we cannot rely on what happened many years ago. This is politics. It is unwise to think that Calabria at FHFA or Blackburn replacing Corker would mean 'stars are aligning'.

Articles by Otting https://www.americanbanker.com/author/joseph-otting

How is that going to play out if she is appointed? She wrote a scathing opinion against the nws.. How in the world will she defend it?

Later this month Treasury releases its semiannual currency report. We will see if Mnuchin has changed his stance re China as currency manipulator. Not too long ago he was squarely in the moderate camp looking for an amicable solution. He now appears to be aligning himself with the more radical side at the WH. Is he being pressured to get in line with the 'war on China'? Point being, relying on Mnuchin's original view on Fannie and Freddie may have become quicksand. 'renewed his push' ? more like 'dribbled out his stale rhetoric'. Thats what I am referring to. He said get them out of government control 2 years ago now. Of everything that could be pushing him towards speeding up the process the housing market sure wasnt one them. Will have to see if that changes. Redfins CEOs comments recently are concerning. Which begs the question... what is really in the Fed/Treasury's mind? The Fed raised interest rates to 6% in 1929 amid a softening economy. The following year the Tariff Act of 1930 (Smoot–Hawley Tariff) was signed into law raising tariffs on over 20,000 imported goods to protect american workers (specially farmers) and Treasury under Andrew Mellon was hell bent on cleaning up rotten speculative investments. They were in a collision course. And they never saw the iceberg. We can't ignore history with Jerome Powell at the Fed's helm and a Trump presidency. Just like Mnuchin may have become quicksand we can't rely on this administration to act rationally. I also thought at the beginning of the year a bad market for housing would push for action. Take a look at cut, wood, nvr, len, dhi, tol, bzh, phm, shw stock after stock related to housing (materials, remodeling, real estate, etc.) have all dropped dramatically and here we are. I do not think the housing market or markets in general are of any relevance to this Administration. They have a different agenda which leaves us not knowing where we or them stand.

Later this month Treasury releases its semiannual currency report. We will see if Mnuchin has changed his stance re China as currency manipulator. Not too long ago he was squarely in the moderate camp looking for an amicable solution. He now appears to be aligning himself with the more radical side at the WH. Is he being pressured to get in line with the 'war on China'? Point being, relying on Mnuchin's original view on Fannie and Freddie may have become quicksand. Perhaps... Also, housing reform, given its domestic nature, may be more insulated from pressures than areas related to world supremacy. So maybe Mnuchin has not changed his stance. But this doesn't mean he never will as he seems to be caving under Robert lighthizer and Peter Navarro's pressure. Hopefully, Trump and Mnuchin are on the same wave re Fannie/Freddie.

Later this month Treasury releases its semiannual currency report. We will see if Mnuchin has changed his stance re China as currency manipulator. Not too long ago he was squarely in the moderate camp looking for an amicable solution. He now appears to be aligning himself with the more radical side at the WH. Is he being pressured to get in line with the 'war on China'? Point being, relying on Mnuchin's original view on Fannie and Freddie may have become quicksand.

When asked a few years ago he said he wasn't interested "in the present form". He hinted at government involvement. Not the sweep, but in general. Like companies subject to policy and Congress. Although he would probably love the toll road of a government guarantee and a monopoly, what type of structure will be needed? And what makes you think Mr. Buffett will not throw legacy shareholders under the bus?

Interesting, thank you. I found this from 2013. https://www.nytimes.com/2013/04/24/realestate/commercial/the-30-minute-interview-hugh-r-frater.html Maybe Fannie Mae is.

Emily, this might help. There is State terrorism. That is when countries like Iran promote/sponsor terror. There is State capitalism. Like when China reformulates the american system in a more totalitarian way. And there's the Regulatory State, our way of life. Which doesn't differ from the other two too much. It allows the US government to do whatever it pleases whenever and for whatever reason. As long there are a few conflicting regulations that appear to supersede the Law and that courts can't overcome. It used to be that 'if the President does it, it is legal'. Add Watt to that.

Depends on how they settle them. A conversion to common offer at a generous ratio can get it done with no cash cost at all, but it would also take an end to the NWS, a recap plan, resolution to the warrants, etc. for the juniors to accept. Cash is much cleaner and quicker (though much more expensive). since it's complicated, a settlement isn't likely over the near term. the cases should continue and in the mean time the sweep should stop and be replaced by the backstop commitment fee. that would provide time to get things done in 2019 in a thoughtful and non-rushed manner, while limiting any theoretical legal liability to the govt. The sweep is actually a variable dividend. So what you are saying is that they should cancel the Sr. preferred shares. That is the only way to terminate the sweep. Isn't there a restriction in place from Corker's Jumpstart 2.0 till Jan 2019?

Yes, settle all jr prefs. The easiest way is to cancel all at par value. If John Doe wants to litigate further for back dividends, then so be it. But settling at par will satisfy the vast majority of pref holders, and certainly 2/3 of them (which I believe is the amount of votes needed). That would be a huge hole for Treasury. Unthinkable.

I highly doubt it would ever get to that point... they'd settle long before. How is a settlement going to work? Lamberth just ruled ALL preferred shares can claim the implied covenant breach regardless of date of purchase. This, from his conclusion that preferred stock rights are inseparable from the stock. The numbers are big. About 37 billion in Jrs. They now can't settle with a few. If they don't settle with John Doe who is buying some fnmas tomorrow, he too will have a claim against Treasury/FHFA. Buying shares today, means buying a claim. Settlement looks messy. Just as a trial. The potential for a nasty verdict cannot be underestimated.

If a trial, will Mnuchin be called to testify? Geithner, Hank Paulson? How in the world could Mnuchin defend the sweep in light of his public statements? There are judges (Lamberth) that have ruled the nws to be an outrageous government scheme, others who in dissenting argued against it and even judges who ruled against us have told the world that while their hands were tied, the nws was a complete trashing of shareholders rights. Even Lamberth in his first ruling in 2014 -against us- stated the nws was an eyebrow-raising move. If these same judges argued, opined or ruled about the deleterious effects of the sweep, what can the government expect from the regular citizen in a jury?

Lamberth's ruling could mean a lot to Bruce Berkowitz. The fact that Lamberth sided with plaintiff to explain how claims travel along with shares validates Berkowitz bet, having his stake been built after the net worth sweep. Not Perry's, who bought around the time we bought. And yes, Kudos to Berkowitz. But also all hedge funds who fought. Maybe B.B. rebuilds his position tomorrow.

There is nothing in the law or the agreements that says warrants were conceived as a back up. And as far as I can tell, no PR's by either Treasury or FHFA. There are, however, written statements by Lockhardt and even Paulson regarding the nature of the PSPAs in relation to HERA. That companies would remain shareholder-owned and blabla. If you do believe that any of the interested parties openly declared the warrants to be an insurance you may have something but I am thinking that was more hearsay. The deal was done in accord and it was a straightforward, Buffett-like type of deal. Money in exchange for a huge bite. Nothing was gifted. Investor's expectations, in this case, are unrelated to giving away your grandma's jewels. Also, in the case of the Jrs. there is clarity as to which rights holders were expecting a positive outcome would one day materialize, namely rights that are inseparably (inhere) attached to those preferred shares: rights to dividends, rights to liquidation preference and any claim that may arise from breaching them and that would travel along, indefinitely. Expectations regarding *these* specifics rights were demolished by the nws. It is difficult to see which rights a common share has. Aside from owning a piece of the business as equity, there are none. That is why preferred shares aren't exactly like commons.

There was a speck of buying when the ruling came out, later vanishing. Probably killed by the confusion Chris referred to. Based on this ruling and based on the 10% moment has passed I would be more of a buyer than a seller. Definitely holding all my shares.

DRValue, this was Lamberth's reasoning if I am not mistaken. When he begins his discussion of plaintiff's implied covenant claims he agrees with plaintiff that rights travel with shares (inhere). He determines that these are "rights of the security itself, dividends and liquidation preference including any claim for breach of those rights" (He starts that sentence "In other words, " and paraphrases Activision Blizzard ruling). Then, he agrees with defendants on the timing issue based on his conclusion that corporate contracts are naturally flexible and the timing for expectations should be set at the time of the most recent change. Prior to the breach, the most recent change was the signing of HERA and the designation of FHFA as conservator (plus 2 inconsequential amendments that he never mentions). Buying shares after the breach and given rights travel with shares can only mean those claims were inherited by post-nws buyers. Someone correct me please if this isn't the right way of reading this ruling. Although never expressed, this simply comes out of his own logic. It will be really ironic if his assessment only applies to shares bought AFTER Hera when expectations were reset. If so, Treasury may have a hot potato in their hands. Lamberth may have been smart in not fully deciding the matter. He only stated "these claims move forward". The next stage, thus, is a question mark. For Treasury, this is great. They may have the opportunity to disassemble the net worth sweep promptly and reset investor's expectations with little damage. Provided this interpretation is correct, Lamberth may be telling Treasury 'there is danger ahead'. Again, I may have read this upside down (and quickly delete this post, if so). But I am feeling a kind of Lamberth redemption at the moment. And coincidentally, his bombshell ruling was issued on 9/30/14. Almost 4 years to the date. it is hard to follow lambeth's reasoning...it seems that he is figuring out how he is going to decide in the process of the writing. I think you have it right, @rros, but I wouldn't say the next step is uncertain. the next steps will be P appeals of the claims that lamberth denied, and moving to trial with respect to the P claims that lamberth upheld...though Ds may appeals these. if there is a trial, all of the fairholme discovery from court of federal claims will be able to be introduced to a jury to show that at the time of the NWS the GSEs were on the verge of historic profitability and that the D's death spiral fear was a ruse invented for litigation, all of which doesn't spell mother for the Ds. And what are your general feelings of this claim moving to trial? Is that when 12 unbiased jurors decide on the matter?

DRValue, this was Lamberth's reasoning if I am not mistaken. When he begins his discussion of plaintiff's implied covenant claims he agrees with plaintiff that rights travel with shares (inhere). He determines that these are "rights of the security itself, dividends and liquidation preference including any claim for breach of those rights" (He starts that sentence "In other words, " and paraphrases Activision Blizzard ruling). Then, he agrees with defendants on the timing issue based on his conclusion that corporate contracts are naturally flexible and the timing for expectations should be set at the time of the most recent change. Prior to the breach, the most recent change was the signing of HERA and the designation of FHFA as conservator (plus 2 inconsequential amendments that he never mentions). Buying shares after the breach and given rights travel with shares can only mean those claims were inherited by post-nws buyers. Someone correct me please if this isn't the right way of reading this ruling. Although never expressed, this simply comes out of his own logic. It will be really ironic if his assessment only applies to shares bought AFTER Hera when expectations were reset. If so, Treasury may have a hot potato in their hands. Lamberth may have been smart in not fully deciding the matter. He only stated "these claims move forward". The next stage, thus, is a question mark. For Treasury, this is great. They may have the opportunity to disassemble the net worth sweep promptly and reset investor's expectations with little damage. Provided this interpretation is correct, Lamberth may be telling Treasury 'there is danger ahead'. Again, I may have read this upside down (and quickly delete this post, if so). But I am feeling a kind of Lamberth redemption at the moment. And coincidentally, his bombshell ruling was issued on 9/30/14. Almost 4 years to the date.

Lamberth's reasoning re plaintiff's implied covenant claims is superb. Pretty much what we here understood all along. That the nws screwed us and came completely out of the left field. Lacking a legal background I cannot assess the consequences of this ruling but, in general, it doesn't look like Lamberth is trying to separate classes into different categories. Instead, the "timing" discussion seems more like an exercise to determine the frame of reference against which the breach happened. In this regard, he set HERA and the designation of FHFA as conservator as the starting point for investors' expectations where it was understood: a) the companies were shareholder-owned and would remain in private hands, b) they would return to normal business operations at some point. Against this backdrop a breach occurred when -without any possible way to anticipate it- the 3rd amendment came to life. Setting this "time frame" (from HERA to the NWS) seems to be the court's practical way to analyze and establish where, when and if there was a breach. Maybe too soon to determine but this seems like a good ruling for all our shares pre-news and post. And it cannot be underestimated this court just determined a) the GSEs were entering a period of sustained profitability at the time of the nws, b) the huge losses recorded swelled Treasury's draws unnecessarily and, c) the death-spiral argument was a complete scam. Not to mention, gems like "at the nascent of a sustained period of profitability, Plaintiff would have reasonably expected the GSEs to be moving out of conservatorship, not doubling down by executing the Net Worth Sweep". Cheer up, everyone! Edit: And shouldn't his demolition of the death-spiral scheme be supportive of Fairlhome's case in front of Sweeney?

Maybe that came up when Ed Royce said he will offer a bill to impede lobbying activities by FF during c-ship, r-ship and will include a way to tract any lobbying post c-ship/r-ship.