rros

Two things, if I may. Warrants and commons are one. Can't be disassociated. W/o the commons warrants cannot exist. I guess that is the positive. As for loud megaphones, when WM went bankrupt there was a standing ovation when commons were virtually zero'd. I do not think it is that simple here. Thus, the alleged blank space in the proposed bill. Some senators may wish to zero us (or the commons) only to realize all the negative implications. One thing is for sure. Corker/Warner will make a push to revive them as "different". Maybe in names or structures. And in that transition there is risk for both commons and Jrs. Mnuchin may see any kind of transition as re-inventing the wheel though.

From Treasury's website. How ironic. Looks like this has been posted since 2008 unfortunately. The irony is that Jrs. have a contract. Commons don't. And the 3 parties that matter, FHFA, Treasury and Congress, have been walking along the same line: rules, regulations, binding contracts. So Jrs. are more difficult to disregard. Commons, on the other hand, are in a different Universe. If the same line of thinking from 2008 still applies today I am a happy camper.

So Jrs. have this... From Treasury's website.

The attractiveness of common stock was based on a possible organic recapitalization by the elimination of the sweep and full earnings retention. This, with the 4th A, is now gone. It is likely that the 4th will be in place until a) there is a comprehensive bill signed into law that includes a resolution to both commons and Jrs., b) there is only administrative action to be had -Congress fails or *exigent* circumstances come into play-. b) may include severe dilution (exercise of warrants, Jr. conversion offer, possible IPOs) to infuse large amounts of capital to replace the funding commitment in its entirety or, if exigent circumstances, another 4th A bandaid -a 5th A- may move us closer to breaking up the PSPAs. In general, it is really hard to think of any common stock elimination given the warrants. A reminder... The 4th A is testimony to how difficult is to handle any PSPAs change. There seems to be an impossibility to easily terminate Treasury's commitment, by design. Little room to maneuver whether you are Trump or Mnuchin.

Found this, anyway. Under case number 17-cv-02185 there are 2 transcript requests from 12/22 and 12/29. Looks like 14 days timeline on each? 2210117056724.pdf 2910117062652.pdf

ok, thanks.

What's the case number? I can search pacer.

I am not sure it is Treasury's role to set policy. The majority of the above items appear to belong to either Congress or FHFA who regulates the entities. That is not to say the WH/Treasury can offer guidelines as they did in the past. So far, the set up has been of Treasury as an investor getting money rewards in exchange for support. It will be strange to see Treasury switching from investor to blackmailer. More than a bargaining card, the Srs. might fall in the right/wrong - moral/immoral dilemma that was born during Obama's tenure.

And the elimination of the 600 mill drainage per year. Sea-change.

So Alex Pollock is basically calling for exercising warrants now, first thing, before anything else making Treasury whole, a SIFI designation, placing a paid-for gov guarantee and retiring the Srs. and rebuilding capital. All, pressumably, within 1 quarter. Or maybe 1 week who knows. Then, reform? What reform? https://www.americanbanker.com/opinion/time-to-reform-fannie-and-freddie-is-now

exactly!

while it's possible they could severely cram down common to levels below current values while giving par to preferreds, imo this would fail a test of common decency and fairness. if it occurs, this restructuring would happen 10 years post crisis, unlike AIG and the others which were heat of the moment deals. also, the market cap of the outstanding common holders is sub-$5bn, it's not like there's a ton of value to squeeze from them. imo common has been unfairly penalized relative to preferred in recent days. Regardless of moral compass around "decency and fairness", isn't it just the priority in claims? yes, if there's a formal liquidation. a lot of investors are hoping for something besides this. but even in the event of a liquidation waterfall, what are the odds there are proceeds to pay jr preferreds @ full par while leaving 0 for common -- possible but not easy to pull off imo. In WAMUs bankruptcy common got zippo. Preferreds, in comparison, did much better. Actually, we commoners got millions of worthless units of a litigation trust. Maybe one day the units will bitcoin themselves and we will become trillionaries. I have 900k of those. As for the waterfall, it has been looking almost about to reach commons... for the last 9 years. We were considered despicable by J. Dimon. I guess it just comes down to -- if we get a positive outcome -- do you believe in a moelis - blackstone type plan or the benziga article plan. Yes, to positive outcome... and the one that makes Trump the most money. I can't get Mnuchin's quote out of my head when in the middle of an interview he said something like ..."oh, he knows how to and he loves making money. Tons of it. Believe me!" referring to Trump.

while it's possible they could severely cram down common to levels below current values while giving par to preferreds, imo this would fail a test of common decency and fairness. if it occurs, this restructuring would happen 10 years post crisis, unlike AIG and the others which were heat of the moment deals. also, the market cap of the outstanding common holders is sub-$5bn, it's not like there's a ton of value to squeeze from them. imo common has been unfairly penalized relative to preferred in recent days. Regardless of moral compass around "decency and fairness", isn't it just the priority in claims? yes, if there's a formal liquidation. a lot of investors are hoping for something besides this. but even in the event of a liquidation waterfall, what are the odds there are proceeds to pay jr preferreds @ full par while leaving 0 for common -- possible but not easy to pull off imo. In WAMUs bankruptcy common got zippo. Preferreds, in comparison, did much better. Actually, we commoners got millions of worthless units of a litigation trust. Maybe one day the units will bitcoin themselves and we will become trillionaries. I have 900k of those. As for the waterfall, it has been looking almost about to reach commons... for the last 9 years. We were considered despicable by J. Dimon.

Why is FNMAT somewhat of an outlier? It lies well above the trend line, at least as of this moment. FNMAJ is 0.875% above FNMAI in coupon and is close to parity with it, FNMAT is 0.875% above FNMAJ but trades at a 10% premium to both. Liquidity does explain some of this; FNMAT has a 200k 30-day average volume which is 10x that of FNMAJ (20k), while FNMAI (9k) is much closer to FNMAJ than FNMAJ is to FNMAT. FNMAS volume, of course, is another order of magnitude higher at 1.5M per day. I have been leaving it out of the linear regression to try and eliminate the volume effect, but I don't know enough about the effect of liquidity to know if this is valid. Perhaps a two-dimensional regression using coupon and liquidity to predict share price is in order. In that case I would need one more set of data (other than just prices) to get a unique solution. The trend line has been flattening out recently. The original point of tracking this was to see if the pref prices (as a % of par) could be split into the price based on liquidation preference and that of coupon anticipation. A steeper line would mean that the market places a higher probability on dividends eventually being reinstated. I'm not sure if this premise is correct but I have been tracking it anyway. Interesting. Thank you!

Why is FNMAT somewhat of an outlier?

I believe that any conversion to common would have to be voluntary given that a bad offer would be against the interest of shareholders and would need 2/3 agreement as per the circular. Though I didn't find that language in Freddie prefs, only Fannie. Does anyone have reason to believe that an involuntary conversion could be forced through? Even the Perry appeal opinion remanded claims relating to junior pref contractual rights, so I think those are still important. Converting can be attractive in that common equity has, potentially, unlimited upside whereas Jrs. have a cap at face value. Simple math says converting at half while common equity post-conversion price doubles you end up at full face value. And you may go north from there with potentially a small dividend. Why force conversion when a good deal can become a great deal? Terms will probably take into account the remaining variables... further dilution by Treasury, secondaries to raise capital, etc. Many things can happen once the companies are free that can make common equity more attractive than Jrs. During this conservatorship schemes were analyzed by which companies could IPO segments of businesses (multi-home, single-home, etc.). They both owned the common securitization platform which they could also monetize 2Q19. I imagine big Jr. holders will try to scoop up a large chunk of any revamped companies by owning large amounts of common. Any and all of these benefits will flow through Treasury's exercised warrants.

It used to be his merger arbitrage fund. Still is, apparently. http://www.schroders.com/getfunddocument?oid=1.9.2228909

I know, Chris. Don't worry. I was trying to be funny on a Friday night. Not only his numbers are completely arbitrary, he and many others -as you correctly pointed out- think the Srs. will simply evaporate while the law says just the opposite. We will need a presidential financial pardon before we can move unto the next stage! Happy Holidays everyone!!

total waste of two minutes reading that Thank God it was only 2 minutes... Guy could have written an even longer piece!

Someone else is thinking on a conversion bet... https://www.benzinga.com/analyst-ratings/analyst-color/17/12/10951395/fannie-mae-freddie-mac-preferred-shareholders-could-see

Big picture, these developments are very favorable and congrats to those who saw this development coming (finally something common-sensical happened! We've waited a long time for decision makers to become aware of economic realities that support continued existence of GSEs). Still a long way to go but odds on average seem to keep improving. With regards to 'backing up the truck', or how to update the odds of a good outcome, I found that Mr. Howard's Comment on his blog (Dec. 19th) helpful. Here it is without comment since I'm still digesting it: I have only owned and still own the Jrs. So I am biased. Two -humble- thoughts on T.H.'s post. Jrs. aren't equity as in common equity. Lower sales, reduced market share, reduced earnings and diminished growth prospects will not affect the Jrs. so long as there is enough retained earnings for the payouts. As for continued conservatorship, once private capital smells the money it will not take long before there are numerous participants in the market and the companies are let free. Money will not wait a century and the housing market is about to leap forward.

https://www.wsj.com/articles/how-the-great-fannie-and-freddie-dustup-could-end-1513880901?mod=e2tw Anyone able to get the full text of this? Thanks in advance PM sent.

Not sure if you heard the recording of the markup where Jumpstart was discussed before being added to the omnibus bill 2 years ago. But it wasn't really sneaked in while senators were asleep at the wheel. It was discussed. Specially by Sherrod Brown and Chuck Shumer who wanted an assurance that Jumpstart would not interfere with any court ruling. Given current circumstances any renewed push for any language resembling Jumpstart may face greater resistance. Today's move, watered down through language, firmly stopped capital leak. It eliminated one important clause from the 3rd amendment, first one needed to begin any recapitalization. Although it looks like a baby-step, it is major progress. Cleverly opening the door for more things to come. Maybe next quarter? We are moving in the right direction. If we were going backwards, the first action before we could move forward was to stop. Capital levels are set at 3 billion.

Thank you for posting this. Here are what I think are the most important points: The Fourth Quarter Dividend section says that the entire NWS dividend minus $2.4B will be paid on December 31. If Watt tries to hold back any money the capital reserve immediately falls to zero. The Increase in Liquidation Preference section says that Treasury's liquidation preference has increased by $3B for each company. My initial thoughts: Overall I don't think this is slam-dunk great news, or even very good news at that. Watt basically cannot choose to hold back capital from this point forward; if he does then the reserve amount drops to zero, making it extremely costly (an extra $3B per company added to Treasury's liquidation preference) to do so. The liquidation preference went up by $3B (per company) anyway. This is essentially a draw of $3B for each company, though that section may have only been included so that Treasury "gets something out of the deal." The NWS continues. The only possible positive spin here is that the only purpose of this agreement was to get it in ahead of any HR 4560/Jumpstart language that could be included in an end-of-year spending bill. HR 4560 states that any agreements made between FHFA and Treasury after January 1, 2018 could not change NWS-type language established before that date, so Treasury and FHFA had to act quickly. The language in FHFA's statement is interesting. The words "contemplate" and "exigent circumstances" leave a lot of wiggle room, even though the letters themselves don't seem to. If reauthorization of jumpstart fails a larger liquidation preference isn't a huge concern. After Jan 1st Trump can do away with all Sr. shares, anytime.

I am thinking Berkowitz is about to double his money today.