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Doesn't sound like Net Worth Sweep is going to be stopped in 2019... We will continue to engage with Treasury to develop a responsible plan to end the conservatorships – with a clear road map and mile markers – and to adjust the Treasury share agreements accordingly. And by sometime next year, my hope and expectation is that we will be on the path where Fannie and Freddie can start to build capital. Isn't it interesting that since a few years ago, at the beginning of every year, I always thought FnF preferreds are the best idea of the year? Then it goes up, and then dives back. Hope that doesn't happen this year. We will have en banc coming. Not sure how that will play out. Why does this matter to you? You do not own any stock anymore.

there is a nontrivial risk of many things screwing up the GSEs as we have found over past 5 years. as for Mnuchin's "statement," all I saw was Bloomberg reporting on a side press availability while mnuchin was in Japan. there were quotes about reform and private/public capital, but I dont see something that looks like a "statement". let's see what the treasury plan says (which itself will have been written by committee and have things in there we will not like) Bloomberg quoted these 3 statements. The rest was their opinion. “What we’re not going to do is business as usual with no changes, just re-capitalize them and float them,” “There needs to be housing reform as part of this.” “Could be IPO, could be private capital, there are lots of ways of doing it, but ultimately it would need a combination of retention and capital raise,” The above does not contradict Mnuchin's testimony from a few weeks ago posted by allnatural. These, together with that testimony, do not represent a change of Mnuchin's mind, in my view. As Chris said, an explicit government guarantee may be an essential requirement by investors willing to fund an IPO. So he is dealing here, suggesting Congress get that explicit guarantee (reform) going. And if this fails, he still can omplement the commitment fee administratively. It does not look like he is backtracking. Just threading a needle (as per investorG). Yes, consolidation time.

Good, common-sense post. Thank you. So we wait..

The most unique would be investors shying away. It already happened once. FMCKJ, FNMAS issued at the end of 07 and FNMAT on 5/08 with yields of 8%+ each were an indication of markets drying up to Hank Paulson. By May, he knew there was no more private capital to be raised. The more this extends and the closer we get to the next crisis, the more remote the chances of seeing any kind of IPO.

So I think we are still in the phase of announcing the announcements anticipating when the real announcement will come. So a sell off. Does this mean sweeping till December? Anybody feels they too are moving the goalpost? What if the market breaks? 2020 recession for the largest IPO? No rush, friends. But not a problem either... Fannie and Freddie (and the sweep) are going nowhere.

Yes, please. I reckon Buffett would be willing to buy the whole business if he were allowed. I think he's very fond of the core mortgage guarantee business. my thoughts were that Buffett would detoxify the GSEs if he invested. it has been fashionable to hate on the GSEs but if warren buys in, GSEs become apple pie and motherhood I would just be afraid that Buffett's terms would be unfavorable to all current shareholders. He can certainly crush the commons if he gets to dictate the terms, and he could probably find a way to hurt the juniors too if it benefits him/Berkshire enough. Sure, but the value he would add might more than offset? What added value he may bring to offset the loss of value on the Jrs. if he requests cumulative preferreds senior to them?

+1

Pollock told Craig Philips in the recent interview he had assessed the IRR of Treasury at 11.5%. Philips, who tagged it at 12%, replied: "well... that is open to debate". Looks like Pollock *adopted* Craig Philips 12% IRR and wants to be inline with the Administration. I would not be surprised if there is another article tomorrow where he praises the benefits of a 2.5% capital level and just a small commitment fee to collect 1 or 2 billions a year for a credit line.

Thank you. Yes, very informative. He said lawsuits are an impediment to any IPO/recap. He may be right. Perhaps both the sweep and the lawsuits are resolved simultaneously. Berko and Paulson may have some leverage after all.

It's the credit wrapper around MBS that requires legislation (paid-for guarantee). Not any financial backstop. The current backstop can continue since it has been congressionally appropriated in HERA. I guess it can be modified. But if it is terminated at some point (and I think Treasury will want this) a new backstop will have to come from Congress I did not think about that... how about the ole' commitment fee for the remaining of the current backstop? Will they let that die? No backstop at all?

It's the credit wrapper around MBS that requires legislation (paid-for guarantee). Not any financial backstop.

Bright was corker’s boy toy. He’s no longer relevant. No, he is not. You are right. But his opinion could be correct which is why I posted it. Here is his full response:

So next in *motions* should be some Tsy official stating they are exploring exercising the warrants. Just so that commons don't run away too much. Which, in turn, should lift Jrs. even more as any endorsement of commons almost guarantees face value on the Jrs. Calab said "whether we can do some sort of conversion with the preferreds OR whether they would get par value it's way too early to figure that out..." NOTE: Michael Bright thinks there are only 2 viable paths for the GSEs a) permanent conservatorship; b) explicit government wrapper (like Ginnie Mae). He said any other option and global investors will not buy the securities and that the notion that some kind of capital level will bring any reassurance is a mistake.

Is Calabria announcing that an announcement is coming where he will announce that some announcement will be made one day? Or are we on track with the motions?

where is this quote from? link to article/report? Thanks. What's funny about the 10% moment remark is that it had nothing to do with the question raised by the Alex Pollock. Philips brought it up all by himself to highlight how smart Pollock was (is). Alex Pollock actually responded he re-calculated yesterday the IRR from the sweep to be at 11.5%. Muscle, how Lamberth dissected and differentiated the notions of breach-of-contract and implied covenant duties. I thought his reasoning was very powerful.

Court doc attached... Thank you, Luke. And Muscle. Don't you guys love this logic?

Good news.

At my new job, I was given the advice of building consensus and getting an idea approved BEFORE the formal meeting in which you seek it's approval and build the case for it. Seems to me that's what's happening here. Informing the audience, building a consensus, and seeking approval BEFORE taking the official actions. Certainly could be wrong, but I'm not concerned by the recent rise in optics on the situation. Well... makes sense.

Anybody else nervous about all this talking by Calabria? Sherrod Brown's favoring a status quo could mean anything from liking the current conservatorship scheme (nationalization) to simply keeping Fannie and Freddie *as is*. While it is highly unlikely Congress may succeed at tying FHFA/Tsy's hands even if they try, it is not inconceivable that they may take a shot at it. The more Calabria talks... We need a material move, less explaining.

Did you not hear his 25min interview? I did. The interview raises questions. Not showing any sense of urgency upon the task at hand, believing investors will easily fund a secondary is disconcerting. The idea of achieving the capital levels he requires -in such short period of time- is incompatible with his admission that the sweep will go on for another quarter or two. FB, one of the most marketed IPOs in US history, raised 16 billion. That was for a company with growth prospects in a growing industry, as opposed to Fannie and Freddie's prospect of shrinking market share. Retaining earnings asap is imperative. There is a profound disconnect with reality when he dismisses lawsuits to the NWS as trivial, something that will go away. This, in the face of a monumental need for raising capital. With no strong commitment to the rule of law facing possibly the largest need for capital ever for 2 US companies, something doesn't click. It's ok to be opaque while going through the motions. But there is a difference between being opaque and not connecting with reality.

The largest IPO ever, Alibaba, raised 25 billion. More recently, Uber raised 8 billion. How in the world will the government raise 100 billion here (4 Alibabas)? Or even 50 billion? While I agree things are moving along, it is disconcerting that the sweep hasn't been stopped on Calabria's day 1.

I agree with everybody else. Pre-planned, motions... as per Snarky. Otting's Jan leak was telling.

Until the Srs. are completely removed from above us, Jrs. will not trade much above 50% par. Calabria deferred that to Treasury. He referred to it as "treasury's investment" putting the warrants and the Srs. in the same bag. So either by court order or by Mnuchin's signature the Srs. must get vaporized. I imagine it will all be part of an amendment and it will all happen by the 4Q. Ideally, before. To tackle Tim Howard's apprehension to capital raising without enough guarantees, the en banc panel should deliver a really painful blow to Treasury itself. Goal being any incoming government official will think three times before playing fast-and-loose with other people's property.

what's astonishing is that calabria is rattling numbers off top of head while his agency has actually proposed a specific capital plan It was strange... Some rough numbers as of 3/31/19. Fannie's book of business is composed approximately of 2.963 trillion mortgage-related assets for single family units and 316 billion mortgage-related assets for multi-family. So over 90% of its book of business is composed of single-family mortgage related assets. The "risk-weighted" concept is critical in determining a final dollar figure. Banks may see a final capital requirement figure closer to a 4.5% of total assets because of their particular mix of assets. Fannie or Freddie, instead, while using the same ratios, can achieve a much lower figure due to only having one type of (high quality) collateral. I believe the FDIC has implemented regulatory capital levels at 50% risk weight for residential mortgages (not being precise here, so correct me please).

Maybe it's a good thing he avoided nailing a straight dollar figure.