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I suppose this means that Watt has until September 29 to decide if he wants Freddie to actually pay the dividend. It does emphasize that Watt is the one who will make this decision, no mention of Treasury. My guess is that Watt will withhold at least part of the $2.0B NWS dividend, but that he will wait until mid to late September to do so. This is wishful thinking in a way; I see it as part of an administrative plan to make sure that Congress doesn't pull the rug out from under them with another Jumpstart-like rider. Then again, actually paying the full Q2 dividend and waiting until the end of December to withhold would support my idea further. Trying not to catch Congress by surprise seems to be the issue. On the other hand, what would be the point of delaying any restructuring now? It made sense back then when Obama's era was coming to an end and there was uncertainty as to who the new President/party in the WH would be. Corker, Warner or anybody trying to tie Treasury's/Trump's hands now and into 2018 with zero capital and a continued divided Congress is an aberration.

I may be off. But right now I am more concerned with what may happen after the 1st bomb is dropped in N. Korea. Will it accelerate recap, will FF be nationalized or will this be meaningless? I am thinking of a market crash as in an instant 10% gap down and 20% down (pushed by ETF selling and bots to -30%) within weeks. And that this might force everyone's hands. If the Fed goes into Q easing or lowering yields again companies may lose plenty.

Still biased. But it is getting harder and harder for Bloomberg/Light and Carney to keep their old stance. The article though does reflect my prior point. Since documents show government's preoccupation about the large 10% dividend -even if only as part of a discussion- it somewhat supports their original argument. Weakened however due to their acknowledgement and awareness of the potential excess money above the 10% dividends that could be retained by FF making any wind-down difficult to impossible. So from the 3 goals/outcomes: a) stop the death-spiral, b) impede revival, c) maximize Treasury's investment, it is difficult to determine the main objective and what could be seen as the icing on the cake. c) appears to be just that, an added bonus. While b) seems to be essential and the primary motivator. Specially, in light of their knowledge. Then a) would only be the acceptable narrative for the populace and the courts. Thus, Stegman et al. can and will continue to make such claims (a) until the cows come home. The problem a) has is someone called Ugoletti. Whose claims directly and specifically contradict what Treasury and FHFA knew and seem to be trying to hide under an acceptable cover-up/narrative. Unless we find a court/Judge that understands the scheme this way, we may be out of luck. The larger picture, in my mind, is the conspicuous absence of any mention of HERA anywhere. It's absence in all discussions could actually be what truly indicates Treasury's disregard to the law and what Congress had decided in 2008 tilting the balance on our favor. Even if considering all motives, goals and outcomes the most important question still is: was a), b) or c) part of the law and what Congress had in mind? So... is there any judge out there that will be able to see what can't be seen because it isn't there?

Thanks for posting this. Since Ginsburg made the "salt the earth" comment and still affirmed Lamberth's dismissal, I am not going to try and guess what the judges will do based on what they say. Thompson was just a ball of energy, which didn't seem to go over too well but I'll give him points for enthusiasm. I'll admit that Stern and Cayne also did a good job presenting their case. One judge (sorry, I can't tell which voice belongs to which judge) points out to Stern that the central argument turns on whether actions by the FHFA that don't actually benefit FHFA or the companies are subject to judicial review. At 15:40 Stern equates the interests of the agency with the interests of taxpayers. While Thompson did address this point during his rebuttal, I'm surprised he didn't hammer Stern for conflating those. Cayne mentions a whole laundry list of powers that HERA grants to FHFA, including broad powers of discretion that he claims are the basis for it being able to lawfully enter into the 3rd amendment. My counterpoint: given that the NWS runs counter to all previous definitions of conservator, why would the FHFA bother with conservatorship at all? Couldn't they have just released the companies from conservatorship and then agreed to the NWS anyway? Cayne himself brought up that the language in HERA that requires FHFA to act in the best interests of the companies and FHFA itself is taken from FIRREA. But if the "best interests" clause must be the same as in FIRREA, why not also the accepted definition of conservator, which in the case of FIRREA has been well-defined? Thompson recognizes that he needs to show that the NWS hurt the companies (easy) and was at best neutral to FHFA (the crux). I would hope this fits the definition of ultra vires. Stern brings up the numbers showing that in 2015 and 2016 the GSEs paid less in dividends than they would have under the 2nd amendment. Does this kind of retroactive justification matter at all here? Or are the judges supposed to only consider what was known at the time of the imposition of the NWS? Fair. But that one judge also dismissed J. Brown's ruling arguing she saw a "regular" conservatorship while in reality this one is *special*. Maybe it comes with french fries? There is really no objectivity on these judges. Oh, yes. Thank you for the link.

She also cared about one more thing: fuck the shareholders. As long as this sentiment pervades, that following the law benefits shareholders, we are doomed in all courts.

Another Judge that doesn't know left from right. Houston, we have an Iowa problem. Again! As awesome as Thompson was the Judge appears not to understand the issues well enough.

This could be a "castling" chess move. Trump negotiating w/democrats to fire AG in exchange for democrats to lower the noise on Russia probe. Then, he fires Mueller with no crisis. Sessions = casualty of war. Don't see any impact on us. For us it is: 1. Better outlook on lawsuits with the latest release of docs. 2. Second half 17' Mnuchin's promise to look into GSEs. 3. Corker enjoying a lot less leverage after his nay vote.

I used to believe in the "all it takes is one" theory but it's clear all of these courts just want to follow each other and the DC opinion specifically. Maybe these docs make a difference but so far nothing has made a difference, and we've lost case after case. Just my humble non legal opinion. The only case that's giving me hope is Sweeney's but that seems to be moving at a snails pace. I still own prefs but have minimized my position. Re "We need to remove the capital so the markets don't get the impression these entities are healthy" As we know, anything can be interpreted in any way. Just like that case of a sign post on a highway where the keyword subject to interpretation (or misinterpretation) was "or". The appeal's court put an end to that one with the statement "or means or" (from the Oxford Dictionary of English). In the above case, all you need to add for a bingo are 4 more words: "We need to remove the capital so the markets don't get the impression these entities are healthy. Because they are not." ... and some judge somewhere will agree with the government that winding them down was the right decision is spite of HERA. If the government does it, it is not illegal. lol

good article http://www.mortgagenewsdaily.com/07252017_gse_conservatorship.asp

damning evidence... yes, but not so much. In my view, this is a close tie. Given the rulings against us, a tie favors us. Solving the draw-death-spiral via a NWS is clearly stated within the 17 page document. This weakens our position. But just as much, statements about Treasury knowing windfall profits were on the way helping Treasury enrich itself even more than with the fixed dividends weakens the government position. There's the tie. But as said, given the rulings against us weakening the government position makes this tie almost a win for us. It undermines and removes credibility from their main argument.

Thank you, Chris.

Question about the new order re-issued by the Appeals court. Investors Unite stated today: "The court now says damages for breach of contract claims are no longer based on when shareholders bought their shares but when the shares were issued." That was my first interpretation. Then, I read what others said here that this decision has been passed to Lamberth. So what is it?

Looks like I only read the conclusion lol... sorry.

It is. It's folly to use a stock's price as a proxy for value. Not folly. This ruling should lead to buying. It has opened the flood gates. The risk now is not in buying potentially worthless shares as before. The risk has moved to how much damages will be granted -if any- to anyone who *has* the shares. Even to those who may become shareholders tomorrow. If demand comes > stock price should reflect the newly acquired value.

It is. It's folly to use a stock's price as a proxy for value. Yes. This has to lead to massive buying now that the damocles sword has been removed. This is what is left from that ruling, that matters: 1. Claims are ripe. 2. Breach of contract and breach of the implied covenant of good faith and fair dealing regarding liquidation preferences and the claim for breach of the implied covenant with regards to dividends. 3. Lamberth is required to allow further proceedings. 4. Damages, if granted, to anybody owning the shares by time of ruling down the road. The above makes the preferreds more valuable than commons: claims not only survived and are ripe, they cover all classes regardless time of purchase. Anyone buying tomorrow should be kosher.

what's the point in reissuing? rub more salt in the wound they opened? adam spittler‏ @aspit 1m1 minute ago Perry court re-issue removes language of damage calculation based on date of purchase, now damages fully transfer from Par. $fnma $fmcc I thought this would be good news?

Yes.

Your thinking is a mystery to me. Although Mnuchin and Cohn could have switched sides now that they have become the "owners" of Fannie and Freddie if for no other reason than having been absorbed by the system, it really makes you question why hedge fund supported Trump then. Hedge funds and specially John Paulson must have assessed exactly these issues. Thoroughly. Of course, there is always the possibility most have reduced or sold off after the initial run that ended in mid. February when things were still foggy.

In my view, this is not conceivable although it may appear as so. Shareholders and what C/W have in mind -which is modifying the current system-, are on opposite sides of the same coin. The closer they were in achieving their goals in the past the more they despised shareholders and saw them (us) as an obstacle. Today, realities may have changed somewhat. New administration friendlier to shareholders, simply worn out feelings by repeated attempts, Congress churn and the realization that a 180 degree in how the companies and markets operate may be counter-productive. As this new reality sets in and as their ideas soften out -and we have had proof that Corker's vision has substantially changed-, the apparent hatred to shareholders may subside and become less relevant. This is just a hope, of course.

Might mean the end of his career as politician. If he makes the wrong move today.

understand this, but wonder how much (positive) weighting to put on notion that congress appears incapable of doing anything at moment. feeds into thesis that administration is just giving congress rope on gse reform and congress is getting near out of rope Chris, with all due respect, judging by the Jumpstart Act Congress is never out of rope. Even if we get to 12/31/17 with no bills on the table a harsh action by Mnuchin or Watt could trigger a last minute reaction. Then, we will again see swift crap coming our way. My hope is that Corker is beginning to understand the WH is not supporting his efforts/goals as Obama did and that the FHFA has its own power to act and it is not in the same page he is. With the balance of power shifting a more reasonable Corker may decide to adjust accordingly. It is just a hope...

I think many underestimate Trump. It is not just him. He is surrounded by smart, domineering, aggressive cabinet members. Maybe his policy in regards to Russia is simply keeping enemies closer besides a big 'thank you' to Putin for helping him win the election. In this regard, it may not matter much what Putin is up to. The big, near term risk we face is Congress (Corker, Warner) coming out with some simple bill to neutralize any effect of earnings retention in our shares. There will be retention before the year's end for sure. Watt will absolutely not allow zero net worth by January 2018. Neither, I think, Mnuchin.

His actual words were: "credit needs to be available throughout all economic cycles and I think the last go around we did not focus enough on that component." But I agree with you. He must realize scale and equity are essential factors. Also, I think he is falling in line (more) after he got reprimanded by the WH when he suggested Watt use taxpayers' money to create an artificial draw.

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows: 1. explicit, paid-for catastrophic guarantee. 2. private capital in front of #1 and not 1/2 percent as in the past. 3. pre-funded fund to deal with failure of mortgages, not bailing out the companies. 4. access to secondary markets by entities of all sizes (regional banks) 5. counter-cyclical nature of GSEs enabling credit during downturns. 6. build off of the existing infraestructure. #1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past. I agree even though the market doesn't. I wonder if the weakness at these low price levels is a delayed timing thing or more of a bad outcome thesis. Everybody and their lawyer is on hold. No buying, no selling. So small bleed is from retail that needs to pay for their daily mcdonalds. What is fascinating about these hearings is that almost everyone agrees the NWS must end. Yet, they scorn at the possibility of the WH/Treasury doing it. It is really, really crazy. Like being in love with someone you hate. Or being faithful to someone that cheats on you. It is completely dysfunctional.

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows: 1. explicit, paid-for catastrophic guarantee. 2. private capital in front of #1 and not 1/2 percent as in the past. 3. pre-funded fund to deal with failure of mortgages, not bailing out the companies. 4. access to secondary markets by entities of all sizes (regional banks) 5. counter-cyclical nature of GSEs enabling credit during downturns. 6. build off of the existing infraestructure. #1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past.