rros

There is some. A paid-for MBS guarantee -as per Mnuchin- is good for us. It validates FF business model and stops the narrative of private gains/social losses (an explicit guarantee mean less profits for shareholders). A role for FF as monoline reinsurers/guarantors is good for us too, as discussions emerge. Watt's initiative of rebuilding a buffer is good for us. What we really need to see to solidify this bet is more of ICBA's solid endorsement of legacy shareholders. Remember, whatever reform may look like we need a seat at the table. We legally own the companies and at a minimum, we have a 20% ownership guaranteed. Mnuchin's comment about shareholders being wiped out in a restructuring is also encouraging. He said "other regulations may come into play" when forced unto the issue. Meaning, "not always".

This may be Watt's point of contention and urge to retain dividends... My understanding is that Watt is not retaining dividends, he's delaying them. In the end they may wind up being the same thing though. Unless they come up with something esoteric, which will be a bad omen, and provided he orders the companies to waive payments those funds *will* be retained earnings no matter how they characterize the event. So even if Watt goes on with his decision the most important thing for us will be how it happens. If it is a simple waiver with no added french fries or hot sauce it will represent gaining ground. And I do not think we have to wait for Corker's 75th day. If Watt is determined, he should make an official request -possibly in writing and public- to the companies in advance of the transfer. BTW, Senator Warren probably had a heart attack reading that last paragraph. Do you all remember how much she publicly punished Mel Watt in that hearing regarding the lack of funding of these funds? All for nothing (maybe) lol. (Note to myself) No matter how progressive or moderate a democrat is, some senators are probably thinking recapitalization with a few fixes is, after all, not such bad of a deal considering this 2018 budget proposal.

This may be Watt's point of contention and urge to retain dividends...

He talks about them but doesn't specify size or what he is holding. Take a look at 3/31/17 (1Q17) disclaimer of largest positions: "From this list, we exclude ETFs and fixed income instruments such as preferred stock." We know he still has them, but that's it.

anti-trump inner-self lol.

Agree. Even Gator guy doesn't include the preferreds on his funds. Optics aren't nice betting on politicians being incompetent idiots. That's a bet you don't want anyone to know.

http://www.schroders.com/getfunddocument?oid=1.9.2228909

It is possible that Corker did not want to be taken by surprise, so #1. But it is also possible Mnuchin asked Corker not to take the conversation in certain directions. It was notable that it was Sen. Brown and not Corker who asked directly about the buffer depletion.

You must differentiate between "backing" and "buying". Treasury is backing losses, but it is not doing the buying. The "buying" part, or better yet the selling of MBS, falls on the GSEs laps only. They have to go out there and find investors. It is not Treasury's problem. It only becomes a problem if GSEs can't sell and no, Mnuchin doesn't appear too concerned about a draw in case no selling leads to liquidity issues. This becomes a problem for Treasury only if liquidity in the mortgage market falters. But the federal reserve can buy them too -as they have been-, so no real liquidity issues and, apparently, no investors' confidence concerns. Maybe Watt believes the Fed buying is the wrong buyer, while Mnuchin doesn''t care and is happy to have all the central banks of the world just for himself. (So there is a draw, investors flee and turn into Treasurys, the Fed comes in as buyer and restores liquidity). I do not know what is happening and I cannot guess anymore. Just disregard my last posts.

That's in Corkers corner. By ignoring it, he's saying he doesn't believe a draw would be an issue. The MBS securities issue is a concern for the GSEs/FHFA. These are sold by them, not Treasury. It is Watt who is concerned about investors not wanting MBS if they continue to see the GSEs in an unstable position. In fact, Treasury may prefer there are no MBS so that central banks around the world only buy treasurys. I am not sure what will happen now and maybe there is something to Wayne's view of not trusting Mnuchin. About the only positive has been his avoidance to be drawn into a corner. Specially, by Mark Warner on the issue of wiping out shareholders of failed institutions. That was a good moment, I think. Perhaps by the time -second half- that more detailed discussions happen Treasury might come out respecting shareholders' rights.

With him saying he wants payments to continue and wants to work with Congress, he might be trying to slow down the Corker's and Warner's of the world from trying to push something through legislatively. It just seems odd that Watt did a 180 and wants to retain capital when coupled with Mnuchin's comments. If Mnuchin came out and said that he agrees with Watt and the capital needs to be retained then Corker, Warner, etc. would likely be in a much bigger hurry to push things through. Just a thought, could be off-base and perhaps Mnuchin really does want the payments to continue. agree. he's got a plan which is: it's not good to piss off the congress Repubs at this moment. Watt can do this on his own, and from corker's comments watt is firm in his view. I found it strange Corker did not specifically brought up "recap and release". Instead, he referred to it indirectly by asking Mnuchin if he agreed with Watt that reform was Congress' jurisdiction and the only way to find a solution. I also noted Mnuchin used the word "credit" as opposed to "capital" when he said he would like to see enough credit in front of a paid-for government guarantee. The word "capital" would have been more appropriate and I am not sure why he avoided it. Unless he was thinking on a backstop.

Anybody expects any issues with Corker, tomorrow?

I will be surprised if he doesn't solidify the present path, the one initiated by Watt. That is, an incipient recapitalization. Although he may try a sanitized version of it focusing on taxpayers, liquidity and the 30 year mortgage. Watt has focused entirely on MBS investor's confidence. The shocker will be suspending the already announced dividends. But that's a slim chance. In the very near term, next 3 to 4 months, many headwinds may cloud the outlook: labor markets continue tightening while economic data begins to weaken, fed continues raising rates all on the backdrop of equity markets taking a hit. Altogether, may scare enough participants that any kind of recapitalization may start to look more reasonable.

Could he be doing all this to avoid being fired for cause? Why wake up now to risk of capital depletion? He's been driving this car without airbags all along? Either way actions speak louder than words - looking to see how much capital will be held? Magic number would be enough to pay par in case of liquidation! Even for that we are in line behind senior preferreds which Mnuchin is in charge of. I hope Mnuchin doesn't set a fix amount and he continues on Watt's path of separating the role of Congress (reform) from the agreement between Treasury and the FHFA (sound and solvency). This would be positive for repairing GSEs balance sheets and more administrative action down the road. I would not like to see a delay arrangement of "collecting now and sweeping later".

Plan is Watt will be gone soon. President Trump will soon have the right to fire him. Watt will not matter. One at a time. I also read that the FHFA deputy, Bob Ryan, was VP at Wells Fargo, WFC is out to steal GSE business. They think everyone is dumb. Haven't seen anyone mention this, but I think it's pretty clear trump will just get rid of anyone that doesn't follow his plan (assuming his plan is to end conservatorship) I agree with this. I am also thinking after Corker's admission that he has an open line with Watt, which seems to have been regularly used in the past, he most likely contacted "Mel" pressing for a stronger Congress involvement and some reassurance of no administrative actions. If this is correct it demonstrates further that Corker has no good standing with this WH, that he can only count on Watt and that this WH most likely will oppose him. Pressing Watt behind the scenes may not succeed after all his badmouthing and Trump could try a renewed push at Dodd-Frank reform. Which includes the firing of the head of FHFA at will. All total and complete filling-in-the-blanks speculation by me. At a minimum, I cannot see all 3 parties (Watt, Mnuchin, Congress) being ever on the same plate. Two at least -Watt and Mnuchin- might.

"nws will remain above the "relatively small" buffer" any indication of this? i havent seen watt say anything other than he might omit dividends. "Ryan said he couldn’t specify how much capital would be needed, but that it would be a relatively small amount to deal with the risk of short-term losses." Matt Scully‏ @scullymb 21h21 hours ago More FHFA's Bob Ryan emphasizes that capital buffer push for Fannie, Freddie is not meant to recapitalize the GSEs. Build buffer, then sweep. That can still be many billions. Not to mention that if tax reform gets accomplished that need may rise to tens of billions. Since retaining earnings appears to be a done deal the best we can hope for is an open-ended agreement due to the inability to determine a fix buffer. Which may require full earnings retention for the next 2 to 3 quarters. Then, January 1st, 2018 comes. Like someone explained to me when I was first introduced to american football (I am a soccer guy) it's all about gaining yards.

people may very well sell on this but he taking them out of conservatorship - which is what he references - is likely many years away even in a favorable outcome. imo better to focus on what's right in front us which is a) sweep b) court case miracle c) hints on priorities for future reform and d) anything else I'm missing. The big one you are missing is January 1st, 2018. Watt can say all he wants about not freeing the companies but if Treasury ends the commitment unilaterally the companies will be forced to recapitalize or be received. Once fully recapitalized he will have to follow the law and end the conservatorship. But he probably won't be around when that happens.

What he really said: replace WH for Trump.

How does Watt do his job as he states he plans to do if he lets the capital go to zero. He just spent 2 hours telling us it shouldn't. In my mind that means zero on 1/18 never happens. He also smerked when asked about a minimal buffer discussion with treasury. Watt and Mnuchin both know how much of a buffer they want. By far, the best we can hope for is that all the details remain ambiguous. It was great to see Watt dodging many bullets like the amount of buffer or how to handle a DTA reduction if tax plan goes through or past Treasury talks. All the while pointing at taxpayer protection, investors' loss of confidence, sound and solvency of companies, liquidity of the mortgage market or whatever reasoning-of-the-day happens to be, as long as we remain invisible. The best route for us here is that they dismantle this thing one piece at a time. First, nullifying the buffer reduction and allowing retaining earnings. Then, dealing with the Srs. and the commitment, etc. So it will be less painful and threatening to the opposing congressmen/women who -as Watt wisely stated, remain in charge of housing reform, whatever that is-. By the time the dismantling is at a point of no return they will be scratching their heads... We do not want a Hank Paulson blast on the floor.

That actually makes sense and you are right, both companies have already stated how much they will be sending to Treasury after June. Yeah, it will be a shocker if Watt reverses that.

I think we will never, ever hear the word "shareholders" as the process unfolds. Instead, it will all be about taxpayer protection and no more bailouts. Shareholders will be made good as default and that will happen before any reform takes place as Mnuchin stated capital is needed before reforming. This would discard any settlements, make equity good and get the Jrs. to face value way before there is any dividend or full cushion. This may also mean that reform will be almost complete administratively with just a few touches, perhaps, by Congress (charters). I know I am a kool-aider but whatever. Wayne, "way optimistic" really? Watt said either with or without Treasury. Said he may have to dance alone if Treasury doesn't join. That sounded just as pure determination.

Assuming the NWS is paused/stopped in June, what do you all perceive as the major risks going forward for preferred shareholders? I'm intentionally not including my opinion in this post as I don't want to influence thoughts/opinions/comments. Thanks in advance for commenting! The main risk is always Corker coming out with some piecemeal legislation. But he won't show his hand until after he sees the new arrangement. Then, he may try another wrench. I hope Treasury works with Watt and they make the simplest of the moves: just cancelling the buffer reduction and not adding any limits or anything silly and definitely not going back to the 10%. That would mean simply scratching 1 line of the 3rd amendment and adding an agreement w/Treasury not to get paid. Then, on Jan 1st, 2018 all that has to happen is Trump dismissing the Srs. as in government has been paid. Which will force to deal with the commitment and a replacement of capital for the companies. Then, Watt may request FF to come up with recapitalization plan. Congress can then reform all they want.

Craig Phillips is our next hurdle.

Yes. Lookout for possible nasty curveballs. We don't want smartypants tomorrow to propose retaining money in an escrow or other esoteric solutions aimed at blocking retained earnings from reaching equity.

Sorry. I have to keep posting. It's far from a guarantee and it could simply be a maneuver to push Congress to write a bill. But I am still shitting on my pants.