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wow let me repeat. wow. I am in disbelief. Wait for tomorrow's senators' shit storm. Can't wait for that hearing. Wayne, thank you for that opportune prepared remarks. And I was wrong about the flipping. Maybe he stated this in advance of tomorrow's battle? Let's hope he pushes through his stance. "FHFA's actions would be taken solely to avoid a draw during conservatorship." This statement is, of course, to divorce his actions from whatever happens to share prices at 9.30am. Thank you, snarky. Someone correct me. Isn't this the first valid and official statement in almost 9 years that recapitalization is a real possibility?

Thank you, Wayne. But you know how it goes with politicos and public servants... The ink may still not be dry yet they flip. And 15 months have passed and a new President and new Treasury Sec. we have and Watt continues not to hear any discussion at all. These are the ones we vote for and pay for their salaries. BTW, Watt is also on record saying he would consider one more draw under his tenure a "dereliction of duty". Reported by none other than Joe Light! ("Watt, a former North Carolina congressman, has told people around him that he’d consider it a dereliction of duty if the companies needed more money on his watch.")

I agree. I just want to see if anyone here have any thoughts about that case. Tomorrow is Watt's hearing in Senate. I am sure Bob Corker would ask him why he still hasn't wound down the failed FnF, and he would gives answers like, I am watching the situations and would act responsively, which is like saying nothing at all. The thing to watch tomorrow is Senators getting a promise from Watt of not stopping dividend payments.

I believe this is highly likely. After all, one of the first things Mnuchin starts every interview with is "I've followed these companies closely for 30 years..." He might as well say, I'm an expert and don't need help on what to do here but I'm a politician now so I might as well make people think they have input so they can tell their constituents they were involved in the outcome. when has he started interviews that way? i know he said that at his conf hearing but im not aware of any interviews. the fact that he hired craig philips and assigned him to housing reform shows he really is exploring all options and isnt wedded to any one path No it doesn't. All it means is he's confidant Phillips knows his shit and can be helpful. Although it is all mere speculation there may be something to that. Originally, when Mnuchin had more freedom and spontaneity to speak his mind he always referred to the GSEs issue as "a fix". How to fix them or even as a "bipartisan fix". I interpreted this as re-regulating them not privatizing them (which may take the government out of the picture completely). If he continues to believe a public-private partnership is the right model, as part of a fix Craig Phillips may be a perfect piece in the puzzle. Again, pure speculation. Since the last share prices run, Mnuchin has abandoned the word fix and replaced it with "housing finance reform". Not sure if he decided to hide his cards to when the moment is right or if there has been a fundamental change.

read tim howard's blog. he basically pooh poohs the whole report The problem TH has is that he does not manage trillions (literally) like Larry Fink does.

I'll tell you what is not ambiguous... If this comes from Larry Fink, which it does, he firmly believes shareholders were toast in 2008 and further toast in 2012 and should be completely wipe out. He believes hedge funds are vulture speculators of the worst order. On the other hand, he is an Obama man so his report may now have less weight. About the only worrisome fact is the infiltration of Craig Phillips, a blackrock fellow, into Treasury.

Wayne, I understand where you are coming from. But can hardy believe anyone giving credit to Corsi as an influential agent. Won't move the needle, in my view. This is periphery, at best. Also, is he really talking about Watt? Or is he confused with ICBA and other minority organizations who have been requesting stopping the sweep for some time? Corsi may be a PhD. but he already got some dates mixed up re 3rd amendment and Collyer/Ocare payments.

Yes, and in the May 1 fox interview he specifically and clearly stated that the current setup is putting tax payers at risk. Of course there are numerous ways to resolve that and still burn fnma common and preferred's. What is absolutely clear to me is that Treasury's backstop will disappear judging from Mnuchin's insistence on getting taxpayers out of the equation. How it ends, abruptly or over a number of years or how it gets replaced... no clue. The implications are clear. The PSPAs will have to be terminated and both Fannie and Freddie will have to look for capital somewhere else. That is when Watt will be forced into the picture.

Please share the quote. I haven't read anything even close to it. I think Mnuchin wants one thing, and one thing only. He wants to remove the treasury from picture and have FnF's debt guaranteed by private interests. That's it. He will take any and all suggestions about how to better handle FnF fate but that's not his priority. Please share the quote. I haven't read anything even close to it. Nobody knows what's going on. So far, we have all been tools.

In light of his comment yesterday to MB that 'these companies exist only because of a giant line of credit from the Treasury' his position on the nws makes complete sense. It also makes complete sense that -because of that- he wants the companies to have their own capital, thus eliminating the needed reward to taxpayers. I only think this Joe Light piece came upon us because share prices were overextended, almost in bullish territory, inciting robots to go on a buying spree (they read technicals). Somebody somewhere is watching charts and technicals. It's been like that for years. Could you tell me why his position that FnF should continue making payments under NWS makes complete sense given he said these companies exist because of a giant line of credit? I wonder what's his true intention and if you think he flip flopped. No. I don't think he flip-flopped. He is being consistent. He is accepting the fact that because companies rely 100% on Treasury's money all rewards should go to taxpayers and none to shareholders. However, he is -and has been- simultaneously saying that this situation is no longer useful/needed/healthy or safe. And he has been more than clear saying taxpayers are at risk with the current set up. From this line of thought he infers: a) companies need their own capital for their existence and stop relying on Treasury. b) once that is accomplished rewards can be shared among all shareholders (being Treasury one of them, potentially). I am adding b) as his next line of thought. Briefly, he says: 'The current set up is legit. But has lead to a risky situation and must be changed.' He is not judging the NWS directly. Only accepting the court outcomes even though his statements reflect its unhealthiness. Maybe he is trying to push things to the limit to force an outcome? The closer we get to a draw, the more politicians will become believers.

In light of his comment yesterday to MB that 'these companies exist only because of a giant line of credit from the Treasury' his position on the nws makes complete sense. It also makes complete sense that -because of that- he wants the companies to have their own capital, thus eliminating the needed reward to taxpayers. I only think this Joe Light piece came upon us because share prices were overextended, almost in bullish territory, inciting robots to go on a buying spree (they read technicals). Somebody somewhere is watching charts and technicals. It's been like that for years.

Bartiromo: "There's been a conversation on Twitter and has been for a long time that President Obama needed money for Obamacare and he would take from all the agencies and he took from Fannie and Freddie. Is that true?" Mnuchin: "It's true. They used the profits of Fannie and Freddie to pay for other parts of the government while they kept taxpayers at risk." Mnuchin has been very vocal that one of his main goals with housing reform is to make sure the taxpayers are not at risk. Here he makes a clear connection that using profits of GSE's to fund other programs keeps taxpayers at risk. Careful. He retracted in the past. This time he could say "I have never said FF's profits were used to pay for Ocare. I said they were used to pay for other parts of the government". I think the point is that he said "They used the profits of Fannie and Freddie to pay for other parts of the government while they kept taxpayers at risk.". I think the most important thing is not whether the money is used to pay for Obamacare or some transgender male's prostate annual exam. The important thing is that he agreed taking profits from FnF will make tax payers at risk. Therefore it should be stopped. Yes, that is my interpretation as well. Diverting companies' profits is the issue.

Agreed. But keep in mind the Administration does have the documents that might connect the dots. If there is one from the last administration that says something to the effect of "we need to take this from Fannie to pay for Obamacare or it will die" then that would be enough, in the court of public opinion at least, to say Fannie paid directly for Obamacare. From an accounting standpoint, and I'm a former accountant, money is fungible of course. I know Corsi is a whack job, but he mentioned that the White House told him that Obamacare paid for with Fannie money. This was well after Trump had been in office and had access to the documents. Trump was also more direct yesterday in his tweet where he said "Obamacare is dead..." In the past he has said "It will die..." "it is going to die...", etc. He knew about what was to be discussed in this morning's interview before it aired. Too much dot-connecting can be detrimental at times, but it seems prudent in this case. And it's kind of fun. :-) I can't believe the market is offering prefs at roughly 30% of par value in this environment... pretty amazing deal if you ask me. What are your opinions on Craig Phillips? Craig Phillips is definitely controversial. But since he played such central role in f*ng up FF he may also know where to plug the holes. And that may be Mnuchin's idea. We really cannot say why he would float ideas from receivership to Corker/Warner to statu/quo. That, by itself, may mean nothing. I would only rely on what Mnuchin has been saying -and said today- from day 1: "as is", taxpayers are at risk.

Agreed. But keep in mind the Administration does have the documents that might connect the dots. If there is one from the last administration that says something to the effect of "we need to take this from Fannie to pay for Obamacare or it will die" then that would be enough, in the court of public opinion at least, to say Fannie paid directly for Obamacare. From an accounting standpoint, and I'm a former accountant, money is fungible of course. I know Corsi is a whack job, but he mentioned that the White House told him that Obamacare paid for with Fannie money. This was well after Trump had been in office and had access to the documents. Trump was also more direct yesterday in his tweet where he said "Obamacare is dead..." In the past he has said "It will die..." "it is going to die...", etc. He knew about what was to be discussed in this morning's interview before it aired. Too much dot-connecting can be detrimental at times, but it seems prudent in this case. And it's kind of fun. :-) I can't believe the market is offering prefs at roughly 30% of par value in this environment... pretty amazing deal if you ask me. This trade is still plagued with risk, so 30% of par makes sense. Unless Mnuchin publicly states the administration supports shareholders' rights just like ICBA did lat week. But that may require a settlement, first. Should that happen, shares will fly. To bear in mind is the fact Mnuchin appears on Bartiromo's right after the government got funded till year's end. So what is the next hurdle? Obamacare replacement bill? I seriously doubt there is a smoking gun of any kind. For sure Obama used FF for funding losses to insures therefore guaranteeing the survival of Obamacare. And Democrats' silence or even the support from the likes of Warren for nationalization may explain a secret pact among them. Specially considering they all believed HC would be President. Nationalization would have implied funding losses for a long time. But if anything like this took place must have been all verbal mafia-style. Like discussing it in the park while sitting on opposite benches and looking the other way.

Bartiromo: "There's been a conversation on Twitter and has been for a long time that President Obama needed money for Obamacare and he would take from all the agencies and he took from Fannie and Freddie. Is that true?" Mnuchin: "It's true. They used the profits of Fannie and Freddie to pay for other parts of the government while they kept taxpayers at risk." Mnuchin has been very vocal that one of his main goals with housing reform is to make sure the taxpayers are not at risk. Here he makes a clear connection that using profits of GSE's to fund other programs keeps taxpayers at risk. Careful. He retracted in the past. This time he could say "I have never said FF's profits were used to pay for Ocare. I said they were used to pay for other parts of the government".

This continues to worry me. Receivership -> create new legal entity ala MBA proposal. Seems this Craig Phillips is not the best person to be in charge. Also, receivership > liquidation preference > Jrs. at par (provided Trump does away with the Srs. on Jan 2018.

For those of us who have been on this trade for years we have learned that when things seem to be going well -reflected on a high priced stock- the time comes when some really bad news is thrown unto us: Lamberth ruling, Appeals ruling or Treasury/FHFA/WH press releases debunking rumors. We have gone through 3 big cold water splashes and numerous smaller ones. But this was intended as half a joke. Your one way to zero is not to be disregarded. Administration/FHFA could force receivership to wipe out equity before moving into a new scheme where new equity is raised. However, there are a few issues with this. Wiping out legacy after what we have gone through could send the wrong message to new investors. Or it could also reinforce the notion of no bailouts to anyone pointing at moral hazard. Another thing to consider is that many voices in the current administration (Calabria, Mulvaney) have stated the government has been paid back. If all this drags into 2018 there is a chance Trump may simply eliminate the Sr. preferred shares (hopefully Corker fails to extend Jumpstart). In which case, a receivership may grant full value to the Jr. shares. Or what Snarky has already stated. Remember, Calabria is big on receivership and he both understands and believes in the process. I would not be surprised he will try to see this working in an actual scenario. But I also believe the chance to see value re liquidation preference of the Jrs. is very high. Provided the Srs. get the boot before.

The way it seems to go is that rulings have already been reached in all cases. But they are only being released as share prices become too frothy. Once prices reach unsustainable levels of speculation someone calls the courts and they drop the ax. So there you have the schedule: pay attention to share prices. And yes, I am assuming all courts are against us.

So far, and for many years, these stocks have run on lack of information and collapsed on hard facts such as court rulings or government press releases. Just like the old dot coms when there was no data to analyze stocks boomed only to collapse when first data became available. Following this line of thought you should accumulate now before the cold water splash. Thank you, Chris.

Money is fungible, how would you determine where the Dollars for a specific expense is coming from? The whole idea makes no sense to me, unless you talk about money laundry. if you read all of corsi's reports, including a couple with govt data, and then the 200 page joint congressional report on the CSR payments, I think you too will think there's a real chance the GSE profits were used for the Ocare subsidies. I believe spekulatius is correct. HERA enables all payments to go to Treasury's general funds. It's in the law signed in 2008. Once in general funds the money gets lost. That money -whether dividends, legal settlements or DTAs- will be no different than any other money Treasury receives. This Ocare payments strategy should be abandoned, in my view. The more transparent theme regarding the NWS has always been "never to share a dime of profit with shareholders". There is even a Treasury memo about it. it's possible you are right, that's why I say there's a chance it was directed to CSR payments. but once again I would say if you read the 2 joint congressional reports and corsi's reports, including the mar13 one (can be found on gselinks.com), I think you'd have some suspicion over the timing of the congressional request, then withdrawal of the CSR funding at the same time of the GSE DTA windfall, combined with the ridiculous stonewalling of the congressional investigation by the prior admin. it's also possible that the current admin knows this but doesn't want to hurt people if their plan is to eventually stop the sweep. but maybe you're underestimating the power of the anti-gse opposition and thus anything that tilts opinion in favor of the GSEs needs to be used, imo. You are right. I did underestimate anti-gse oppo. But I also failed to assess correctly what a mess an investment tied to political outcomes could be. What's worse, I miserably missed the mark in assessing courts and would have never concluded that court outcomes are 50/50 (complete uncertainty). I guess the oracle had it right when he avoided such type of investments. But the point is "suspecting" something does no good to your investment. Neither it adds. On another front, Stevens proposal is a shift in the right direction. The shareholders' piece, however, needs to be adequately plugged in to make the proposal wholesome. That is, the new owners of the successors of re-chartered Fannie and Freddie should be the legacy shareholders.

Money is fungible, how would you determine where the Dollars for a specific expense is coming from? The whole idea makes no sense to me, unless you talk about money laundry. if you read all of corsi's reports, including a couple with govt data, and then the 200 page joint congressional report on the CSR payments, I think you too will think there's a real chance the GSE profits were used for the Ocare subsidies. I believe spekulatius is correct. HERA enables all payments to go to Treasury's general funds. It's in the law signed in 2008. Once in general funds the money gets lost. That money -whether dividends, legal settlements or DTAs- will be no different than any other money Treasury receives. This Ocare payments strategy should be abandoned, in my view. The more transparent theme regarding the NWS has always been "never to share a dime of profit with shareholders". There is even a Treasury memo about it.

I think that is what he is saying. Take a look: Competition can come later and only if the regulator charters out to other institutions . And we know banks will kill for such charter. I do not think Berkowitz wanted a gov. guarantee though. Maybe Ackman. Stevens plan may gather consensus from many parties. As well as shareholders provided we are part of the transition.

Stevens is simply being cautious navigating unfamiliar territory (new admin). Note he said they were "agnostic" in regards to shareholders but later on he used the word "speculators" first thing referring to hedge funds. So in his mind -and possibly in off-the-record exchanges- he continues to view terms such as shareholders /speculators as synonyms. We still need to see if the combo Jared-Ivanka-Paulson is for real and will lead to any positive push as in "respecting shareholders' rights".

LOL..... I've seen traders doing that after wiping out their leveraged commodity/option accounts. I've yet to see traders doing that when their position still have a floating profit. If you are not comfortable, take the small profit and call it the day. I do agree that the unrealized gain have diminished by a lot after the Perry Appeal ruling, but the lesson I learned over the years is taking small profits can be detrimental. (You can't go broke taking profits? No!) Trade or invest to your sleeping point. If you can't, it's time to look for greener pastures. There is always a bull market somewhere.

Perhaps it will take some time but there are likely important signs along the way -- for instance the reform principles that Calabria mentioned by this summer and also the inclusion or not of the long term GSE swept profits in the full OMB budget scheduled for May release. The current price levels, to me, represent low expectations of positive resolutions -- even the GSEs' main antagonist, the large bankers' organization, kept FnF alive among other competition in their recent proposal paper. In my view, any change will come abruptly, without notice and with nothing being telegraphed in advance. So it is a moot point to try to figure whatever public information there is. You either believe it is going to happen or you should be out. And I know this sounds more like a gamble than investing. But perhaps this is what it is. I also believe Treasury/WH won't be negotiating that much behind the scences (w/Congress). Most likely, any move regarding GSEs is being cooked between Gary Cohn, Mnuchin and Calabria.