rros

He has 3 former OneWest guys that he needs to get confirmed.

wayne, maybe it IS good luck. So far, 2 rep judges bailed on us!

So raising the warrants price would be Stegman's recap "at the cost of the taxpayer". And then, there is a double dip on this scenario. Not sure this has a chance. Mnuchin is on record saying "I never said recap and release". Before anything happens, or simultaneously, the companies will see more stringent regulation. Re: illiquidity/insolvency. You can cure illiquidity with a simple credit line. You can't cure insolvency the same way. They are radically different concepts.

Not trying to add kool-aid but it is not just Mnuchin who has to do a 180. It is also Mulvaney, Cohn, Ross and a few others. It is unlikely that businessmen coming from the private world would all do such a turn at the same time and for the same reasons. Unhappy as I am with this last ruling I try to put it into perspective. It may just be the last vestige of Obama's era -the non-sensical era- with the majority of the ruling having been written while he was President and by a judge appointed by him (Ginsburg may have just wanted to bury Fannie and Freddie and saw an opportunity). The wind of change is already being felt. Just not strong enough, yet. We are in the transition period, with many hiccups, from the non-sensical to the most sensical and realize you are all analyzing facts through your gloomy glasses after yesterday's ruling. Give yourself a day or two.

Best will be to avoid using the word "shareholders" completely. As well as the subject of lawsuits. If he continues on his common sense path of protecting taxpayers by making the companies have sufficient capital all pieces will fall into place. Re: dividend expectations for post 08' buyers according to Millet/Ginsburg guidelines. Investors who did their homework absolutely had such expectation. After all, Lockhart said companies would leave conservatorships (return to normal business operations) after they are stabilized. Many papers circulated in 2009 and 2010 showing the path to profitability and the activation of the DTAs. This natural process was arrested by the 3rd amendment. Not by the creation of FHFA or by establishing a conservatorship. Although this is easy to prove, we have to contend with Lamberth :(

i very much hope you're right but a 4th amendment that reduces the 187bn before jan2018 seems difficult based on the headline language at least. and if he adjusts the dividend retroactively to a fixed % instead of all profits, but keeps the 187bn steady, then he'd have to send $ back to the company, which might be a home run as a down payment on capital build but politically difficult. i fear when he said they can do this quickly on nov30 he meant with congress' (or the courts) help. still, any supportive language and a stop of the NWS forward looking could be material from these price levels. This. If you all want quick, here is quick. Mnuchin and Watt remove -by a 4th A- the dwindling positive net worth clause effectively removing the block on recap. A one liner. Then, Watt orders Fannie and Freddie to work on a recapitalization program as per HERA. No explanations or if need be, protection of taxpayer. Our shares become good. And that is that. End of story. No more doubts, no more court anxiety and the hell with Congress. Details on recap may be worked up later by each company throughout 2017. Meanwhile, companies could continue to transfer funds to Treasury until the last December 2017 transfer (Feb 2018). By then, Srs. simply disappear by an EO. And the commitment is replaced by the capitalization programs for each company.

There's no expiration, although with quarterly volatility in earnings and no ability to retain capital, the GSEs would eventually hit the caps on facility size (sometime well after 2018). Hit the caps? Isn't the commitment for both at around 500 bill from which 187 bill has been drawn? Are you saying we will see another massive catastrophe in real estate in our lifetime? It took more than 70+ years to get to the great recession!

Word "may" in play. As opposed to "shall".

At the risk of inflaming this thread to another 400 pages, here are couple things that Mnuchin can probably do that won't make current shareholders happy: - Stop NWS as of now, but not roll back past NWS. Yeah, this is not a quick solution and I know everyone criticized me when I suggested this as possible step. - With weak legal situation, perhaps Mnuchin can settle for sub-par conversion of prefs to common plus huge common dilution with govt position, etc.? The argument against this is that this would be "Obama/Clinton" thing to do, but why not? Yeah, his buddies are screwed... but shareholders might take scraps now that legal situation is weak. Anyway, I'm not arguing the above solutions are high probability. But IMO between this and potential Congress "input", there might be some not-so-great outcomes for shareholders. Let's ask this differently? Who still thinks that par-solution has higher than 40% probability? A priority for Mnuchin is the networth of the companies reaching zero on Jan. 1st and taxpayer protection. In this respect, today's ruling only adds to that urgency. Besides this, and like Cherzeca mentioned, the ruling shouldn't influence any of Mnuchin's previous thoughts. Given his priorities, maintaining a liquid mortgage market and protecting taxpayers within the frame of a private market (Mnuchin said reform is possible only after companies are capitalized), it is conceivable he will still look for an amendment to the PSPAs reviving equity. Then, -believe it or not- the rest is noise as Congress could still work on reform. Don't lose your north. We only need a change or an announcement that equity is kosher. Then, down the road, the Jrs. could get the icing too if they succeed in claiming for damages. NOTE: the fact that the courts are saying the nws is legit doesn't mean Mnuchin will suddenly believe nationalization is the best thing after sliced bread. He may still believe Treasury got the most of it already.

there was advocacy in oral argument by i believe fhfa lawyer that govt thought the economic effect of NWS would be a wash. i am not sure this "better position" language directly contradicts this, because you can be in a better position but not be able to realize upon this if profits dont grow. just generally, i havent seen a smoking gun in any of this discovery, but it is certainly true that all this material was before the govt at time of making NWS decision and should have been included in administrative record. Yeah it seems that what has been brought public thus far is only enough to get the sense that this was much more premeditated and directed than the "death spiral" associated narrative outlines - but as you said, no smoking gun. The smoking gun is the fact that the government understood there was going to be *more* of something that was not going to be captured by the 10% established in the original agreement. And that capturing that excess would mean favoring only 1 actor to the detriment of all others. Had the government thought there was a death spiral or an irreversible melt down of the companies none of this language would have existed. It only exists because they were alerted of a melt up. I would infer same, but the legal experts here don't seem to think that's the case. Possibly. But we will not find an email that says DTAs will revive the companies and make vulture speculators rich. That conversation may have happened around some water cooler. So what is the best second smoking gun we could hope for?

there was advocacy in oral argument by i believe fhfa lawyer that govt thought the economic effect of NWS would be a wash. i am not sure this "better position" language directly contradicts this, because you can be in a better position but not be able to realize upon this if profits dont grow. just generally, i havent seen a smoking gun in any of this discovery, but it is certainly true that all this material was before the govt at time of making NWS decision and should have been included in administrative record. Yeah it seems that what has been brought public thus far is only enough to get the sense that this was much more premeditated and directed than the "death spiral" associated narrative outlines - but as you said, no smoking gun. The smoking gun is the fact that the government understood there was going to be *more* of something that was not going to be captured by the 10% established in the original agreement. And that capturing that excess would mean favoring only 1 actor to the detriment of all others. Had the government thought there was a death spiral or an irreversible melt down of the companies none of this language would have existed. It only exists because they were alerted of a melt up.

Just my opinion. January 1st, 2018 is approaching fast. Then, the minimal capital cushion becomes zero. Although nothing changes dramatically this means that the slightest loss, however unlikely, will create a draw and a political storm Treasury won't be able to blame on past administrations. I seriously doubt Mnuchin wants that time bomb on his lap. So he may try to defuse that fast. Very fast. This does not mean we are golden. He can simply arrange with FHFA to allow a certain amount of capitalization to increase the cushion. A 4th amendment that allows to retain earnings up to 5 billion of net worth and any excess goes to Treasury. That would be a gigantic change signaling the first stage of recapitalization and possibly light at the end of the tunnel for the commons and Jrs. equally. From here, FHFA can order the companies to work on a capitalization plan as per HERA and both Treasury and FHFA can start work on how to exit the conservatorships, including welcoming restructuring ideas and possible bills from Congress. All the while, we would have gone from winding down capital to building capital.

haha before this happens T's Treasury will move to label China a currency manipulator, create "an accident" in any of the South China sea man-made islands, initiate a trade war announcing possibly a large geopolitical conflict in which Russia will be our main ally. Then, both russian issues and impeachment talk will die.

i've been thinking about this also. first, with a rights offering, you have the existing shareholder base. second, if the NWS senior prefs are wiped out and junior prefs are enticed to convert to common, you have a clean financing slate for new conventional senior pref that would be enticing to many institutional investors (pensions, insurance etc). but you are right, more is needed. but dont forget, if income rates go down, fnma can retain mucho dinero as long as dividends are foregone on all but any new senior prefs. let me put it this way, mnuchin calls in wall st, and says to bankers he has about $1B in fees to dole out, my guess is that you will see the bushes being beaten (so to speak) Buffett is on record about what he doesn't like - the non cumulative nature of preferreds, and the companies taking on too much risk in the past and focusing too much on quarterly earnings at the time he sold them. Berkshire certainly has the cash on hand to fire the "Elephant gun" and finance a very large part of the deal, the reinsurance market is well within their core circle of competence, it is a time when there are few undervalued investments around. This would certainly beat buying more of his least favorite industries in tech and airlines lol. The word lolapalooza effect comes to mind Number 1 issue is solvable: Buffett negotiates cumulative preferreds for Berkshire. The second too: companies become utilities. Problem with Buffett getting involved is that both commons and Jrs. get buffetted.

So this assumes that the warrants are reversed or the strike price goes up to $10 minimum. Bold predictions imo, but nice spreadsheet. Hadn't seen this, but I like the basis. I just don't see where such an adj. on warrants is such a far out idea. We know they're going to be adjusted in order to be able to raise capital and as a likely part of settlement. Doesn't Trump/Mnuchin desire to achieve overall larger goals outweigh the idea that they choose massive dilution as the answer? Well they can always raise some additional capital on top and also convert the junior prefs...and allow a retained earnings buildup as well. Based on their ideas regarding financial regulation, I wouldn't be surprised if all they do is retained earnings + reverse the 10% dividend back to 2012 (include excess dividends as Sr pref repayments). That should allow a minimum amount of capital while still maximizing the value of the warrants at $0 strike. Imo they will keep the strike at $0 as that not only makes a great political headline but helps fund his infrastructure ambitions. Do you really think these guys will go for a gradual approach? I haven't seen anything "gradual" in the last few weeks lol. The bet for the next 4 years will be "shock and surprise". You won't go wrong betting on that. But would not know how this relates to our investment.

I actually think this is a black and white thing. If equity is revived in any way, shape or form the Jrs. are automatically at par. Period. That is the big picture. No matter who whines. Then, comes reform.

The writing was on the wall for the entire Obama administration when he announced, as senator, he would be against vulture speculators buying the stock for pennies. He said this in an interview in reference to the collapse of the GSEs. Most of us disregarded his stance and were wrong for 8 years. This time, the Treasury Sec. nominee has announced privatization is the way to go, recapitalization is vital and an end to the conservatorship is needed. Some will also disregard this comment. To their regret, provided he is confirmed today or tomorrow.

The one danger he faces regarding impeachment is Cherzeca's key word: administrative state. The more he does this, the more he will piss the wrong people. http://thefederalist.com/2016/10/25/gop-needs-elect-trump-impeach/ But at this stage impeachment talk makes no sense. Republicans are getting away with murder. Far more likely: he pisses off so many people in so many different areas and in so many nations that he gets stopped jfk style. Hopefully not.

This is to tell the Elizabeth Warrens of the world and all other socialists/progressives to F*off.

I was down $2 million that day lol.

think about what mnuchin is likely thinking to himself.....here is a possible thought balloon: "hmmm, i would love to act on a bipartisan basis with democrats on GSEs. but let's see, sherrod called me a liar, and dems boycotted my committee vote. maybe time to rethink how practical it is for me to try to be bipartisan..." But Chris... he IS bipartisan. He is for Trump and for himself!

Because of hedges?

Pauly, excuse my lack of english mastery..But this is what I picked up from your new(er) diatribe: "hey obama, as an aside you're an ahole."... With which I fully agree. Again.

Probably based on their prior paper "GSE Reform, What You Need to Know". Attached.GAR_GSE_Reform_WTK.pdf

I have been trying to find that out unsuccessfully. Hatch did say he was going to try to schedule another vote later today. there is apparently a rule that says a committee vote cant be held w/o a member of minority. makes sense to avoid majority action secretly in middle of night. but doesnt make sense to give minority right to postpone vote indefinitely. but dems are now holding sessions committee vote hearing, so i guess they will show up for mnuchin vote at some point. I found out there is Senate Rule #14 that allows the majority to discharge legislation out of a committee and bring it directly to the floor. Perhaps it also applies when mark up votes fail?