rros

It looks like. She said: "so does that mean that you have a certain amount of capital requirements, so 4.5% for risk-weighted assests, for instance, for the largest banks.." at which Calabria replied: "Exactly". However, when the reporter brought up specific amounts in dollar terms, $250 billion, the amount was much higher than 2.25% of total assets. So, not completely clear.

Video is live now: https://video.foxbusiness.com/v/6035185923001/#sp=show-clips On minute 15:20 reporter actually said 4.5% of risk-weighted assets. That would make it half the value. Risk weight is set at 50% for single family mortgage-related assets. GSEs have mostly single family loans pooled.

Mnuchin has never disregarded the lawsuits. He has never (and never would have) said 'they will go away'. So far, it's all Calabria. Collins and others are suing both. We can't anticipate Treasury's reaction to a setback in Collins. Sure, WH/Kudlow have a laid out plan. But those nobody is suing.

There are still risks out there. It is at this altitude that we usually get the court exocet. Let's hope none this time.

I only care about the expropriation of private property. Add shareholders' rights, if you'd like. The rest, personally, no opinions. So I am laser-focused on one thing and whatever the lady writes... well, it may be an entertaining read. I have recently seen the dark side of Fannie and Freddie for the 1st time since I hold this investment. Been President of our Assn. numerous times. About 2 months ago, a unit in the blgd goes up for sale. We look at the background information for the buyer and notice he is a low income individual with the possibility of having issues meeting the current expenditures we are going through ( assessments). In the interview all goes fine. I take the opportunity to ask him how he feels about meeting our needs. He says he is ok. A week later, we receive a letter from the City requesting we sign a document accepting the City's second mortgage. Never seen that before. When I finally understood the transaction. In order to buy the unit the buyer was borrowing twice to exceed purchasing price by about 10%. In order words, from these 2 lenders, he was leveraging 110%. Obviously, a zero-down purchase. We modify the City's document with our attorney to acknowledge our placement on a lien to avoid being the last in line. Another week goes by and we receive a document by the Title company asking us to sign an affidavit of sufficient funds for work that was pending by a contractor. In reality, work got cancelled and the matter was being resolved separately. Again, we adjusted the document and signed it. Then, it was all about insurances. Mortgage lenders request us to comply with Freddie Mac requirements for all our coverage. We fight back. After weeks, we agree to raise premiums for crime adding $3 per unit of monthly maintenance forever. Then, flood. The Florida Condominium Act's only mention about flood is that -while not mandatory- it should be *adequate* if obtained. FEMA, on the other hand, overrides this and makes it mandatory for certain locations on their "flood map". We are on a FEMA-designated flood zone so we have always carried flood. But FEMA never changed the concept of *adequacy* accepting the fact some properties could remain under-insured. Solution: condo unit owners to buy additional coverage on a personal basis (personal flood). Think about this for a second. Half of the owners here have been cash buyers. Another 3rd, used non-fannie/freddie financing money over the years. And the few owners who had issues have paid the difference themselves. Now, a low income borrower comes along -whose loans are hotter than a hot potato and every one of his lenders is trying to run away from them damping the credit risk to Freddie Mac as fast as they can- which triggers an economic shock to our Association resulting in an increase of $25 (22 flood +3 crime) a month of maintenance per unit, for life. I could not even find solace in our attorney so, much to my chagrin, flood coverage was raised. What this amount to. We like to think of the social mission of Fannie and Freddie. But there is a large apparatus at work that obfuscates who gets to pay the final bill. Because this was a low income borrower, every actor in the play felt compelled to go along with the transaction. The actors that mattered were quick to disappear through the back door. In order to do so, all they needed was our Association to pick up the slack. While this was not a case of "may or may not", ours involved the City's Attorney's office and we know how lawyers can find ways to interpret things in the darkest manner. So we gave up. Strangely, a month before all this happened, another transaction went through swiftly. That buyer -a financially stable person- had similar issues at the start but asked Regions how to forgo the requirements: 30% down and an 8% mortgage. That buyer told Regions to go packing and looked for an alternative source of money. He got all requirements waived in exchange for a 25% downpayment (and current market mortgage rates). Transaction closed promptly with no issues, nothing to be signed. Wrap-up. In the painful (for us) transaction, only the seller got the win-win. He made coin while not having to participate in the raise of insurances (he leaves). Mortgage lenders unloaded the risk. Freddie Mac makes everybody else pay for the risky borrower. Us, residents, got the lose-lose. We now pay $25 more each of monthly expenses, for life. Just because of one single real estate transaction. And, we have now the risk of an owner who may not meet our needs. Just 3 years ago we had to place a lien on an unit when an owner with a similar profile stopped paying maintenance for 6 months. We forced a sale of the unit and collected the debt. So again. Careful what you wish for. The same socialist principles that may be feeding through the Fannie/Freddie ecosystem may have a close cousin in the NWS. I am not too smart to have an opinion on how housing finance should work or if there should be a Fannie or a Freddie. This is why my only concern is expropriation of private profits and our rights as shareholders.

the frigging last thing you want before a large capital raise is to have a decision maker spouting off. I will say however that Bethany will be great as a questioner. Bethany is fantastic. It's not clear she is pro-shareholders. https://washingtonmonthly.com/magazine/maraprmay-2016/mend-dont-end-fannie-and-freddie/ Thanks. I stand by what I said. While she is clearly pro-Gses in a twisted type of way, she is not being straightforwardly pro-shareholders. Simply trying to tell all sides of the story in the most possible unbiased way (like in all of her interviews) does nothing to support the rights of shareholders. Specially, with a 'Bloomberg' type of remark like this: There is, however, a fourth option: fix the flaws in Fannie and Freddie and let them operate, as they did—effectively—for more than half a century, as the main public-private guarantors of the thirty-year mortgage. This idea might sound sensible to most Americans. But in Washington it is considered, if not completely insane, then at the very least a political nonstarter. Yet it does have some backers, including certain reform-minded financial analysts, think tank scholars, civil rights groups, lobbyists for small banks, and, curiously, a few hedge fund billionaires who bought Fannie and Freddie stock low and stand to make a killing if the companies are revived. While this odd assortment of players isn’t getting much of a hearing right now, their idea has one advantage over all the others: it would actually work. Alright. You win :)

the frigging last thing you want before a large capital raise is to have a decision maker spouting off. I will say however that Bethany will be great as a questioner. Bethany is fantastic. It's not clear she is pro-shareholders. https://washingtonmonthly.com/magazine/maraprmay-2016/mend-dont-end-fannie-and-freddie/ Thanks. I stand by what I said. While she is clearly pro-Gses in a twisted type of way, she is not being straightforwardly pro-shareholders. Simply trying to tell all sides of the story in the most possible unbiased way (like in all of her interviews) does nothing to support the rights of shareholders. Specially, with a 'Bloomberg' type of remark like this:

the frigging last thing you want before a large capital raise is to have a decision maker spouting off. I will say however that Bethany will be great as a questioner. Bethany is fantastic. It's not clear she is pro-shareholders.

my best guess is that if there were a 4th amendment that recharacterized prior "excess of 10% dividends" into pref reductions then the pref balance will be reduced to zero. no hit. what that does to prior years' accounting I know not So looks like I'm in the minority. My thinking is shaped by the "let the gse's pay us back act" bill that was proposed where the interest rate was amended to 5pct. It didn't go anywhere but tells me it's possible. It'd be quicker and give investors more confidence. I can't help but think a capital raise is going to take a long time. Those were Senators. Treasury is the baddest pirate. Ever.

The real question is, how fast can Mnuchin and Calabria get them out before stuff like this produces long term damage?

Changing subjects a bit... Is this our Judge Willet? https://www.facebook.com/JusticeDonWillett/

My fear is that Calabria will do too much of what Watt did: make no move and wait for Congress. However, I have re-read the article after taking a break, and it isn't as bad as I thought. Calabria has talked about a sense of urgency, and he is committed to getting FnF out of conservatorship. I don't think the article is entirely positive, but I have backed away from the ledge! For the juniors, I agree. But a capital raise could dilute the commons badly, especially if it's large-scale and fast. There will be value added, but much of it could accrete to the new common shareholders. I ask myself everyday if I am being gullible in believing their words, while the real game is a waiting one. Government can wait forever. That's the problem of fundamental analysis. A lot of times this kind of uncertainty drives me nuts and then I sell, and then right after I sell, the stock goes 3x. :( I don't have this problem any more after I give up on FA. The chart continues to look incredible. It is one of the best looking chart in all of my holdings right now. I see lots of buying and no sellers on the market. What's really funny is that on Tuesday, the collaborated bashes by John Carney and Gasparino happens to be the lowest volume day of this week for FMCKJ. That tells us that the last group of weak holders (Chris call them LIFO guys) are out. So now we have no sellers and eager buyers, so guess what's gonna happen next. :) In a strange kind of way, LocusofTexas got it right. This, whether we like or not, is a gamble of the rankest kind. What makes this a sordid speculation is government's involvement. Not the kind of involvement known through 10k's, that is, Congress providing GSE's charters and public mission or government entanglement as a "sponsor", but the type of pervasive involvement that is so vast and widespread that involves both houses of Congress and all branches of government in an insidious type of way: politics. I imagine that the day Warren Buffett reached a similar realization, way before any hint of any nws, he promptly concluded fundamentals really did not count or, if they did, they would take a back seat to anything even remotely connected to a politico farting, deciding -was it a large position in Freddie Mac?- it was time to pack and leave with a boatload of profits. Not to risk such fart would end up smelling worse than a rotten egg. Judging this bet on a fundamental basis or a technical basis is an exercise in futility. Charts also looked GREAT on the day this article was published making it the first public acknowledgement of hedge funds' involvement on the Jrs. https://www.bloomberg.com/news/articles/2014-03-10/westhus-reaping-fannie-windfall-to-rival-big-short-mortgages That day, my friend, was the historical peak (or the day before if you want more precision). A day later, the sell-off began. And within 2 days Crapo announced a plan to eliminate and replace Fannie and Freddie: https://www.forbes.com/sites/nathanvardi/2014/03/12/fannie-and-freddie-preferred-shares-fall/#567834e9423e Then, a few months later, Lamberth hand-grenade blew us up into pieces. Fundamentals? Technicals? Coincidence? Inside trading? The only right way to handle a bet on these shares -and I only focus on the Jrs.- is by trying to assess in the best possible manner cumulative information from many different sources interpreting this data in many different ways with a great deal of latitude and an enormous amount of humility that allows for admitting errors. Sometimes major ones. And this assessing, in general, is more like reading tea leaves in its simplest form. Today, I like to think Mnuchin is not yapping. He told us last year, to our great disappointment, that the GSEs were a 2019 story. We got crashed. But we now know he was honest. Why would he publicly say such thing last year and why continue to say it today, in an open forum, that not only this is a 2019 story but one that will unfold within the next 6 months? Why not continue to delay the story to 2020 and beyond? Given he was honest last year, I'd like to think it is true we may see things accelerating in the next few months.

My fear is that Calabria will do too much of what Watt did: make no move and wait for Congress. However, I have re-read the article after taking a break, and it isn't as bad as I thought. Calabria has talked about a sense of urgency, and he is committed to getting FnF out of conservatorship. I don't think the article is entirely positive, but I have backed away from the ledge! For the juniors, I agree. But a capital raise could dilute the commons badly, especially if it's large-scale and fast. There will be value added, but much of it could accrete to the new common shareholders. I ask myself everyday if I am being gullible in believing their words, while the real game is a waiting one. Government can wait forever.

I largely agree. Calabria can and will correct the capital structure in the near term. May is around the corner. It seems unrealistic to expect it to be done in June or July. Anything that happens after that shareholders will have a little voice. May not be the front seat but they will have one. Or a working prospect. In correcting the shareholders issue the Jrs. have the advantage. Commons will continue to be plagued with uncertainty as it will be difficult to assess future earnings or the final size of the companies until the final outcome, perhaps through legislation. For Jrs. instead, it is more important that companies regain their ability to retain enough earnings so as to cover their dividends. Whether they are reinstated or not. we have gone from a former congressman (and skirt-chaser) to an academic/bureaucrat as fhfa director. in terms of what is involved in raising $150B in capital and releasing GSEs from conservatorship, calabria is clueless...which is good quite frankly, let's have Treasury and Mnuchin drive the bus. if you think Calabria will push back on what Treasury wants to do, or will withhold doing what is necessary to get the recap done, you are giving calabria far too much credit. I do wish however that he would shut up about competition, understanding that even he acknowledges that he cant make it happen on his own. Well... we have him on record for an out-of-conservatorship-6-month marathon. If it is just talk to prop the stocks he surely must realize it isn't working. May be someone drops us a better bone. With meat.

I largely agree. Calabria can and will correct the capital structure in the near term. May is around the corner. It seems unrealistic to expect it to be done in June or July. Anything that happens after that shareholders will have a little voice. May not be the front seat but they will have one. Or a working prospect. In correcting the shareholders issue the Jrs. have the advantage. Commons will continue to be plagued with uncertainty as it will be difficult to assess future earnings or the final size of the companies until the final outcome, perhaps through legislation. For Jrs. instead, it is more important that companies regain their ability to retain enough earnings so as to cover their dividends. Whether they are reinstated or not.

I wish I could share your optimism here, but this piece actually gives me a sinking feeling. My investment thesis has started to coalesce around the idea that everything (full recap and release) needs to be done before the end of the year so as not to affect the campaign and election cycle. But here, Calabria makes it sound like getting FnF released ASAP is not really a goal. He also keeps mentioning Congress, which should be a non-starter. It's a lock that Calabria will be able to be fired at-will by Trump, or the next president if Trump is not re-elected. The en banc decision will include this, and that part won't be appealed by either side. That means if Trump gets voted out, the incoming president could fire Calabria (and Mnuchin, of course) and derail the entire thing. I have therefore thought that if Trump really wants FnF released, it has to be done before the end of his term, and more likely much sooner due to the aforementioned campaign and election cycle concerns. To me, these are the concerning parts. I do wonder if the negotiations over the PSPAs could move up if Treasury submits its plan earlier than expected. Waiting until September or October could be too late, unless Treasury has already lined up the big money for the capital raise. The key dominos seem to be the en banc decision, Calabria issuing actual binding capital standards, and Treasury's plan. Once those are all done the PSPAs can be amended and then it's capital raise time. This line sounds like a regulator speaking, not a conservator. Respectfully, what does this have to do with Calabria correcting or not the shareholders' issue? This matter, the one we all care about, was born from an improper administrative action, not from Congress legislating. In fact, Congress followed the right path to protect shareholders based on Calabria's own contributions to HERA. In my view, this matter is simple. As is, shareholders have nothing because companies have 6 billion in net worth and an inability to retain full earnings. On top, Jrs. have someone looking down at them from the top. If/when Calabria makes a move to correct this faulty structure value is automatically added to all shares. And that value will not disappear. It will travel along with any reform.

It's better this way.. numbness will allow both classes to grind higher w/o turbulence. No talk of windfall. A little each month, by Sept/Oct we should be close to targets barring any bad news from courts.

while I dont read gaspo and carney, I can see how the LIFO guys do, and so this can only mean volatility until a plan is released...and likely a new round of volatility once the plan is sought to be executed. the POTUS memo was a sea change (the B guy thinks a recap is now a foregone conclusion), and a favorable collins en banc decision is another sea change opportunity. but this is going to be a slow moving process with a lot of chirping by the gaspo/carney/tbtf types The positive sign to me is that the number of LIFO guys have greatly diminished. With Gasparino and John Carney bashing hard on Tuesday, we have seen very little volume, and stock closed higher than the open after an initial dip of 3.5%. All stocks tend to make a move to where the least number of people make money. It is never so easy that everyone is making money on the trade. Only those who are strong and smart are the ones making money in the end. As Livermore put it, "it wasn't my thinking that made me money. It was my sitting on my hands".

Reducing risk at FHFA could mean terminating FHFA's role as Conservator so that it becomes Regulator. This way, FHFA is not "in the shoes of Fannie and Freddie" anymore. So he said the same thing twice in that sentence. But why would a conservator have any risk? Honestly, 6 months is really tight if he really meant that.

The B analyst is not considering that Tsy/FHFA may agree on a commitment fee for the balance of the credit line. Maybe have overlooked this? The balance is substantial and the commitment fee will be radically different than Sr. preferreds drawing 10% or all of the earnings. So the downside coming from a ratings downgrade may not exist as federal support may extend for a while. While thinking the bank lobby owns the Treasury Dpt. is an interesting idea, mine is that Trump owns everybody and everything and is the 1st President (or one among a few) who understands how to pull all the right levers to exert real power preventing him from becoming another puppet. And that if indeed the Bank lobby or Warren Buffett's preference is that the Jrs. take a cut, that will never happen. Nothing but an opinion sitting in front of my screen...

People... there has been no bad news. Relax and enjoy the journey. Next month we move higher. And even higher the month after that. We are in a 2 steps forward-1 step back process.

Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.). "Charters and paid-for explicit government guarantee may require legislation". I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan. recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization. so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively Precisely! (explicit/ may)... This will be the year.

Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

Totally agree. Food for thought, Locus. Thank you.

Perhaps a matter of liquidity. When they all broke out in March-April 2013 the illiquid ones had the largest gains that month and upon profit taking one month later the most liquid ones closed the lowest literally losing all their gains. The illiquid, instead, lost half (I confess, I only looked at fnmas, fmckj and fnmat). Less players may mean large breakouts and -proportionally- less profit taking. But a poor run just before take off. Maybe what you are seeing is 2 trades getting crowded.