Luke 532

Lamberth trial pushed to March 2021. Lamberth_Trial_-_March_2021.pdf

https://www.nasdaq.com/articles/exclusive-freddie-mac-offers-early-retirement-to-25-of-workforce-sources-2019-12-18 “As is common in many American companies, Freddie Mac is offering employees who meet certain age and tenure requirements a voluntary opportunity to retire early. As we prepare for our next chapter, we anticipate this will help realign our workforce to create a company attractive to outside investors as well as current and future employees," a spokesman for Freddie Mac said in an email statement. In October, Mark Calabria, director of the FHFA, told reporters that he had asked Fannie and Freddie to come up with a plan to boost their return on equity, adding the pair could "can definitely cut expenses," without specifying how. Edit: roughly 25% of workforce is being offered the retire early option. That sounds like a company preparing itself to be sold. Not saying that's what this is, but sure is interesting.

Senate Democrats Ramp Up Scrutiny of Trump’s Fannie-Freddie Plan https://www.bloomberg.com/news/articles/2019-12-17/senate-democrats-ramp-up-scrutiny-of-trump-s-fannie-freddie-plan Letter: https://www.acg-analytics.com/wp-content/uploads/2019/12/Warner-Banking-Letter-to-FHFA-and-Treasury-121719.pdf

Sweeney no redactions attached... Sweeney_No_Redactions_12-13-2019.pdf

Bloomberg Intelligence attached...

Rosner's post today... Hon Sweeney recognized shareholders have deriv claim, direct claim is w GSEs. Does @MarkCalabria, as Chair of @FannieMae & @FreddieMac, know he has an obligation to demand, or sue @USTreasury @stevenmnuchin1 to write-down liquidation pref as per contracts. Think Goodwill suits ...and Pagliara's response. That is incredible insight- and provides the legal basis for the independent regulator to write down the liquidation preference.

SCOTUS decision on whether or not to take Collins pushed to January 10, 2020. Attached.

if there are any outstanding juniors that are cheaper than what would be issued by GSEs in today's rate environment then it would make some sense to leave them outstanding...unless for some reason the GSE financial advisors don't want any prefs outstanding (I wouldn't know why if they are cheap) That's a good point. A possible counter-point, not that I necessarily agree with the strength of it, could be that if the gov't leaves them outstanding then they wouldn't count towards Tier 1 cap. They'd also have to pay out dividends, albeit just 1.54%, but that would be money leaving the company when they're trying to raise capital levels. Again, not saying I think the counter-points are necessarily a strong argument, just mentioning them.

I wonder if it's plausible for the gov't to convert some series of jr prefs to common, and simply turn on the dividends for other series of jr prefs? In other words, treating various series of jr prefs different than others.

Did U.S. steal $300 billion from investors in ‘coercive’ takeover of Fannie Mae, Freddie Mac? https://www.inquirer.com/columnists/fannie-mae-freddie-mac-mortgage-refunds-20191209.html?outputType=amp&__twitter_impression=true

I am not sure what this means in terms of the big picture. But Sweeney did not sound like she would be happy rewarding post-nws buyers. Perhaps her ruling reflects this? Subsequent e-mail from Peter A. Chapman... Everything is under seal at this time. Put your dancing shows on. This is a huge win for GSE shareholders. It's a Wow! moment that feels really, really good. It could also add up to a judgment directing the government to pay shareholders nothing years from now from the U.S. Court of Federal Claims if administrative reform isn't completed.

my problem with ACG is that like any other consultant that advises clients for a fee, it must not give away to the public what it charges its clients. but it can't seem to keep form hitting the twitter button, halfway as it were, with tidbits that it doesn't want to elaborate upon...which leaves non-clients not knowing the whys and wherefores, or whether what they think makes sense Agreed. It's tough to know whether they are offering guesses/predictions based on information they have heard vs. concrete facts based on what they have heard. I am guessing the former. With that said, David Metzner said this earlier this morning... The key to the Settlement will be the overpayment being credited back to the #GSEs as a prepaid asset for future commitment fees. Means less capital to raise. #housingfinance Seniors will be deemed paid back.

Anybody see a scenario where some classes of junior prefs (those with high dividend rates) are converted at or near par, and some (low dividend rate) are not converted at all and simply left alone/ignored? Maybe this happens through Admin action and/or a legal settlement, maybe they claim some classes are not convertible, maybe the conversion dates outlined in the prospectus don't align with the plan, etc. Thanks in advance for your opinions.

Sweeney decision... commentary below from Peter Chapman. Under seal, Judge Sweeney issued an opinion and order (Doc. 447) this evening "granting in part and denying in part" the government's motion to dismiss. "The court grants defendant's motion to dismiss with respect to the direct claims and denies defendant's motion to dismiss with respect to the derivative claims. The parties shall propose redactions by 12/16/2019 and file a joint status report in which they propose further proceedings by 1/10/2020," according to notations on the docket sheet. It appears Judge Sweeney was prophetic when she said "we'll have many days in court," at line 12 of page 255 of the hearing transcript from Nov. 19, 2019.

The latest from Gary Hindes (attached)...

ACG estimated timeline, as of 12-6-2019 (attached)...

SCOOP: @FHFA soon to select adviser on massive @FannieMae @FreddieMac stock offering list narrorwed to several investment banks, including Perella Weinberg Partners, possibly PJT Partrners; Govt signaled decision after Thanksgiving to oversee massive IPO more now @FoxBusiness

FSOC https://home.treasury.gov/system/files/261/FSOC2019AnnualReport.pdf In September 2019, Treasury and the FHFA agreed to modifications to the Preferred Stock Purchase Agreements (PSPAs) that will permit Fannie Mae and Freddie Mac to retain additional earnings in excess of the $3 billion capital reserves previously permitted by their PSPAs. Under these modifications, Fannie Mae and Freddie Mac will be permitted to maintain capital reserves of $25 billion and $20 billion, respectively. Treasury and Fannie Mae and Freddie Mac also agreed to negotiate an additional amendment to the PSPAs adopting covenants that are intended to further enhance taxpayer protections.

Bloomberg Law quote... https://news.bloomberglaw.com/banking-law/fannie-freddie-investors-should-be-paid-ex-treasury-aide-says Fannie Mae and Freddie Mac’s existing shareholders should be compensated as part of any overhaul that ends U.S. control of the companies, according to a former top adviser to Treasury Secretary Steven Mnuchin.

Rule of Law Guy's post today on Tim Howard's blog: https://howardonmortgagefinance.com/2019/10/21/some-simple-facts/#comment-13752

Gary Hindes on recent developments (attached)... Finally_J_a_judge_who_gets_it.pdf

Guys, what do you think about the 3 possible scenarios Gaby Heffesse lays out regarding the Supreme Court (1) not taking the case, (2) taking the case and gov't wins, (3) taking the case and gov't loses. I'm trying to figure out how juniors prefs get hurt in any of those scenarios. Thanks. Video: at around 9:30 https://www.realvision.com/tv/shows/trade-ideas/videos/an-update-on-fannie-and-freddie-the-road-to-recapitalization Here's the transcript... GABRIELLA HEFFESSE:There's three scenarios. There's one, the Supreme Court does not take this up, in which I think we can see the PSPA amendment around the second quarter because it, I think,forces the government's hand to settle because as they said,it frustrates their policy objectives. They can't do it. B, Supreme Court decision in June,there's two outcomes,either the government wins or the government loses. I think both of them and then a pretty similar outcome actually. Because if they win, then they can just do whatever they want. They have more flexibility. If they lose, they settle the litigation and they have great political cover to really not have the headline of you've made hedge funds billions of dollars. I don't think there is a bad outcome for the administration given what their policy goals are. JUSTINE UNDERHILL:What about in terms of shareholders, do you see negative outcomes there or positive? GABRIELLA HEFFESSE:That gets into the timing. If the Supreme Court takes the case, and they go in June, I don't think we'll see the PSPA amendment until late summer next year. Really, if they don't take it, and it signals a settlement, it's somewhat positive. I think that the shareholders think there is a good chance of winning this case in the Supreme Court. If it's legally decided the benefit that you get from it isyou can't retroactively change it. If there is a different president and they would change their policy objectives, having the net worth sweep deemed to be illegal in the first place, make sure that it will never happen again and gives more investor confidence in investing in the enterprises.

Tim Howard's comments posted this afternoon on the transcript... https://howardonmortgagefinance.com/2019/10/21/some-simple-facts/#comment-13727 NOVEMBER 29, 2019 AT 1:43 PM I’ve now finished reading the entire 392-page transcript of the Oral Argument in the Defendant’s Motion to Dismiss the various lawsuits in Judge Sweeney’s Court of Federal Claims, and agree that the Washington Federal case—the only one which challenges the 2008 conservatorships—is likely to survive the motion to dismiss. The government made two arguments for dismissal—that the Washington Fed suit needed to be filed within the 30-day window applicable to the companies were they to have challenged the conservatorships, rather than the general six-year statute of limitations that applies to the other suits, and that the Washington Fed plaintiffs had failed to state a valid takings claim. My reading of the transcript is that Sweeney will side with the plaintiffs on both issues, allowing the Washington Fed suit to continue. Most if not all of the suits against the August 17, 2012 net worth sweep are likely to survive as well. Sweeney all but said as much when, just prior to breaking for an afternoon recess, she said, ““I want the parties to have their day — well, we’ll have many days in court, but I mean, for this initial oral argument…”. I also was struck by Sweeney’s clear and direct statements about how she sees the merits of both the 2008 conservatorship challenge and the 2012 net worth sweep. On the former she said, “I’m very concerned that Treasury approaches the board of directors of the enterprises and says, you either agree to the conservatorship or you’re out. That’s – that sounds like undue influence, if not a death grip,” and “The enterprises were never able to repay the debt to the United States taxpayer… and so the– Freddie — the enterprises were never able to right their financial ships of state and then make their profits while not borrowing anything from the U.S. taxpayer and then pay what dividend they can to their shareholders. And that doesn’t seem cricket. That doesn’t seem cricket to the way our government operates.” She was even more unambiguous in her description of the net worth sweep: “I hate to say it, I’m not — this is going to sound so flip, and I don’t mean for it to, but this is like the mob. And it’s not, of course, but, I mean, you have all the money is being turned over to the Treasury.” The substance and tone of Sweeney’s comments throughout the hearing was strikingly different from we’ve noted in the recordings or transcripts from other cases concerning Fannie and Freddie, and of course there’s a reason for it. All of the proceedings so far have dealt solely with issues of law, and the government has consistently given a false rendition of the facts leading up to and surrounding the companies’ initial placement into conservatorship as well as the subsequent net worth sweep. Judge Sweeney permitted discovery in her case, and she therefore has become intimately familiar with the facts, which to put it mildly do not favor the government. Sweeney’s view of the merits of the case thus is not just a harbinger for how she might rule if the cases in her court ever make it to trial, it’s a foreshadowing of how the judges in other cases likely will react once they focus on the actual facts of the issues they’re being asked to adjudicate.

Tim Pagliara... The Fifth Circuit didn’t argue with David Thompson either. I doubt that this was a cosmic coincidence.

Not only is the government schizophrenic (Judge Sweeney's words previously), they have also acted like the mob (again, according to Sweeney). According to this transcript, she has already completed a rough draft of her ruling. Seems to me like this case won't be dismissed: "I want the parties to have their day -- well, we’ll have many days in court, but I mean, for this initial oral argument. Let me just -- we’re going to go off the record just for 10 minutes so we can just..."