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Luke 532

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    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I'm still reading it, some 120 pages, but by i) 9-7 majority, 5thC en banc reversed the dismissal of the APA claim and remanded to DCt (meaning the Ps can go to trial to prove that the conservator did not have authority to adopt NWS), and ii) by a separate 9-7 majority ruled that the single fhfa director removable for cause only provision was unconstitutional but that Ps are entitled only to prospective relief (so NWS not invalid as a matter of constitutional law).

     

    both parties will likely appeal.

     

    Christian, thank you for your input. Do you think this leads to a settlement?

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Carney's take...

    https://twitter.com/carney/status/1170104322945892353

    Long-awaited $FNMA 10th Circuit en banc decision just dropped.

     

    Quick take-away:

    1) Sends question of 3rd Amendment back to trial court.

    2) Says FHFA director is unconstitutional but relief is prospective only; director now removable at will.

     

    Shareholders survived dismissal.

    ---

    I don't have a link to the opinions. Sorry. I'm sure one will be up in the usual places.

     

    There are tons of battling opinions in this thing on the constitutional question. More general agreement on the claim that Net Worth Sweep question is "plausible"--meaning, goes to trial.

    ---

     

    This creates a pretty severe split with several other circuits which upheld motions to dismiss. So the next step here is, presumably, the Supreme Court.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    While most on this board have actually read the full report (and provided terrific thoughts and insight - thanks!) and also have the context of the past and recent history, I think it is important to take a step back. This is probably the first time in years that anything related to GSEs has received such wide media coverage. If you are an investor and seeing the headlines for the first time in a while your impression is that this is basically more of the same and if it happens (or as Bloomberg and other's are saying it won't if Trump loses) we are still years out. If you are a holder today, like many on this board I believe are, we are betting that today's perception of a recap (if it happens) is moving forward ASAP and is not years out, which is what the market seems to think (basically market is wrong in its view about timing of recap and risk of it not fully happening).

     

    Bingo!  Well said.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    No shit. Even quoting irrelevants like Jim Parrott, really? Jim Parrott? They just cant bring themselves to just take the side of shareholders. Those losing the grip are trying anything to scare off shareholders. All the stuff that those dick heads were wrong about and now they warn about the "wait" oh the horror! LOL. Next will be comments about the NWS and how it isnt enough, then the FHFA capital levels and how bad those are, then the recap plan may not be favorable for shareholders yada yada.

     

    https://www.bloomberg.com/news/articles/2019-09-06/fannie-freddie-bulls-might-need-trump-win-in-2020-to-mint-riches

     

    As frustrating as the media can be, I always remind myself that fear and worry created by headlines is largely responsible for where I am today.  It helps a ton on entry price and is irrelevant once you're already invested if you have the right mindset and temperament.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Maybe I'm a Pollyanna, but I am overall pleased with the plan.  Many of the stuff mentioned we already suspected/knew but it wasn't in an official document.  Now it is, that is important.

     

    The most important near-term action I noticed is that it is very likely the capital buffer is increased (reduce NWS) in September.  So the full sweeps may already be a thing of the past.  This happens before the Sr. Preferred Agreement is amended.  Calabria has said he wants to amend it only once.  He previously said negotiations for adjustments would be in September/October.  The plan released yesterday said they want to increase the capital buffer immediately to start the recap process while they figure out the Sr. Preferred Agreement amendment.

     

    Of course we'll get crazy price action as short-timers exit, and commons may get hit as heavy dilution is likely.  But I don't concern myself with price action so it was probably a waste to even spend a few seconds to type these last two sentences.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

     

    P.4 The existing Government support of each GSE under its Senior Preferred Stock Purchase Agreement (“PSPA”) with Treasury should be replaced with an explicit, paid-for guarantee backed by the full faith and credit of the Federal Government that is limited to the timely payment of principal and interest on qualifying MBS.

     

    P.5 To ensure stability in the housing finance system pending comprehensive housing finance reform legislation, Treasury expects that it will be necessary to maintain limited and tailored Government support for the GSEs by leaving the PSPA commitment in place after the conservatorships. The Federal Government should be compensated for its continued support through the periodic commitment fee, as originally established by the PSPAs. Each GSE should be recapitalized with significant first-loss private capital so that Treasury’s ongoing commitment under each PSPA could be drawn upon only in exigent circumstances. To facilitate recapitalization of the GSEs, Treasury and FHFA should consider adjusting the variable dividend (also known as the “net worth sweep”) required by the terms of Treasury’s senior preferred shares, as well as the other approaches set forth in this plan.

     

    P.18 Pending legislation, the Federal Government should be compensated for the continued support of the GSEs through the periodic commitment fee, as originally established by the PSPAs. The amount of the periodic commitment fee should be set and adjusted from time to time considering, among other things, the remaining PSPA commitment and the equity financing, CRT, and other loss-absorbing capacity of the GSE. In connection with setting the periodic commitment fee, Treasury and FHFA should also consider adjusting the variable dividend required by Treasury’s senior preferred shares.

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    https://www.realvision.com/tv/shows/interviews/videos/when-geopolitics-moves-markets

     

    13:38

    ED HARRISON: When you were talking about that, I noticed you were talking about some of the inside, the beltway DC talk, and off camera, we were talking about this. You had a story where you were talking to someone in DC, which is a ghost town, I live in DC, but that he was working late at night. Give me a little sense of how that all plays out.

    14:00

     

    DAVID METZNER: It's interesting, because there's so much going on, whether on trade, mortgage finance or form with the GSEs that if I'm invited to a reception, normally, they'll really want to go home. But every time I'm out, I learned something. I'll give you an interesting GSE story. Literally I had an event, again at the Trump Hotel, nonprofit, and a senior member of the administration's economic team. I said good work on the presidential memo. That was roughly end of March.

    14:32

     

    This gentleman grabbed my arm and said, David, don't you know that POTUS wants to privatize this? I'm like, he thought he didn't say anything important to me. I was like, shocked, because privatization of Fannie and Freddie means two things. It means you have to build capital through retained earnings and you have to settle the litigation. That's what the President wants. That means all his advisors that were rumored to be fighting have to do what the President wants, and they will do it.

    15:03

     

    ED HARRISON: That's something that you had told me earlier is, is that really, this is a thing if the President wants it, he's going to get it-- forget about what all these other guys are saying?

    15:13

     

    DAVID METZNER: Absolutely. There's no dissent in the White House among these advisors. They know they worked for the President. I've known Mick Mulvaney, who's the chief of staff. He's an interesting person, because he's chief of staff acting, he's the Prime Minister of the United States, he was supposed to run the government. As you know, a budget director, he's the CFO of the United States. He could be the most powerful person in the government since Kissinger was both Secretary of State and as the advisor.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Plan will outline a path to privatization. What can the executive branch do and where do they need Congress. Building capital through retention of profits will listed as consistent with Exec Power and HERA.

     

    In other words, the NWS will be ending soon.  For what it's worth, Gasparino agrees that this is what is happening.

     

    Based on what I have reported on the @USTreasury GSE plan this sounds accurate. BUT it also displays a kick-the-can approach so there probably won’t be a full reform in an election year

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