Luke 532

http://www.valueplays.net/2015/11/17/what-did-former-fannie-cfo-mcfarland-reveal/ What Did Former Fannie CFO McFarland Reveal??

Paraphrased quotes from Steele: “I can’t remember being more excited about representing a case.” “Let me ease any concerns… nothing in any of the briefs by the government could be considered a surprise or unexpected. The arguments were very predictable. Nothing we’ll have a hard time responding to.” “The government set up a standard they must comply with and then they violate their own standard. You’ll see this clearly in our response briefs.” “We will dispute each and every claim the government made, there are no concessions* to be made.” *I’m not sure if “concessions” was the word he used, but that was the idea. I know specific words are very important when it comes to legal matters but I didn’t catch the exact word, although it may very well have been “concessions.” “Very short in their responses to Delaware and Virginia law. They didn’t spend much time on it because they want the court to focus on dismissing the case outright.” Upcoming Court Events (according to Steele): -January 16th is deadline for Steele’s written reply to each government argument. -Then a reply from the government shortly after that. -Then it’s in Federal District Court Judge Sleet’s hands. Q&A Christian Herzeca (attorney that covered the MBIA case so well on his blog a few years ago) asked a question but I didn’t write it down as it didn’t strike me as material. It probably was material given Herzeca’s profession is law and mine is not, but I didn’t write it down. Joe Light (WSJ) asked if Steele was open to asking for damages instead of just the 3rd Amendment complaint. Steele responded (paraphrased) “we have the option to amend our complaint for damages. If we were to do that I’d hold my response until then.” Roger Parloff (Fortune article author) asked if Steele represents both preferred and common shareholders. Steele responded (paraphrased) “we represent our clients Hindes and Jacobs and each has held both.” Overall, I thought it was a very good call. Steele seems confident.

I RSVP'ed via e-mail but they didn't send me a confirmation code. The phone number listed in my post above was e-mailed to me this morning (and it is different from the original press release) so the new phone number is effectively the confirmation code I would imagine.

WASHINGTON, D.C. —On Tuesday, November 17th at 11:00 AM EST, Investors Unite Executive Director Tim Pagliara will host a teleconference to update Investors Unite members on the latest legal developments affecting Fannie Mae and Freddie Mac shareholders. Former Chief Justice of the Delaware Supreme Court and lead attorney on the Delaware GSE litigation, Myron T. Steele, will join Pagliara on the call. DIAL-IN PHONE NUMBER: (800) 230-1059

Well, the weather would certainly be a change for the better if that were the case. Miami vs. Northern Virginia.

Fairholme reading COB&F? :-) Just received this e-mail from Fairholme... Dear Shareholder, "The spectacle of a conservator wiping out shareholders just as the companies he's supervising are about to have their best years in history simply doesn't smell right," writes Roger Parloff in a newly released Fortune Magazine article about Fannie Mae and Freddie Mac. The conservatorship has effectively "nationalized two Fortune 50 companies," and Parloff pointedly remarks that "it's hard to picture the Supreme Court letting it stand." To read more: http://fortune.com/2015/11/13/fannie-mae-freddie-mac-nationalize-housing-finance/ Kind regards, Investor Relations Fairholme Funds, Inc. 4400 Biscayne Blvd. 9th Floor Miami, FL 33137

Fortune picked up the story. More are becoming aware of the situation as the days go by... http://fortune.com/2015/11/13/fannie-mae-freddie-mac-nationalize-housing-finance/ The spectacle of a conservator wiping out shareholders just as the companies he’s supervising are about to have their best years in history simply doesn’t smell right. It’s hard to picture the Supreme Court letting it stand.

Denied by Sweeney...

Excellent. It never made much sense to exclude Perry anyway. Merkhet, is the verbiage "abundant good cause" ordinary? I wouldn't read too much into it. That's what I figured but wanted to check. Thanks.

Excellent. It never made much sense to exclude Perry anyway. Merkhet, is the verbiage "abundant good cause" ordinary?

Perry granted access to Fairholme discovery materials...

NCRC white paper posted in a tweet by Joe Light of WSJ: http://www.ncrc.org/images/protecting_duties_to_serve_web.pdf Edit: I should mention that Joe Light has nothing to do with this white paper... I simply found him tweeting about it rather interesting given WSJ's stance on all-things-GSE.

Potentially interesting tweet from Jon Prior today (attached)...

Seth Klarman has a discussion about this and I agree with him. In other words, no I am not worried even if Ackman does have to sell his stake and the share price plummets. 9:08-10:48 https://www.youtube.com/watch?v=e0kXOy8LFU8

I was thinking the same thing.

Perry briefing schedule:

Recent filing in Perry case: http://gselinks.com/Court_Filings/Perry/14-5243-1581672.pdf Christian Herzeca's take on it: the order states: "The parties may refer to the lodged supplement to the appellate record in their remaining briefs, but they must identify it as such." so really, in all practical effect, the court granted the motion for judicial notice of the supplement to the record (the fairholme discovery material) insofar as the appeals court will be looking at this material in addition to the district court record. usually on appeal, parties are constricted solely to the record, which in the case with lamberth, plaintiffs are alleging is materially misleading and in certain respects false. so the plaintiffs can make their arguments based upon the fairholme discovery materials as well, and the appeals court can either find it persuasive or not, just like anything else that is submitted.....but getting it submitted for review is what plaintiffs were looking for and it is what they got Also interesting is the WSJ article about Corker's potentially shady trades: http://www.wsj.com/articles/sen-bob-corker-profits-on-quick-stock-trades-1446596135?alg=y

Summons for Mel Watt attached. Summons_for_Watt_Filed_10-30-15.pdf

Interesting video on Fannie and minorities:

Major civil rights groups join push to recapitalize Fannie Mae, Freddie Mac http://www.housingwire.com/articles/35487-major-civil-rights-groups-join-push-to-recapitalize-fannie-mae-freddie-mac?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire Excerpt: "In a letter sent Thursday to President Barack Obama, as well as many other senior members of the federal government with housing ties, the National Community Reinvestment Coalition, the National Association for the Advancement of Colored People, and the League of United Latin American Citizens say they urge the Obama administration to reconsider its position on recapitalizing the government-sponsored enterprises."

Thanks, merkhet. Assuming we win Delaware, I'm trying to come up with ways that FNMAS holders still get hurt. Legally speaking, Delaware seems like a pretty strong bet.

Let's say Steele wins and the gov't is ordered to return some money. What if they simply refuse to do so? I wouldn't put it past our gov't to do something like that (heck, not turning over 11,000 documents is one example).

New lawsuit: http://investorsunite.org/wp-content/uploads/2015/10/KY-Complaint.pdf

Anybody else have thoughts on my question below? Thanks in advance for your input! Assuming merkhet's assessment is correct (and I know he'd likely insert his disclaimer here) and it comes to a legal decision (no settlement), I have a question. If Steele wins the case, what actions can the government take that would prevent FNMAS from returning to par? They would obviously appeal the decision which would extend the process, but can the Delaware courts demand that dividends be reinstated for FNMAS while the case is going through the appeals process? Other than appealing, can the government just ignore the Delaware court decision? I'm trying to guesstimate how shareholders of FNMAS could get hurt even if Steele wins the Delaware case. It is becoming increasingly difficult to resist the urge to have an out-sized position in FNMAS. Many thanks for input! I think there's a lot they can do to keep the preferreds functionally worthless if they want to; the GSEs will still have no capital, so if they set out to target building up capital through earnings alone, the government would have plenty of justification to continue omitting the dividend for years. Furthermore, the government would still have plenty of capacity to drain earnings away - e.g. they provide a mammoth credit facility to the GSEs which the private sector would probably find impossible to replicate (current availability: $258bn combined!); in any case this commitment is what affirms the government's support of the entities, without which they likely cannot do business. If the third amendment were voided, especially retroactively, I don't see why the commitment fee would not be re-imposed, perhaps also retroactively. This could easily consume the entirety of available profits for the GSEs - the fee is effectively at the discretion of the Treasury (again, unless you believe the GSEs could and would replicate it in the marketplace). Big picture, these companies require the government's continued support to function. So the answer to what can the government do to impair their equity securities will likely always be "a great deal". The real question is how much does the government care about continuing to grind away here rather than potentially working out a deal with partners who, although relatively small, might be able to help get private money back into the mortgage market place.

Correct, 10 years was an arbitrary number. +1