orthopa

Knowing what other steps are needed to get "real progress" I didn't think the report was that disappointing. I think a certain surprise was the discussion about the NWS ending. Didn't we know that we would need the NWS to end, FHFA captial rules, and recap plans to really get "progress". None of that was going to be released out right in the plan I thought as an absolute but is clearly laid out as mile markers. Also congress is no longer a roadblock and clearly laid out as such. Another positive is the preferred conversion which is now put on paper. Looking at the recap scenario laid out I do not see how preferred does not get par or a very close % with the recap options listed. The preferred clearly have a seat at the table and Treasury is going to negotiate. As suspected those holding preferred are sitting side by side with Paulson et al. Receivership would be a disaster but as cherecza said its there to placate the mob. I really don't know how one could be really disappointed with this plan or the suspected treatment for the preferred. Next step is NWS stopping adjusted then FHFA capital rules. Waiting surely blows but we can at least see godot in the distance now.

Skimmed it quick have to go back over, things I highlighted. 1. Sounds like the NWS could be stopped sooner then later as an initial small step before a final PSPA amendment is agreed upon. I liked reading that. 2. Wonder what parameters determine "promptly as practicable"? 3. Treasury recommends that FHFA start getting the GSE's out of conservatorship and not wait for congress. 4. Sounds like FHFA and Treasury are already assessing recap options which hopefully moves up "promptly as practicable" 5. Never considered convertible debt in a recap but see that as well as mention of exchange of Sr. Preferred as more dilution concerns for common. 6. Negotiation of exchange options of one or more classes of Jr. Preferred. Hopefully all will be offered exchange as previously discussed.

CNBC reported on it, dont see it yet though.

you don't have to be in the same boat as Bradford. you can be in the same boat as Paulson. ;D ;D ;D ;D ;D

per gasbag tweet plan releasing after closing bell (we knew this already it seems.) Buckle up!!

Shareholder value transfer IS value destruction. Why would the FnF boards offer a low conversion price to Pref and dilute the Gov? The thing for the board to do is... wait. They could have til 2024 to raise capital. It makes no sense to me for the boards to go begging to the market when Fannie is sitting on c.$25b of capital and Calabria leaves it to them. Point being they're basing conversion prices on current prices. They could be anything by the time they actually raise capital. There could be a capital standard that isn't fully recapitalized but allows them to be released from conservatorship, for example capital above critically undrcapitalised. Assuming being critically under capitalized is the trigger for conservatorship (if they can't recover), would not being critically under capitalized be the trigger to leave consrvatorship? I think your looking through the lens of what would offer the best return for common holders instead of being objective about likely outcomes, precedent, capital structure and reorganizations in general. Preferred holders are not necessarily the enemy of common (could be in conversion) and no doubt preferred holders have contemplated the common as an investment but I feel those who hold the common made the investment hoping for a windfall initially, and now rationalize ways to make that come true instead of the other way around. I contemplated at first when considering buying some common with the fact that treasury was in fact aligned with the common via the warrants,and as you say why would they sell at a low price? My best explanation now is bc common holders didnt pay .00001 for the shares. At $2-3-4-$5 dollars a share treasury makes a killing, BC they paid nothing. When you pay nothing and hold 80% of a 100B+ company your incentive is to get out. Treasury already made their money. Their main concern will to get out IMO and if getting out means attractive terms for new $$$$ even better.

I read boves common share analysis on junior preferred conversion. I feel like people think the treasury or fhfa will turn round and tell the GSEs to convert preferred at silly common prices. I don't see this at all. It'll be left to the companies to raise capital as they see fit, which was indicated by calabria. Treasury and fhfa controlling private company recap leads to more lawsuits imo. Unless that would be within fhfa remit and not ultra vires (see, I do listen to the court hearings). Why is $2-4 dollars a share silly prices when treasury owns an 80% stake, preferred conversion builds capital faster and capital levels should be robust which is the whole point of all of this? I don't see how you can sue knowing the risk before the restructuring? It isn't like common holders are going to be blind sided. Whats the argument? I didn't make as much as I thought i would so i will sue you? The obligation is to recap the companies not a target price based on speculation and ones purchase price. As hashed out many times before Preferred has capital structure preference and contract value. Again who has commons seat at the table and fiduciary duty? My question would be how do you settle the lawsuits in your opinion?

I broadly agree. I think the language of stopping the NWS/building capital is important too ie immediate, eventual, important, highly recommended etc. Logic would make one think that if the recommendation by an entity is to start building capital/stop NWS then it would happen sooner then later ie no later then Q4 earnings. I mean how can you not follow your own recommendation on paper? This is the US gov tho.

https://www.bloomberg.com/news/articles/2019-09-04/treasury-discussed-hiring-houlihan-to-advise-on-fannie-freddie?utm_campaign=socialflow-organic&utm_content=business&utm_medium=social&cmpid=socialflow-twitter-business&utm_source=twitter

whoa. I am not a big fan of a senate hearing at this moment. would have preferred to see it earlier this year when more general terms could be discussed and/or at the end of the year to give more time for a potential 4th Amendment negotiation. good luck everyone. I’ll take the exact opposite. SBC will passive aggressive posture. Nothing will happen other than mnuchin saying you have a role so do it or not and stop bugging us. Warner will be a certain clown This looks like the final warning/offer from the trio to congress to act. We all know what will happen or not happen that is, at least in the short term. Looks like plan release is T-7 days for those keeping score at home.

Assumption would have to be that the plan is out by next Tuesday if they are going to openly discuss it correct?

Donald Trump=John Paulson. Its soon to be payback time.

Looking at the US economy as a whole GDP is ~20T right? So is 100-150B of tariffs really that big of a deal in the big picture? That's what, 1-2% of US GDP?

I think its worth a look. I looked at Citi a while back, and most recently at AIG. I think its worth referencing. Its been hashed out here before but probably buried hundreds of pages back, but I think the preferred to common conversion, new preferred issues, and eventual sale of warrants/exercise by treasury has been tested multiple times since the financial crisis with some tweaks along the way. Mnuchin and Phillips may have their own tweaks but the above builds capital faster, gets rid of expensive legacy preferred, and has been executed successfully before. Remember back in May supposedly some investors met with Calabria and were "thrilled" with the discussion. My assumption has to be these were preferred holders as there were/are still too many unknowns regarding the common to make a valuation call within reason. With common we still dont know capital ratios, how much or if preferred get converted, What the ratio of conversion is, and does treasury exercise warrants and how many, how much capital is retained and when does it start? With the preferred it could be as simple as you get converted at par, etc. Much easier to predict that IMO. Of course that could all be rubbish and a waste of time but something to think about in regards to why there were so thrilled.

your statement suggests that price will not move until material news comes out. Check the chart in March and ask why the stock started a strong rally days before the White House initiative was released? I think the stock started a strong rally because multiple news outlets were reporting the the trump administration was releasing a plan soon. It was being discussed up to a week ahead of time if I remember correctly plus you had the Calabria confirmation process going on and the Otting comments. The most recent time that the preferred moved up was just recently when material information again...regarding an upcoming release of the plan was coming after labor day.

I think we may get a little bump from the plan release but like Ahab mentions who really believes its coming? Otting supposedly let the cat out of the bag almost 8 months ago now. People are tired and want details and their return on investment. Secondly if you want to be in, your in by now and probably have since as early as mnuchin on fox news or at any other bullish mnuchin/trump/otting/calabria comment on the way. I think what really has the most potential to move the common/preferred are a stop to the NWS after this coming earnings report. FHFA captial rules which likely affect common the most, and then recap/IPO plan. Of course Enbanc is a wild card in there too.

I've gone on margin buying Preferred against my other holdings before, in fact I am now. :)

https://www.whitehouse.gov/wp-content/uploads/2018/06/Government-Reform-and-Reorg-Plan.pdf Starting on page 76 maybe a large portion of what we see in the plan.

“I’m expecting that Treasury and the administration will lay out their vision of what they think Congress should do, what they think I should do and what they think the Treasury and I should be able to do together in terms of amendments to the share agreements that allow an exit out of conservatorship,” Federal Housing Finance Agency Director Mark Calabria said in an exclusive sit down with HousingWire. The report should discussion about amendment for NWS to end. Finally getting on paper it seems.

oh, this argument again... the answer of course is because you can lose $ from here. the market doesn't hand out free gains or easy doubles. I can easily paint a scenario where the jr pref receives a major discount to par only after several more years and a handful of 25% drawdowns along the way. or something worse. of course there are other positive outcomes also. Yes its back. Why not? We are here to make money right? What's your argument for preferred receiving a major discount to par once NWS ends and capital build starts? How is the common worth anything before the preferred is worth par as money flows down the capital structure? Cant be forced conversion. Do you have specific examples where this has happened? Time I agree with. Some preferred trade~ 40% of par. 150% upside leaves a lot of room for waiting.

https://www.housingwire.com/articles/49952-trump-administration-to-release-plan-for-fannie-freddie-after-labor-day Calabria discussed what he "thinks" will be in the release. He has already seen a copy/draft no? ;)

Why not margin up or go all in if one hasn't already? Biggest risk seems to be the time this takes to be realized. No longer permanent loss of capital. If your margin rate is 10%. The preferred arent 10% higher a year from now? Unlikely.

My only fear from a very short term perspective is that the WH plan release tell us a lot but doesn't tell us how much the preferred and common shares are going to be worth in the end. The mile markers that Calabria has discussed and hint or discussion of the end of NWS are likely shown as a path out of conservatorship. But until the FHFA capital rules are released and final recap plan revealed I think the preferred will still trade at a substantial discount to par. Maybe there is a slight bump with each significant development along the way? It surely is an exercise in speculation and short termism but are everyone's thoughts? Looking at Calabrias previous comments regarding the preferred getting par or getting converted. When is that revealed? With the recap plan? That could still be well into 2020 which is fine but if there was a chance to maybe look for a short term trade this could be it. Im likely putting the cart way before the horse here but any substantial shrinkage in FnF foot print or business could certainly throw a wrench in long term value of common shares. Something to think about in any conversion situation. Could be a double edged sword.

Anyone able to PM me the text of the lastest WSJ article? Thanks in advance!