orthopa

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.) The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup. Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise. The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

to block Emily, go to profile--> account settings---> modify profile--->buddies/ignore list-->edit ignore list---> type Emily in add to ignore list box and enter Thank god there is a way. Everyone should do this.

For shits and giggles how do you see/how would you raise capital here cherzeca? I'll give you my shits and giggles version. 1. admin comes out with a plan that has two parts: a) fhfa director sets capital standard, treasury eliminates senior pref (declaring correctly that it has been paid back as per original terms), and retains investment bank to represent govt in a recap of GSEs; and b) congress is encouraged to consider various additional reform proposals requiring legislation (likely competition and govt mbs guarantee). admin will want congress to be "involved" though admin will not wait for congressional action. while (b) may adversely affect (a), depending upon what congress might do, I think the market sufficiently discounts likelihood of (b) happening to not worry about it in recap. of course, potus can always veto anything that congress passes that is antagonistic to protect (a). wildcards: (a) collins en banc; while I think admin agrees to kill NWS, this ruling will provide impetus if Ps win. (b) does fhfa release GSEs from conservatorship before or after money is raised? you would think after, but this is where collins comes in...if Ps lose collins, market may not want an almighty conservator in charge of capital raise. Ps winning collins will make market more indifferent to GSEs remaining in conservatorship during capital raise. I think moelis blueprint discussed how primary and secondary offerings might play out, based upon AIG recap and sell out of treasury position. AIG is the roadmap that govt's investment banker will follow. Thanks for the detailed response. I need to re familiarize myself with the AIG recap.

For shits and giggles how do you see/how would you raise capital here cherzeca?

if we win collins, depending on appeals, Tsy's forward value might be in the warrants. If we lose, the sr pref has material cramdown risk into billions of common shares, on top of the warrants. And no hope of recap. None of T’s stock represents capital. Only newly issued stock raises capital. Cram down of senior pref means no recap. Very true, None of Ts stock is capital. They will likely exercise and sell out over time but how do you envision new capital coming in knowing they will get a 79.9% haircut in future? Is it just priced accordingly taking into account the 80% dilution? What is the structure and flow of capital where new money doesnt get whacked by gov warrants?

Ill let you guys do the worrying and hand wringing for me. I still think par or just below +/- some arbitrage opportunity is possible. That being said, surprised this hasn't been posted yet but lots of juicy details here. Probably one of the most leveled headed thought out assessments of the current situation in both time frame and price expectation. https://www.realvision.com/tv/shows/trade-ideas/videos/a-new-fannie-mae-play

what time is hearing today?

This slow deliberate leak of information and insight by all involved has done a great job of numbing many who have invested. This has been a great way to temper any outrage or knee jerk reaction. No one seems upset publicly at any of this news!

I don't understand this commons not so much meme. There's no receivership so common will exist. Aig common were diluted 92%. I don't know the ratio under moelis but I expect it to be very close if I work it out. That would be bad for shareholders from 2008 but not those whose average cost of $1.50. I guess it's possible for shareholders to be screwed and rewarded lol. As you mention there will be heavy dilution, and yet another clue even from Muolo . Is ~300% on the preferred at these prices not enough? Not referencing you specifically but the prospects of a lotto payout is too much for some to resist, even if it means missing out on a more likely 3x return and losing money or breaking even on a 10 year trade. In the article he also mentions that the administration may hire a banking firm with a Washington specialty also.

Zachary Warmbrodt ‏Senate Banking Chairman @MikeCrapo is releasing a housing finance reform plan today that would make Fannie Mae and Freddie Mac private companies, overhaul FHFA and establish a new “Market Access Fund” to address affordable housing. More details @POLITICOPro Wow that was quick. Funny what happens when your feet are held to the fire. Is this a beginning to a race to finish line in regards to who can get it done first?

Would you give up 80% of a payday? You yourself want 17.75 for your common so I can tell you the answer is no. The warrants have never been in question. You can try to go back and parse out accounting fraud was the bailout needed etc. but that is impossible to do and the climate at the time totally necessitated some form of take over or backstop of FnF. You can place blame where you want regarding banks etc but in that climate there was no other option. Dow would swing 5-10% a day. There were bankruptcies all over the place, countrywide, GE, GM, not to mention all of the bank bailouts. What the government did, did necessitate compensation. It an be argued if the treatment of FnF was to extreme but every single other bailed out entity had steep terms or massive dilution. AIG was diluted 92%! C, BAC, etc all diluted. Buffet got great terms with GS etc. Warrants are not going anywhere and IMO they shouldnt. Its easy 10 years later to say oh thats not fair yada yada. Put yourself in that time and place and the climate. The NWS is a different story.

Maybe just another in the Trump, Paulson, Mnuchin, Otting coincidence. :o

If I'm the one doing the screwing, obviously yes. As a matter of principle your argument seems valid, but when I dig into the specifics I see a much different picture. The ones who truly got screwed here are those who held in 2008 and those who held in 2012, regardless of it they sold since then. The conservatorship and NWS were both blindside attacks, devastating whoever held shares at the time. On the other hand, right now we know that the companies need to raise a lot of money quickly, and that new common shares is a key part of that. Can you truly say that a hurricane "screws" someone who sees it on the radar and decides not to evacuate? The argument of "who says the government can't do another conservatorship/NWS?" also fails because those events already happened and cannot be undone. There can never be a guarantee that something similar will never happen again. This argument won't keep the new money away entirely, it will just drive the IPO price down even more to compensate the new buyers for that risk. If your idea of "making shareholders whole" involves a payout to only those who currently held shares, you're paying off those who bought recently and shafting those who were hit by the conservatorship or NWS and sold (especially those who were forced to sell). I see this far too often: clamoring for "justice" but then also invoking the "everything travels with the shares" argument. The first is a moral claim, the second legal, and they actually conflict with each other. Conflating the two is what leads to this particular cognitive dissonance. Put it this way: what do you think it would take for current shareholders to not feel screwed? And why would that make the new buyers feel better enough to overcome the fact that they are getting a smaller stake in FnF? Diluting the commons into the ground (with a $0.25 IPO price) while getting the prefs to par can also be twisted around as promoting justice: the (preferred) shareholders were made whole! Dilution is always a threat to a common shareholder. I actually agree with your points, especially regarding this potentially happening again as when this is all over, assuming a good outcome I'm considering buying the new preferred and it bothers me. But I guess this is a question of nuance. If treasury say today that the nws is over and they can retain earnings and will be released, what price do commons go to? $3, $5, 15x earnings? What's the dynamic for a capital raise then? 20pct discount to the new share price? That makes me think the dilution won't be too bad. Commons are still screwed compared to 2006 shares outstanding but the cause of that is illegal government action and unnecessary warrant issuance. A "Fair" treatment in that scenario to me is the govt keeping the warrants but the "existing" shareholders not going to effectively 0. You've got me relitigating now! I think most common holders think that the day the NWS is over and capital is retained that the price will sky rocket and that will allow a quick out for huge profit. I guess my fear would be what if the day the NWS is declared over a comprehensive recap plan comes out similar to what Midas has described and the common is quickly found out by the market to be worth pennies with future or assumed capital raises prices etc. Hell even if its worth $2 a share at todays prices you lost. Im not as fluid on the mechanics of what may happen as Midas but the same day relief is given it maybe taken away from the common with extreme projected dilution via a plan. Is this not possible?

If I'm the one doing the screwing, obviously yes. As a matter of principle your argument seems valid, but when I dig into the specifics I see a much different picture. The ones who truly got screwed here are those who held in 2008 and those who held in 2012, regardless of it they sold since then. The conservatorship and NWS were both blindside attacks, devastating whoever held shares at the time. On the other hand, right now we know that the companies need to raise a lot of money quickly, and that new common shares is a key part of that. Can you truly say that a hurricane "screws" someone who sees it on the radar and decides not to evacuate? The argument of "who says the government can't do another conservatorship/NWS?" also fails because those events already happened and cannot be undone. There can never be a guarantee that something similar will never happen again. This argument won't keep the new money away entirely, it will just drive the IPO price down even more to compensate the new buyers for that risk. If your idea of "making shareholders whole" involves a payout to only those who currently held shares, you're paying off those who bought recently and shafting those who were hit by the conservatorship or NWS and sold (especially those who were forced to sell). I see this far too often: clamoring for "justice" but then also invoking the "everything travels with the shares" argument. The first is a moral claim, the second legal, and they actually conflict with each other. Conflating the two is what leads to this particular cognitive dissonance. Put it this way: what do you think it would take for current shareholders to not feel screwed? And why would that make the new buyers feel better enough to overcome the fact that they are getting a smaller stake in FnF? Diluting the commons into the ground (with a $0.25 IPO price) while getting the prefs to par can also be twisted around as promoting justice: the (preferred) shareholders were made whole! Dilution is always a threat to a common shareholder. I think the hurricane analogy is a great one. Discuss this topic with any fanatic common shareholder and they for some reason believe a wrong will be righted and warrants cancelled yada yada and although that lottery type outcome is very very unlikely to happen they believe very strongly in that thesis. Lottery's are stupid but some people cant stop thinking about the exponential returns. Midas has shown multiple times over how common can just get eviscerated and can have a pound of fleshed pulled from all parties involved, jr prfd, gov, and new money. I remember back in 2016 ish there was some discussion on the board about the connection with Paulson, Trump, Mnuchin, One West, now Otting etc. There was some legitimate debate about the connections there and investing upon that thesis alone. Say what you want but that has been the most accurate thesis to date. That being said Paulson owns preferred. Own the preferred. Terms will be most favorable for the preferred. If it was going to work out best for the common, he would own the common. He is the most informed person in this entire trade outside of the administration. Even at these prices you can get ~3x your money on most preferred. Is that not enough? Is the allure of 10x or whatever of the common worth a zero?

Just to throw my 2 pennies in I think it the past mnuchin and others have talked about taking FnF out of conservatorship, capital etc and then separately about finance reform. I think the WH is willing to work with congress on actual reform of FnF not the plan Otting etc have. Otting and Mnuchin administratively can do a ton obviously; stop NWS, possibly cancel sr prfd, exercise warrants etc all before or along side any actual "reform" the WH and congress decide to do. I think shareholders can still make out nicely before or along side anything congress or WH come out with. I maybe naive but believe everything Otting said on the recording and implied with his comments.

I haven't seen this before. can you provide a copy of the actual full email? Yes, completely new. This changes the picture slightly (for the better). If DeMarco saw no death spiral coming, why did he agree on the 3rd? And why he went along with the narrative? Does this reinforce the ultra-vires argument? Are his actions becoming fraudulent behavior? Proof that Geithner's Treasury was completely in charge? Would love to see Miller's answer. Treasury had the FULL picture, no doubt. Just a bit earlier (or after, can't remember) Susan McFarland told Miller of the 50 billion in windfall profits coming in 2013. From her own oral testimony, if you all remember. Are these really new documents? I cant imagine someone is just releasing these now. Who? Why now?

I think the time has come and gone for enriching the rich hedge funds narrative. If someone does pipe up they better do it quick. Secondly they will likely make a stink once the plan is in motion. Too late at that point. Otting, Calabria, Mnuchin, WH are all aboard the train. The train isn't stopping. I think its interesting that the MBA and other opponents haven't said a word since the Otting news was reported and then verified. Where is the opposition? Waters basically wants to know what the plan is and Warner barely got the time of day. Corker hasn't said shit since he left and I haven't read anything out of Stevens. The 5 fellow travelers last yelp was an admission of the future and a dying last breath. As crazy as it seems since this is a 10+ year hold over of the GFC it's starting to seem like fatigue is settling in on the political side and any opposition will have a hard time drumming up fierce opposition about the "tax payer" " public loss private gain" etc. How hard is it now to get the public riled up about the bailouts of the bank etc. This isnt an occupy wall street climate anymore. No one cares about this.

First Scenario: 72% of par Second Scenario: 85% of par I think this makes sense. while I don't think the prefs ever reach par until they see a redemption notice at par (or a very attractive conversion offer), I think getting a 39% return (72%--->par) and a 18% return (85%-->par) after these two events is quite possible. the 85% may be high, but my thinking is that with prefs still under 40% now and the horizon for these two events becoming somewhat clearer, I would think prefs still have much upside in the near term (3 months) Just pondering with you but how do the preferred not get par in a recapitalization scenario? I think whether or not the dividend ever gets turned back on is highly up for debate due to restructuring/retirement but as soon as the gov exercises the warrants or NWS stops/released from conservatorship how is the par value after relase for that entity not valid? The div would have to be declared by the board and surely not until capital is built back. Value is not based on earnings and there is a contractual par value in the preferred circular offer sheet that reads for example "Preferred stock is redeemable at its stated value at the option of Fannie Mae on or after specified dates" If the company is released how much of an arbitrage opportunity can their be when there is only way to remove the preferred...at par. So either it stays as is and divs get turned back or, or it goes away at full price. Time of course is highly up for debate here but especially now I see everyone of my par holdings worth their full value over time. Lastly Otting/FHFA/Treasury has only surprised to the upside and in my humble belief it will continue this way.

Looks like FHFA is not going to defend the constitutionality of FHFAs powers under Otting. Impactful in anyway legally? Looks to me like FHFA saying why bother if we have a road map anyway.

Idk if the treasury has presented the GSEs in that fashion or anyone in the Trump administration has discussed the GSE's as failures etc. That was the Obama, Demarco, Stevens etc narrative. I don't think they have to distance themselves much from that as they never presented the GSE's that way. Mnuchin from day one has wanted out of conservatorship and no risk to tax payers. Regarding capital raises I would look at the govt sales of AIG, Ally etc. The capital was there and those were assets that were heavily diluted by a govt stake and big stakes. The gov TARP warrants were easily sold too. I believe if the price is right and terms attractive the money will show up for secondary offerings. In regards to new shareholders not caring about old this could certainly be the case in the common and with dilution. Different story with preferred and their treatment once out of conservatorship and retaining capital. How can legacy shareholders disappear? Maybe in receivership but its clear this is not going that way at this point. How can legacy common and preferred shareholders not be considered in capital rebuild? They will be the ground floor to build upon! I think in regards to the preferred the treatment of dividends/back pay on dividends I think is highly up for debate and speculative but I think eventual par out of the conservatorship and retaining capital is not a stretch. Big unknown will be time.

I guess relative to the the gov? Ie private capital in FNMA and not govt sponsored capital.

These were notes I kept back in June on this... They are giving a major hint, possibly. Mentioning that they are private companies repeatedly is encouraging. Explicitly stating that they are privately-owned, and then completely wiping out shareholders (instead of just massive dilution to common), would seem to set the White House up for lawsuits that could come back to hurt them. I think they are smarter than that. It reads to me that they are making a concerted effort to mention that they are privately-owned companies. "However, this system is challenged by the operation of two privately-owned Government sponsored-enterprises (GSEs), Fannie Mae and Freddie Mac..." (page 75) "Competition to the duopolistic role played by the two privately-owned GSEs would be an essential element..." (page 75) "In order to propose changes in the Federal Government’s role in housing finance, this proposal outlines policies related to the privately-owned GSEs and ending their conservatorship." (page 75) "Under the current system, Fannie Mae and Freddie Mac, two privately-owned GSEs, buy and guarantee..." (page 76) I agree and just read rros link. I caught the emphasis on privately owned also. Looks we have at this point privately owned companies out of conservatorship cross referencing ottings comments, WH, Mnuchin etc. :) That being said I added more preferred.

What I find interesting is that he comments that there is a clear path and mission that has been laid out by Treasury and White house and what they want to accomplish. He also mentions a lot can be accomplished, and the path of the mission that has been laid out. Did all of this go over my head? All we have heard from Treasury is ending conservatorship and not putting tax payers at risk. What has the White house said about this entire thing? Nothing from what I an remember or have read? Clearly there is an administrative plan that looks at the liquidity capital (ie NWS dividends etc) and all of the above. That plan hasn't leaked but for sure Otting and Calabria/Mnuchin are aware of it.

Hopefully really imminent. That piece from October said new people were going to act fast. Lets see it!

Another opponent of FNMA from the Milken Institute abruptly leaves? Coincidence? https://www.housingwire.com/articles/47884-michael-bright-abruptly-steps-down-from-ginnie-mae "In its announcement, HUD said that Bright is leaving “pursue a new opportunity in the private sector.” Bright came to Ginnie Mae from the Milken Institute, a think tank. At the Milken Institute, Bright worked in the think tank’s Center for Financial Markets, where he led the housing program. Prior to working at Milken, Bright was a top aide to Sen. Bob Corker, R-Tennessee. While working for Corker, Bright helped author the Corker-Warner housing finance reform bill, which failed in the Senate in 2015 and would have seen Fannie Mae and Freddie Mac wound down and replaced."