orthopa

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices? I try to think at things from multiple angles. what if the joe light article was simply a way to grease through the jumpstart extension, and ultimately means little? or what if the corker plan pays back preferreds but only over many years, which reduces the NPV? I wouldn't be writing this if conveniently the jumpstart renewal didn't appear 12 hours after the Bloomberg article. Did you even read that bill that was posted? It appears as an extension of 1 year BUT it actually tries to stop paying out money for the housing trust funds while assuming dividends will stop as well. What this bill (Corker/Warner) is trying to achieve is prevent Admin to nuke the Srs. because... my view, they want to do that in the housing reform bill and this little bill is a prelude to allow recapitalization and build up of capital. The original jumpstart was two lines. It only referred to tying up Treasury's hands. Had no language on anything else. This is much more than just an extension. It is already meddling with potentially a 4th amendment that will stop dividends. There are still funds/retail that use any rally to unload. A bit disheartening. @ Orthopa that wayne comment wasn't nice. And we still don't know the end to this movie. My view why Mnuchin is implicitly okeing all this. He said any reform comes after build up of capital. The above bill appears to: a) give congress 1 more year for reform b) strongly suggests fixing the coming zero net worth capital as it includes language of "not paying dividends". Comment to Wayne wasn't derogatory, just looked back in the thread and noticed he was out 2 days before, thats all. Also any bill needs to be signed by Trump (mnuchin) of course. I dont see congress going to far off he rails here but always possible of course.

Ouch, sorry Wayne.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices?

I can see made whole as in a target ie par. What is the made whole target for common? Can be any number I guess. Secondly there was some talk in the thread about the huge volume spikes in the preferred FNMAS and FNMAH in october. Very well could have been Ackman et al. Some here thought it her was it was berkos clients liquidating. A

My own biased interpretation of some shareholders is jr preferred and made whole IMO would be par or close to it. Why? Lawsuits go away, Paulson, Berkowitz, Ackman(depending on how much preferred he has now) are happy and you take the combative nature of the outcome away to a large degree. They start praising the bill, Mnuchin adds his two cents and works with legislators as promised and we go on our merry way. Easy to prime the pump is sneak out the politico/bloomberg piece and see how the market/investors respond. The common has always been a big crap shoot and has had little representation by those who really matter ( see above). At 20% of par before trading tomorrow is 500% upside not enough when compared to the substantial risk common represents? Even more so after reading the bloomberg piece. Hopefully we see the preferred spike tomorrow. Who speaks out loudly for the common if they get hosed and what leg to stand on do they have if congress drafts legislation that "upholds the contract" as Berkowitz has wanted. You now have the 2 of the largest previous opponents of shareholders now switching sides with mnuchin etc. Hensarling is toast.

it is highly unlikely -- even in a positive scenario -- that jr preferred holders receive par. if pressed, the moelis authors would likely admit the same -- they started at par for their request but know that the Congressmen will want some haircut in any potential deal. somewhere around two-thirds of par seems reasonable. I wouldn't dismiss the crapo news today. there are a lot of forces coming together that suggest an aggressive attempt to make a deal in congress during 1h 2018 before things shut down for the midterms. for those who think a strong attempt won't be made, that view suggests mnuchin is lying when he's said all along in 2017 that he wants to work with a bipartisan congress on housing reform. Agree that 100% unlikely but many have invested because that thought is its was going to be high if not close. I guess my point is do you bail now if you think 30-40% of par is possible at best? Why cant it be? Many have talked about whether or not shareholders are treated fairly, thats step one. Step 2 is how fairly, ie what % of par +/- div etc. Who sticks around for 30-50% of par as we have little leverage at this time and FNMAS trading at 24% now. Is this worth the risk with that upside in what could be another year plus after holding for 2,3,4 already?

Since Powell talked today https://www.housingwire.com/articles/40615-fed-governor-powell-here-are-5-principles-for-housing-finance-reform. Old though

Not great news. I for one always saw this as a mnuchin driven investment once he was picked for treasury but losing court cases on the surface if anything do lower our potential negotiating power. As kookie as it sounded origninally I think a large remaining part of this investment is the political aspect. Paulson and Mnuchins relationship, berkowitz and paulson via Trump etc. Mnuchin has made it clear about not getting rid of fannie/freddie, 30 year etc. As always what do the shareholders get? I think these relationships ie need for private capital will drive any further returns for shareholders. Legislatively Fannie will be changed but I think shareholders are treated based on Mnuchin and his relationships alone ie private capital, the warrants etc. I think all of those still invested need to seriously look at what level of par if rewarded is still worth staying invested. 30%, 40%, 50% of par? Is mnuchin the last say in what preferred shareholders get? Does everyone stay invested if he comes to the table and says 30% of par, no dividend take it or leave it? I guess this has always been the risk but it seems we maybe slowly losing leverage. As I questioned before any settlement will have to come with the end of lawsuits. How can the gov restructure FnF and screw shareholders/give them a raw deal if the Sweeney case is still going on? You cant give shareholders say 40% of par in the middle of 2018 and have that case be a win for shareholders a year later with a decision at 100% of par. Any lawsuit or question of shareholders right should be a bit of a freeze on private capital. Does anyone think this is not true? If so I think you have to be crazy to keep this investment as this a large part of the private capital argument. I get the argument about bankruptcies and secondary offerings with others have lost their investment but we are talking billions if not trillions of dollars eventually of private capital invested in a company with a lawsuit about shareholders rights. Should/will shareholders rights in this instance be decided before private capital steps up?

Both Moelis and MBA plans want explicit guarantee right? If so doesn't tell us too much yet.

Being that mnuchin carefully answers the questions and no doubt screens them why not just answer a question regarding shareholders? The easiest answer would be they will get nothing right? FnF would still be backed by the gov, the mortgage market likely would continue as is. What would change? Shareholders would be pissed, and lawsuits now doubt would continue with vigor. I guess my point or question is if shareholders are getting nothing(and I think whether or not they are is already known) why not just come out and say it. Get it over with and move on. Why the wait? It will affect the share price but who cares. Is it only the warrants keeping the gov from just saying F it and restructuring them?

I will try to re find and re read mnuchins testimony before the senate finance committee. If you guys gals remember who was pressed on acting on the GSEs and said that working with congress was his preference but reserved that he may act on his own. Will have to get the transcript again and read. Its buried in this thread somewhere. All along Mnuchin has been pretty consistent with what he has said/telegraphed so now that we are where we are now its even more interesting that he did not rule out that he would act alone.

Where did he say this recently? That was in reference to what he said last Nov when on Fox Business that Luke posted. The question is how much if any his thinking has changed.

It is interesting to re hear what mnuchin says about the gse's in light of the fact they are going to become a focus in a couple months. *Restructured *Out of Government ownership *Out of Government control So again I ask as I did almost 1 year ago. Who owns them and controls them if the govt doesnt? And does restructuring include recievership? Reading the tea leaves gets old after a while

I keep feeling the need to point out that shareholders won in part and lost in part, which goes against the statement that SCOTUS represents shareholders' last hope. (Also, Jacob & Hindes, etc. that cherzeca pointed out.) Whether the claim for breach of contract will end up being large or small can be debated, but it's mildly important to keep the facts straight here. Also, the case that Fairholme appealed to SCOTUS was in the U.S. Court of Appeals for the D.C. Circuit dealing with the Administrative Procedures Act. It is wholly separate from the case that is being tried before Judge Sweeney's court in the U.S. Court of Federal Claims under a Takings Claim, so it doesn't really matter that discovery is ongoing in the U.S. Court of Federal Claims while Berkowitz et. al. petition for cert based on the APA claims. Agreed, regarding court cases how could someone completely forget Sweeneys and Hindes etc. I think the issue Watt/Mnuchin have to be weary of is any final solution that does not satisfy/quell lawsuits. What kind of a bind is the gov/mnuchin/FHFA in if shareholders win a case in any court and the GSEs have been reformed/restructured/received etc in a way negative to shareholders. One would think a final solution would include an agreement with shareholders and the big players would could be satisfied are well known.

How does the corporate tax rate go to 20% and a 4th amendment isn't immediately made to prevent another draw. What happens first the GSEs dont pay the div and or tax legislation goes through. I don't know what the percent chance is legislation goes through before year end but no way GSEs can build enough capital to prevent a draw unless tax legislation goes into the middle of next year or later.

Another active manager biting the dust? Different then his mutual fund the Fairholme Fund. Hes just shutting down the Hedge fund he was running in addition.

Correct me if Im wrong but the hedge fund he closed is not the same mutual funds that hold the vast majority if not all of the GSE preferred. Same guy, different entity. At this point Berkowitz' main role is keeping the lawsuit going in Sweeney's court and any effect that may have with Mnuchin regarding a final GSE reform picture. I highly doubt the outcome is different if he sells even a couple million preferred shares with redemptions.

My extention of this would be why not just let them draw on tax payer support again. Like Corker says its there, do it. And we know Corkers motives and how another draw solidifies his view and MBAs view of the GSE's and what would happen for the big banks and shareholders. Lets not kid ourselves, the money is there right? Its just changing pockets at that point for a little until they make more money again. So the question I ask myself when Watt is adamant about preventing a draw who is he really concerned about protecting. Tax payers? Really? I guess optically it reflects very poorly on Watt if that happens but again. Who cares, money changes pockets, everyones hates the GSEs again and we go on our merry way. I think the far and away least resistance path is for congress/mnuchin/watt is to just say fuck it. Liquidate the companies or whatever they come up with....But they dont, and have gone to a painstaking amount of trouble with Phillips, and meetings, and hearings before Congress, yada, yada, yada. But for what reason? In my opinion something is in the way that is causing all of this run around, posturing and bullshit... and honestly I think it does truthfully have a lot to do with bondholders, and MBS, and the 30 yr mortgage etc.....but also shareholders, and the lawsuits. If there are no lawsuits or shareholders this is a easy fix. Im starting to trust all of these guys even less the before but there seems to be a huge roadblock to all of this and a lot of fucking around for a solution that I think most see in plain sight. Its like they are just afraid to do it.

It also maybe worth pondering why Trump has not tweeted or commented on this once since Nov. Yeah its Mnuchins'/Watts baby but he has no problem commenting on anything remotely close to his presidency. He is avoiding this it seems willingly. Makes you wonder why.

Everyone may have already considered this so the point may not be worth making but Watt has said the GSE's have been reformed. He feels its congress that should enact housing reform. He seems to feel that they are totally separate things. I think in his prepared statements he mentions this may or may not include the GSE's as they are but in addition he lists reforms that have taken place. Watt feels (or at least says) he feels strongly that congress should take care of housing reform but at the same time I think he feels the GSEs are in a position where they could be released as is because they have been "fixed". He acts like all of this is way bigger then him even though he has the power to do a lot on his own. Also watching the testimony it seems as if he can only say very little of what he actually thinks and feels. He seems very hesitant to answer the most obvious questions. Its almost painful to watch. If he has discussed with mnuchin about a capital buffer then you know for sure that releasing the GSEs, recap release, moelis, etc have been discussed. Only to date Watt has said he does not want a capital buffer to be seen as recap and release. Mnuchin has never said this though right? Wonder why he is very outspoken about expecting the div but has had no comment on what a capital buffer may signify. Also why such a run around with Mnuchin about a capital buffer? Either do it or don't right? How many discussions can you have about it. My one thought is that "capital building discussions" maybe preliminary or ongoing talks for a more final solution in light of everything that Jan1st signifies. Thus the SIFI point brought by Watt. Him saying it means for sure its been discussed as well as the 2-3% capital amounts. The democrats and Watt, ICBA, etc want a capital buffer with a big deadline in 3 months but no one wants it to signify recap and release of companies that have been deemed reformed or "fixed" by their regulator. There also is no alternative to date and you have a treas. sec who wants them out of conservatorship. The answer seems obvious to me what should be done

http://www.realclearmarkets.com/articles/2017/10/04/a_practical_fix_for_fannie_mae_and_freddie_mac_is_finally_within_reach_102903.html

Agree, I think campuano was referencing how Mnuching expects the div and Watt was referencing building capital as a seperate topic.

Love campuano

Remember to from the outset Mnuchin said he wanted a bipartisan solution. Seemed like the last thing that was going to happen at the time.

Seriously what is going on? Why is the RNC so concerned all of a sudden about FnF? They/Them are certainly taking the blame it on Obama angle to heart as some on here speculated Trump would, and now the zero capital is scaring the democratic senators. Whoever wrote the RNC statement seems pretty well versed on all of the key points that Berkowitz, etc have been pounding the table about for years. After 3-4 years I have learned to not get excited much at this stuff at all but is this why Paulson, Ackman etc see a resolution by year end?