orthopa

Thinking more about the conservatorship lite option if that was the plan of action IMO it would be done by now. Why? What's the pushback from that? Plantiffs are already suing and you may get some pushback from small lenders and on twitter but no one on Congress is going to bust your balls. This is hands down the easiest solution and I dont see a reason to wait and duck out after that. If anything the majority of Congress and the Biden admin would praise the move. Protecting the taxpayer has been another one of Mnuchins goals and I dont know how a letter agreement with an increased liquidation preference protects the taxpayer with no private capital nor does it follow the Treasury Plan. Reasoning it out makes no sense where we are today. Lastly if any of the reporting lately is to be believed no way Wall Street is meeting with Mnuchin and the DOJ is reviewing a letter agreement. That's a quick agreement between Treasury and FHFA and would Calabria even agree to that? He has been pushing for huge changes. I would argue that Calabria wouldnt even sign that agreement as it goes against his mandate. Now on the other hand if you were going to do something a little rash waiting and ducking out is the way to go. No 4 hour hearings in front of congress explaining to those retards why you did what you did and Calabria can scream at the top of his lungs that capital is what is needed. As a regulator he is independent and insulated till the SCOTUS decision. Just thinking out loud here.

Agree. One of the purposes of this is to listen to different opinions. Otherwise it's just an echo chamber... It is important to control emotions and have objective assessments on the same facts that everyone is seeing. Sometimes when price drops, people feel a lot of emotional distress and couldn't help but be mad at anyone bearish and disagreeing with their bullish views. Everyone wants to have an informational edge and profit from that, and this thread has done an excellent job on that. But sometimes everyone is looking at the same amount of facts, and have to objectively assign the right probability to the outcome and take actions based on that. The problem is you have shown on multiple occasions you dont know the facts, HERA, what congress does with the GSEs, the SCOTUS, on and on and on. So no one who truly is informed on the issue can take your or spek's opinion seriously. You guys don't know the facts so your opinion FWIW is rubbish. No offense meant but perfectly sound reasoning based on your own logic.

1. What evidence do you have that he wont act vs that he will. The he will pile is way higher then he wont pile. We are not down to minutes here with still a week and a half to go. 2. There is no way to invest in the Sr Preferred now so no way arbitrage with them. And your correct MM buys high and sells low. After the outcome occurs, he will come and tell us what happened. Has happened 3 or 4 times now. 3. FnF do not have to exit conservatorship in any way palatable to Maxine Waters or the Democrats. FnF exit conservatorship is an agreement between Treasury and FHFA and if CD between FHFA and the GSEs. Congress is not involved at all now or in the future with that. Who cares what Maxine Waters thinks. The only input she will have will be in a bill that can pass through congress that hasnt happened in 12 years. I hope you dont hold your breath on that. Maxine Waters has no imput on compensating equity investors. After out of conservatorship its the GSEs that will deal with investors vis CRPs. 4. The SCOTUS cannot release the companies from conservatorship. Only deal with the NWS. If you havent already, please re read HERA. 5. If you looked at the OMB projections they do not include dividends from FnF. Not really sure this makes much sense objectively.

*salutes* These seems to undoubtedly be the right move at these prices. Just to review as its easy to let the market guide you not serve you on slow news days. A quick review of recent history reported regarding Mnuchin. https://www.wsj.com/articles/fannie-freddie-overseer-seeks-to-end-federal-control-before-trump-leaves-11605873600?mod=article_inline "The Treasury secretary must agree to any move to alter the terms of either the companies’ bailout agreement or the government’s stakes. One person familiar with the effort said Mr. Mnuchin is supportive of locking in a path to private ownership but mindful of steps that could disrupt the housing-finance market." "Mr. Calabria has met twice recently with Mr. Mnuchin to discuss an expedited exit of the companies from government control, most recently the week of Nov. 9, according to people familiar with the meetings, which also involved Larry Kudlow, the director of the White House’s National Economic Council. Mr. Mnuchin was noncommittal about the push, the people said." https://www.bloomberg.com/news/articles/2020-12-10/mnuchin-says-he-s-likely-to-back-changes-to-fannie-and-freddie Speaking to reporters on Wednesday, Mnuchin said he supports amending the companies’ bailout agreements “to set them on the right direction.” Revamping the accords, established after the government took control of Fannie and Freddie at the height of the 2008 financial crisis, is crucial to releasing them from U.S. control. Federal Housing Finance Agency Director Mark Calabria, Fannie and Freddie’s regulator, has recently pushed for a sweeping amendment that would set them on an irreversible path to leave conservatorship, according to people familiar with the matter. “We’re going to create a blueprint,” said Mnuchin, adding that he had spoken to both Republicans and Democrats in the past few weeks. At a minimum we have weak hands leaving with the recent rumors of Mnuchin leaving and I believe the market pricing in a "lite" 4th PSPA that does not eliminate the Sr Preferred but only raises the retained earnings cap. This certainly would hamstring Calabria and certainly does not set them on a path anymore then they are now. Those who have followed along know the unlikelihood of locking in a path to private ownership as Mnuchin says with the Sr. Preferred still in place. So we wait. Only 9 business days left for the crystallization event to occur.

Is there a way to easily confirm this? I am still holding and thinking about what if scenarios on what Yellen will do and what her plan is once she is in office IF SM doesn’t do what we think he’ll do. We have been disappointed many times so if SM does something it’ll be an exception to the norm. Just be careful what you post here, it’s a stressful time for those holdings. Per HERA once treasury is out of the picture with another amendment Treasury is out. There is some language that Treasury has to agree for the GSEs to be released also. The Consent Decree is an agreement between FHFA and the GSEs and Yellen will have no power or input at that point.

I added more. If there ever was a better time to add more its after a ~40% drop from highs a month ago with 9 business days to go! What I do find interesting is the higher div and lower div preferred seem to be coming together a bit in price. Whatever is coming it seems the market believes divs may not matter as much for whatever reason. All of these securities are trading like an option that expires on Jan 21st. When Mnuchin signs the 4th amendment the expiration date goes out to eternity and the time value embedded will soar. Not a bad idea to add a little each day going forward until its signed.

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived. What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo. At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth. Even if executive action were to occur, there is a strong likelihood that it will just be reversed. Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least. Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment. Investing is a probability game. What do you think is the likelihood of this? My assigned probability is 0.0005% Which is pari passu with your level of understanding the intricacy's of this investment. I think you got lost in the wrong thread again.

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived. What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo. At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth. Even if executive action were to occur, there is a strong likelihood that it will just be reversed. Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least. Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment. Which will most likely promptly reversed 2 weeks later. Just a general observation from binary net situations, I have found that in most cases absent much indications of progress and with deadlines approaching these often trade on more hope than facts. I guess we will know in two weeks. to piggy back on cherzeca the more you post spek the more it shows how much about this you don't know ruining any credibility you could muster in the last 2 weeks here. Fanning flames is fine I guess, but with your level of understanding of the last 10 years coming down to the next two weeks it might be best to just read along and jeer at the end if this blows up. Its painful to read what you have been typing.

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived. What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo. At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth. Even if executive action were to occur, there is a strong likelihood that it will just be reversed. Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least. Wow, yeah I didnt realize congress controlled this investment. Great point. Thank god your around muscleman.

Your not the bearer of bad news. Your driving blind and guessing yourself FWIW. As I mentioned before we are all allowed an opinion as we are each on the outside looking in on this. That being said major pieces of what you typed go against nearly everything those in charge, Mnuchin(phillips), Calabria, Otting etc have said. Like I said before if nearly everything they have said was a lie I would agree with nearly every one of your opinions. We are all still of course still waiting to see if those mentioned above spent 2-3 years lying. If so fuck me and fuck them I guess. The one thing I still really dont understand is your thought that Jr Preferred get converted at the end. What's the purpose of that point and how do you get the 2/3rds majority to convert if not very favorable? Unless the GSEs retain capital exclusively for years capital will need to be raised which I think most agree with. New money may very well demand a dividend and I think the exclusions in the capital rule realize this. So how do you presumably raise new common with the very real possibility of a dividend for those issued shares but have a defaulted capital stack with no dividend paid on preferred? If your assumption is the preferred will get paid a dividend to not have a defaulted capital structure then assuredly they would trade at par or close if not higher with some at 7%+ rates in this environment. So if I have a preferred paying a div (because common will pay one to raise new $$$) that is trading over par, why the hell would I convert to common and lose a 20-30% div rate on cost? My other question is assuming FnF are released on CD (maybe they wont and Calabria lied, Mnuchin lied to congress, the capital rule text is misleading/lied, and the FHFA/Treasury letter to congress earlier this year lied) then the financial advisors, the CEOs, boards etc are going to be incentivized to raise money ASAP and in large amounts. I dont see a slow recap high on the list of priorities for JPM, MS, the boards, and the CEOS. They are completely incentivized otherwise and frankly everyone is BESIDES the common holder. So anyway getting to my point JPM and MS no doubt see the preferred value counting towards capital once converted explicitly laid out in the capital rule and they just sit on it? 33B worth and they just sit on it for a couple years and then try to convince preferred holders close to if not getting a dividend to convert away from that? And when exactly do they convert it then? When there is 33B left to get out of consent decree? Id like to hear your opinion on why preferred get converted last? How you parse through the dividend discussion along the lines of what I describe above against the capital rule discussion of dividends? What's your trigger at the end to convert? Waiting to need 33B to get out of consent decree? How do you incentivize or why would a preferred holder convert assuming divs are turned on? And if divs are not turned on at the end before conversion why? ie why not just sit tight and wait for your 20-30% on cost to turn on? And to round it out how it makes any more sense then just doing it unannounced based on a previous 30 day trading range and completely avoiding the dividend discussion entirely and clearing the capital structure for new assumable convertible preferred?

Maybe Im belaboring the point but Phillips has publicly stated the Sr Preferred were paid down, preferred should be exchanged, warrants exercised etc. He was out of the admin when he publicly said this so maybe these are his own views but he was also in charge of spearheading the GSE topic within treasury for what that is worth. Coincidence or not his public statements do match options in the treasury plan. As mentioned above we very well could have been lied to but I don't see who benefits in that situation? Who comes out on top if Phillips, Otting, Calabria, and Mnuchin are lying publicly? No doubt Stevens, Whalen, Sherrod, Maxine, etc would be happy but Im not sure if thats better then who would be happy otherwise.. But if that was the end game what was the point of the whole charade? What a waste of time. No question no view point is set in stone and are all valid at this point. We continue to wait and see.

How is it a bad deal if the GSEs have been paid back. If you don't feel like Treasury has been paid back, and the SP doesn't get written down I struggle to see why your still invested to this? Everyone is allowed to have a view, but if this view was mine I would pass on the investment.

FWIW the letter agreement had this to say: The Enterprise and Treasury agree to negotiate and execute an additional amendment to the Agreement that further enhances taxpayer protections by adopting covenants broadly consistent with recommendations for administrative reform contained in Treasury's September 2019 Housing Reform Plan, in further consideration for the amendment contained in Part I of this agreement. https://home.treasury.gov/system/files/136/9-27-19%20_FNMA%20Capital%20Agreement_0.pdf Granted things can change but they have followed the treasury plan to a "T" and "an additional" amendment does not sound like just increasing amount of retained capital precluding another amendment. Per the treasury housing reform plan there is "Adjusting the variable dividend on Treasury’s senior preferred shares so as to allow the GSE to retain earnings in excess of the $3 billion capital reserve currently permitted." The letter agreement came out after the Treasury reform plan so I believe we have to go off of the language of the letter agreement above. For this reason I believe its one and done and don't see evidence of it going any other way.

Does it really matter where Mnuchin is? Everything could be wrapped up, but they might wait for a specific date to actually release the news. Not sure if it matters where Mnuchin is at that point, as long as he's still alive. And yes, I have worried about whether Mnuchin or Calabria dies before a PSPA amendment! Thats true but if this goes through when he is in the middle east it may look a little weird. It is 2020 though so who knows! I have thought about the death angle but thank god for lackeys below.

Last time FnF traded like this was before capital rule was released. Like many in this thread I have been conditioned to think another disappointment is on the horizon so we will see. For the investigative types mnuchin is taking a trip overseas in early January so some have ear marked today/early mid january as possible dates this goes though. We will see.

Following some of those on twitter the thought is Treasury wants the Wall Street Bankers to look and advise on the PSPAs, consent order milestones regarding capital, and strategy to exit govt control (capital release plans). If that tea leaf reading is correct that means that CRP from JPM and MS have been submitted, approved and sitting on mnuchins desk as reported. This must be what he is "contemplating" per the congressional hearing and why the Fannie email said stand by. If all correct the big bang goes through, PSPA, capital release plan, and consent order all at once. If that comes to fruition I would expect a preferred to common conversion to be part of that capital release plan. If its going to come it has to come unannounced. Question is will it be enough for Plantiffs to drop their suit if that is still pertinent.

As with any investment depends on the risk and time spent. Undoubtedly for some this is a rounding error position and for others a huge position. Size of capital is relative to everyone but once you get into the 7 and 8 figure amounts with an investment that can provide 300-400% returns IMO it becomes worth the time spent. If not a huge position I would likely have the same view as you. Not worth the bullshit unless your in with size.

He is good at playing the game though but weak sauce for sure. The "framework" (do they mean PSPA?) must call for one of the litany of options to recap the GSEs in the Treasury plan. The "blueprint" assuredly deals with the Sr Preferred and warrants in a way that Wall Street benefits of course. Treasury undoubtedly is exercising the warrants so outside of eliminating the Sr Preferred there is some potential to conversion of a different security there on Treasurys behalf.

The plan is sitting on Mnuchin's desk right now ready to be signed. More: Wall Street bankers tell @FoxBusiness that the framework is on the desk of @stevenmnuchin1 and it has input from @MarkCalabria. No immediate comment from @USTreasury or @FHFA. Unclear if and when it will be released cc @FannieMae @FreddieMac $FNMA $FMCC will discuss at 345 At this point Q is what will include? Seems market is pricing a soft PSPA or whatever we can call this. Im not smart enough to guess this question right but why are wall street bankers involved in the "blueprint"? There has to be some offering of a security/initial placement/etc something. Why are wall street bankers involved already and why is mnuchin meeting with them. The cap restoration plans go through FHFA.

The plan is sitting on Mnuchin's desk right now ready to be signed. More: Wall Street bankers tell @FoxBusiness that the framework is on the desk of @stevenmnuchin1 and it has input from @MarkCalabria. No immediate comment from @USTreasury or @FHFA. Unclear if and when it will be released cc @FannieMae @FreddieMac $FNMA $FMCC will discuss at 345 Thats weird! Day after amacker and Joe Light run their mouths someone from Treasury/FHFA rights the ship. Right on time! ...and now we are wasting wall street bankers time too. Do wall street bankers waste their time? How do they get paid you think, for their time? That incentive will lead you to your answer of what will happen.

I think its good to refresh ourselves with the Treasury Housing Finance reform plan. 1. Preconditions for Ending the Conservatorships The guiding principle for ending the conservatorships should be that each GSE should remain in conservatorship until FHFA determines that that particular GSE can operate safely and soundly and without posing an undue systemic risk. The specific preconditions for FHFA considering a particular GSE’s exit from conservatorship should include, at a minimum, that:  FHFA has prescribed regulatory capital requirements for both GSEs;  FHFA has approved the GSE’s capital restoration plan, and the GSE has retained or raised sufficient capital and other loss-absorbing capacity to operate in a safe and sound manner;  The PSPA between Treasury and the GSE has been amended to: (i) require the GSE to fully compensate the Federal Government in the form of an ongoing payment for the ongoing support provided to the GSE under the PSPA; (ii) focus the GSE’s activities on its core statutory mission and otherwise tailor Government support to the underlying rationale for that support; (iii) further limit the size of the retained mortgage portfolio of the GSE; (iv) subject the GSE to heightened prudential requirements and safety and soundness standards, including increased capital requirements, designed to prevent a future taxpayer bailout and minimize risks to financial stability; and (v) ensure that the risk posed by the GSE’s activities is calibrated to the amount of the remaining commitment under the PSPA;  Appropriate provision has been made to ensure there is no disruption to the market for the GSE’s MBS, including its previously issued MBS;  FHFA, after consulting with the Financial Stability Oversight Council (“FSOC”), has determined that the heightened prudential requirements incorporated into the amended PSPAs are, together with the requirements and restrictions imposed by FHFA in its capacity as regulator, appropriate to minimize risks to financial stability; and  Any other conditions that FHFA, in its discretion, determines are necessary to ensure that the GSE would operate in a safe and sound manner after the conservatorship, including as to the GSE’s compliance with FHFA’s directives or other requirements and also as to the build out of FHFA’s supervisory function. 59 2. Recapitalizing the GSEs As described above, each GSE should remain in conservatorship until it has retained or raised sufficient capital or other loss-absorbing capacity to operate in a safe and sound manner. Potential approaches to recapitalizing a GSE could entail one or more of the following, among other options:  Eliminating all or a portion of the liquidation preference of Treasury’s senior preferred shares or exchanging all or a portion of that interest for common stock or other interests in the GSE;  Adjusting the variable dividend on Treasury’s senior preferred shares so as to allow the GSE to retain earnings in excess of the $3 billion capital reserve currently permitted;  Issuing shares of common or preferred stock, and perhaps also convertible debt or other loss-absorbing instruments, through private or public offerings, perhaps in connection with the exercise of Treasury’s warrants for 79.9% of the GSE’s common stock;  Negotiating exchange offers for one or more classes of the GSE’s existing junior preferred stock; and  Placing the GSE in receivership, to the extent permitted by law, to facilitate a restructuring of the capital structure. Each of these options poses a host of complex financial and legal considerations that will merit careful consideration as Treasury and FHFA continue their effort, already underway, to identify and assess these and other strategic options. Treasury recommends:  Treasury and FHFA should develop a recapitalization plan for each GSE after identifying and assessing the full range of strategic options. (administrative) What is needed in the 4th PSPA is spelled out in preconditions for ending the conservatorships and eliminating all or a portion of the Sr preferred is also listed. Its seems to me FHFA and Treasury have followed the plan pretty closely. I dont know why they would veer off now and and completely eliminate the possiblity of writing off the Sr preferred.

Just because these two are just dicking everyone around and wasting everyone's time. If Mnuchin/Calabria were not going to act they wasted A TON of their time, Treasury's time, Congress's time with 3,4,5,6 hearings, confirmation of Calabria, making of an interim amendment, publishing a capital rule, yada yada. If they were not going to act a good way to go about it would to have not done a god damn thing 2 years ago before Calabria was nominated and the Treasury Plan was requested by Trump.

I think a better set of questions who gets you to your answers are; 1. How did Mnuchin go from a nobody campaign finance guy to Treasury Secretary in a matter of months? Why was he picked as Treasury Secretary? To do a job? He got to dispose of his investments once tax free to lock in all appreciated gains. What does someone else get in reciprocation for that multi million dollar favor? 2. Why did Mnuchin mention FnF as a priority immediately on Fox news after the election? Trump never ran on it and outside of a singular comment has been mute since. Why does Mnuchin care so much about it. 3. Who stands to benefit the most if Mnuchin comes through? 4. Why was Calabria picked to be FHFA director? His past comments on twitter and the paper he wrote was well known before. Why pick this guy unless you wanted him to act on it. 5. Why has John Paulson been so quiet? We havent heard from this guy in 3-4 years. Whats up with that?

It is probably correct that nothing has changed about Mnuchin/Calabria plan. But our guess of what that plan is keeps changing. Since we don't know, the price goes low. I disagree. Until this article, Mnuchin has been on record stating they are deliberating on the issue. Then these statements appear from a late in the day interview in the article - he would have known it will end up on the front page of the WSJ. Puzzling but definitely a negative coming from him (alternative being silence). WHY? Did talks breakdown? Was a decision to punt reached with concern for impact on the financial system? What changed for him to give these statements? Mr Market letting prices freefall along with volume indicate some are getting the message. Serious question? Does one line from a biased journalist overturn all the evidence you have other then what he reported, even with direct contradicting quotes from the same person (Mnuchin)?

Mnuchin may have been responding to this: https://narfocus.com/billdatabase/clientfiles/172/3/4198.pdf A premature release of the GSEs from conservatorship would threaten these outcomes without clear benefits in terms of the near-term health of the GSEs – that is, from an operational perspective, the GSEs outside of conservatorship but under strict consent decrees would look very similar to the GSEs in conservatorship. There is little to gain from this approach, but, as noted above, much to lose. Letter he recieved yesterday from the usual groups again. These folks are getting awfully worried. Funny I haven't seen/read any letters from the side wanting the GSEs to be released. Just the side against? Why is the side for release been so quiet and tamped down the rhetoric? Parrot, Demarco, MBA, Stevens, NAR, NAB, WaPo editorial boards have been really fucking noisy for some reason. Must be because Mnuchin isnt going to do a PSPA agreement and release on consent order, yeah, yeah thats it. edit: reading the article again more closely the concern these groups have is losing govt backstop but they DO NOT mention a paid for guarantee that will be in place in a PSPA until action taken by congress. This is a key part they leave out as a reason to not release and a convenient one at that.