orthopa

Im surprised that some guys are throwing in the towel with the court case on an appeal that was already dismissed. It was ok to hold through an administration that wanted the GSEs dead with all hope hanging on to a couple court cases, and not when the current treasury secretary wants to release them from govt control? I totally appreciate the idea of breaking even and not losing money but dont follow the logic. How is mnuchins whims and biases any worse off then judges and justice system that is crawling at a snails pace?

I would be more concerned it he was given a position within an administration. Remember he was being floated for Treasury Secretary but backed out or whatever. Mnunchin, Ross, and Mulvaney are in. That's what I'm concerned about. Hensarling will go on the record for what he wants because he needs to get re elected. The appointee's don't.

New Politico article picking up on the DTA issue. Looks like a sense of urgency is building FWIW. http://www.politico.com/story/2017/02/fannie-freddie-bailout-looms-over-white-house-235460 Pressure is mounting on the Trump administration to fix Fannie Mae and Freddie Mac as the two mortgage giants grow increasingly vulnerable to another taxpayer bailout despite robust profits. The companies are watching their capital dwindle as the Treasury takes most of their earnings, weakening their ability to weather market volatility and raising the odds of short-term losses. Corporate tax reform — a top priority of President Donald Trump and congressional Republicans — could force them to take huge writedowns. Treasury Secretary Steven Mnuchin says a fix for the companies isn’t at the top of the administration’s agenda. But without action from the White House or Congress, it’s all but certain that Fannie and Freddie, which back two-thirds of U.S. home loans, will need another taxpayer rescue on the Republicans’ watch. “This would be a new bailout,” said Rob Zimmer, a lobbyist for the Community Mortgage Lenders of America. “Republicans own this town, and they will own this problem. It will be a big political black eye.” Complicating the political calculus is the federal spending that Fannie and Freddie help finance. Allowing them to keep their profits would deny Congress revenue that could be used to cut taxes, pay for infrastructure projects and fund a repeal of the Affordable Care Act. Given the slim chance for a legislative fix, some banks, investors and housing groups are counting on Trump to break the gridlock that has left Fannie and Freddie trapped under government control since the 2008 housing meltdown. On Feb. 17, the Independent Community Bankers of America warned of “another massive bailout” if the companies continue to be starved of capital, an opinion shared by hedge funds and some lawmakers. “There’s no reason whatsoever they shouldn’t be able to recapitalize,” said Michael Capuano (D-Mass.), a member of the House Financial Services Committee. “They’re being used as a piggy bank.” It might seem farfetched to think of the mortgage giants on the brink of another rescue. Earlier this month, they reported robust profits and said they would send $10 billion to taxpayers. That brings their total remittances to the government to nearly $266 billion, a sum in excess of the $187.5 billion in aid they received to operate during the foreclosure crisis. In return for forfeiting revenue, the companies are promised a government lifeline to make ends meet if they suffer a loss. Tapping that credit line would highlight eight years of congressional inaction that has left the companies in limbo. But allowing them to bulk back up brings its own political risk if it’s seen as a step toward re-establishing the mortgage giants as private companies that profit from taxpayer risk. That’s the choice confronting Trump, who has stacked his administration with mortgage experts who call the status quo unacceptable. Chief among them is Mnuchin, who has the power to recapitalize Fannie and Freddie, but hasn’t signaled that he’ll use it. “It’s something we’re going to very carefully consider before we come out with a plan,” Mnuchin told Fox Business News on Feb. 23. “We don’t want to do anything that would put the taxpayers at risk going forward, so this is something that’s going to take us a little bit more time.” Industry might get a clue to the administration’s plans for the mortgage companies next month, when Trump releases his first budget plan. Like Mnuchin, Trump’s budget director, Mick Mulvaney wants action on Fannie and Freddie. Last year, as a member of Congress, Mulvaney introduced legislation to allow the companies to retain capital, a bill that won support from small-government groups. Allowing the companies to rebuild capital, even without a promise to set them free from the government’s grip, could also trigger a legislative backlash from Congress that could make broad reform even more complicated. House Financial Services Chairman Jeb Hensarling (R-Texas) is among the lawmakers who oppose recapitalization and want to minimize or eliminate the government’s role in the mortgage market. “There’s a common view among most Republicans, in Congress anyway, that the worst-case scenario here is re-privatizing them,” said Jim Parrott, a senior fellow at the Urban Institute and former adviser to President Barack Obama. “What you do not want politically is to be subject to the narrative that you’ve taken the first step toward re-privatizing since 2008.” A Treasury spokeswoman had no comment on the administration’s position on recapitalization. A Hensarling spokesman did not respond to a request for comment. Some lawmakers may be reluctant to agree to a legislative fix because Fannie and Freddie have proved useful as a source of cash. In 2012, Congress funded a payroll tax cut by raising the guarantee fee, or g-fee, that the companies charge mortgage borrowers. Rep. Mark Sanford (R-S.C.) has sponsored legislation with Rep. Brad Sherman (D-Calif.) to stop the practice. Tax reform, too, looms large for the companies. If Congress lowers the corporate tax rate, Fannie and Freddie would have to write down the value of deferred tax assets by as much as $30 billion, according to an analysis from Fitch Ratings. That could trigger a loss that forces the companies to seek taxpayer help. Finally, any change to the current arrangement, known as Treasury’s net worth sweep of the companies, would land in a thicket of litigation and might give an edge to the hedge funds who bought Fannie and Freddie stock at bargain-basement prices. Investors were dealt a legal setback last week when a federal appeals court said they couldn’t sue over the net worth sweep. Still, some of the biggest of those speculators, including John Paulson and Bruce Berkowitz, raised money for Trump’s campaign and are betting the White House will act in their favor. “We are optimistic that the indispensability of Fannie Mae and Freddie Mac to affordable homeownership eventually overpowers the taboo imposed upon them by the previous Washington establishment,” Berkowitz told investors last month. When Fannie and Freddie's losses do come, they’re are likely to be short-lived. In the long run, the companies should continue to report profits as home prices rise and default rates stay low. That’s another reason lawmakers aren’t eager to take on heavy lift of reform, said Christopher Whalen, senior managing director at Kroll Bond Rating Agency. “The status quo is ugly and conflicted,” Whalen said. “There’s a huge downside for the politician who wants to wade into the crocodile-infested waters, but not much upside.” Victoria Guida contributed to this report.

https://www.foreignaffairs.com/articles/united-states/2017-02-13/trump-and-economy?cid=otr-press_note-trump_and_the_economy-022317&spJobID=1103985698&spMailingID=53497268&spReportId=MTEwMzk4NTY5OAS2&spUserID=MjUzNTA0OTM5NTYwS0&sp_mid=53497268&sp_rid=YXBhbGxhZGlub0BjZnIub3JnS0

3 guesses: mortgage standards are tight -- average fico is quite high. he'd like to loosen these up and get the homeownership rate back up to help the economy. in addition he likely wants competition in some form, which of course is bad for the GSEs earnings stream. and he's a smart capitalist and realizes what's going on to the shareholders, many of which are his peers, is unjust. I guess my point is an interest that stands to benefit one way or another must be pushing him. Was he sitting in his hedge fund office or movie studio stewing about what has been going on with FnF? Believe me Id love the guy to death if he makes us $$$ but he feels REALLY strongly about a plan that could really benefit a certain number of people. Reasoning this way I think there is no doubt he helps shareholders. Secondly I cant find the transcipt text but in a confirmation exchange with Senator Warner he does not agree to not make any changes to FnF without legislation. Thus the bipartisan sch peal we heard the other day. Senator Warner then goes on the record against him in the charade before the vote essentially saying he does not trust him. My guess for the record to look back on if there is one FnF are taken out of conservatorship and NWS stopped by end of second Q, shareholder plans start soon there after with housing reform talk going strong going strong by the holidays.

I have been spending a lot of time thinking on what mnuchins motives are to bring the GSEs out of govt control and ownership and relatively quickly . Why do it and who benefits? Whats the rush? Fannie and Freddie have operated just fine since the financial crisis with dwindling capital and another amendment could easily be done to make sure FnF dont draw again or be allowed to build capital that some how creatively excludes shareholders. Outside of a private interest (Hedgies) who could benefit from Mnuchins plan, and why does he feel so strongly? Himself and his family cannot no personally benefit from any changes. Is the ability to invest in a quasi FnF s/p restructuring so appealing that he has pressure to open up that market to private investors? We know a private/public system wont benefit the home buyer any differently bc the 30 year mortgage has been running along just fine in the state that he says can no longer go on. Why does he feel so strongly about the situation and why is it even a priority? Who cares? The mortgage market has been fine.

I think your over thinking it. I think you see Paulson leave the Administration as an adviser if he is betrayed. Why would he have sold his shares already? The guy lobbied for years to have fannie out of govt control and govt ownership (sound familiar?), took a chance on trump, likely had a huge amount of influence in the decision of secretary of the treasury and finally got his guy in. This is binary for him too. Either he gets betrayed and fucked by his former partner and fellow trump economic advisor or he make billions of dollars. The koolaid drinker in me bets on the latter.

I dont think 90% or more of the public even knows what fannie mae does let alone knowledgeable enough to bitch about it at a town hall meeting. Halt mortgage approvals, buying and selling, and shut down the "liquidity" of the housing market in the US and then the simpletons may start to get rowdy

Exactly, Im surprised you guys are still debating possible legal outcomes. The man says he knows nothing about the lawsuits and deferred to the DOJ on that. He said in this building they are dealing with housing reform going forward. I think you start to place your chips on Sweeney if Mnuchin liquidates shareholders, other then that the court cases mean squat. Remember the court cases are a product of an administration who would never sit at a table with other stakeholders and had no interest in housing reform. I would argue that you would never even see the lawsuits come about if this administration was in place instead of Obamas. These lawsuits are stale hold overs that wont be anywhere near completion when mnuchin decides what he wants to do and housing reform takes place.

Its been a couple months but did we forget this stuff? http://www.cbsnews.com/news/meet-the-13-men-on-donald-trumps-economic-team/ https://www.nytimes.com/2016/08/06/business/economy/donald-trump-economic-team.html?_r=0 http://www.marketwatch.com/story/fannie-freddie-surge-as-trump-taps-advisors-who-back-privatization-2016-11-10 (mnuchin says the same stuff today but its bearish for some reason :o :o ) https://www.wsj.com/articles/bets-on-fannie-and-freddie-get-help-from-lobbyists-1463087581 It says Paulson was financing a lobbying campagning for lifting their controls on fannie and freddy. Isnt that "getting them out of govt control" http://thehill.com/blogs/congress-blog/economy-budget/207937-treasury-stealing-from-fannie-and-freddie-shareholders

More questions to clog up the board. 1.Can mnunchin liquidate current shareholders and still get FnF out of conservatorship simultanously? 2.Another thought, is there another scenario where compensation for shareholders could be a TARP style warrant. Isnt this what AIG did for existing shareholders? 3. In everyones opinion what has Mnunchin said since Nov 30th that leads them to a scenario where shareholders are liquidated without compensation?

No position but in agreement with this. It starts getting speculative when you have to read between the lines and analyze tones. If Trump had not won (a seemingly improbable event), I can't imagine these securities would be trading anywhere near current market prices. Agree, Mnuchin is the gse investment thesis. as was the obama administration. That's why all the reading between the lines. What other options do we have, to look at the current earnings and future earnings?

Nice summary. I think we can all agree Mnuchin will get them out of conservatorship no? He has said multiple times he wants them out of govt control. The questions I have are the day he announces conservatorship is over. He is returning the companies back to their state prior to conservatorship right? FnF will no longer need the back up of the govt. Is this action essentially returning the company back to shareholders or not that simple? If (when)the companies are out of conservatorship can the net worth sweep still be in place? If the companies are no longer are in govt control can they still have all of earnings swept? No right? Even looking at this page it seems there was a desire to get private capital into fannie and freddie and investors are mentioned as stakeholders FWIW https://www.fhfa.gov/Conservatorship/pages/history-of-fannie-mae--freddie-conservatorships.aspx Anothe question is for the legal guys. What happens if the govt/Mnucnhin winds down FnF and liquidates shareholers and then sometime after they get a positive Sweeney or otherwise final court ruling. Where do those funds come from?

Interesting tidbit from the beginning of the Mnuchin confirmation hearing. Whole text here. http://www.aba.com/Tools/Ebulletins/Documents/Mnuchin-Senate-questionnaire.pdf Senator Orrin G. Hatch 3. GSEs As former Treasury Secretary Hank Paulson has stated, the conservatorship of mortgage giants Fannie and Freddie, also known as Government Sponsored Enterprises, or GSEs, were to be a “time out,” while the government decides how to restructure the GSEs. Fannie and Freddie went into conservatorship in 2008 which means that the “time out” has lasted for more than eight full years. Numerous commentators, including analysts at the Federal Reserve, have commented on a need to finally get to restructuring Fannie and Freddie. For example, in a March 2015 Staff Report from the Federal Reserve Bank of New York, analysts wrote that “…there appears to be broad consensus that Fannie Mae and Freddie Mac should be replaced by a private system—perhaps augmented by public reinsurance against extreme tail outcomes…” You also recently echoed the need to get to finality on restructuring Fannie and Freddie, and I’d expect you, as nominee for Treasury Secretary, to be thinking about such issues. The Obama administration has, for the past eight years, shared the view that Congress should pass legislation to reform our housingfinance system. Do you agree with the views of many that the “time out” on the GSE’s ought to end, and Fannie and Freddie need to somehow be restructured or ended? Mnuchin I agree that the United States needs a comprehensive approach to its housing finance policy. With Fannie Mae and Freddie Mac both in conservatorship it is difficult to articulate their long-term role within our housing finance policy. Eight years passed since they entered conservatorship and there has been a significant recovery of housing prices across the country. So that lends itself to be a good time, in my view, to address the desired future state we seek for housing finance in our country. I look forward to exploring with Congress and stakeholders across the public and private sector solutions to this important problem. 1. So if its difficult to articulate their long term role in conservatorship then the way you articulate it is by....? 2. I think we can figure out who congress is...but if he wants to explore solutions with stakeholders Who are the current stake holders in Fannie and Freddie in public and private sectors?

This is worth a read again, mainly the last part of the transcript of Ross and Mnunchin. http://www.housingwire.com/articles/38635-trump-treasury-pick-fannie-mae-and-freddie-mac-will-be-privatized CyhkVztVEAALuox.jpg-large

In trying to destroy an idea like Munger says.... In the previous video I posted Mnuchin says FnF need to be privatized and is no good because it displaces private lending. That being said.... Anyone know of a good way to get $10-100 Billion plus in private capital into mortgage entities immediately after shareholders holding billions of dollars in private and common shares of a similar entity are liquidated by the incoming Treasury Secretary?

Mind explaining to me how you get new private money/investors to recapitalize a company and commit hundreds of billions of dollars while taking the first loss in a new entity when previous shareholders were liquidated? Is this something you would invest in and expect other to do also?

i think this decision will hasten a settlement. certainly the Ps are ready to come to table with a more humble ask; Ps dont get much by waiting if mnuchin is ready to talk. but as you say, i think this decision hasnt changed the framework of a resolution that i think mnuchin will pursue. many have been very critical of treasury's warrant position. assuming mnuchin wants to maximize the economics of this position, within an acceptable political framework, we should all be very thankful that treasury got these warrants in 2008! Understand your point. Another point that I would like to make or bring up is that in effect both Mnuchin and the Ps are on the same team. What do I mean by that? We have been conditioned to believe that its Ps vs Treasury and the Gov. That was true for years, but that all changed when Trump won and Mnuchin became treasury secretary. If you remember correctly it was Mnuchin himself that brought up FnF getting out of govt control and restructured back just after the election on Fox. Where did this idea and thinking come from? He feels this strongly all by his lonesome? You cant tell me Mnucnhin thought this up all alone without other heavily incentivized people. If he does even better! Not going as far as saying that Mnuchin was planted for Treasury Secretary....but had anyone heard of him before Trump won? I know I beat this horse before but how much more of a perfect Treasury Secretary for Ps is there? He took a bank in distress due to bad mortgages and turned it around making millions with Pauslon as a partner. Came out on TV 2 months before being confirmed saying exactly what Ps wanted to hear. Did he really work as Trumps campaign finance manager and never talk to Paulson, Berkowitz, Icahn, Kushner etc about FnF? Just refreshing the memory for what he said unabated on Nov 30th. President-elect Trump’s choice for Treasury Secretary, Steve Mnuchin, said he believes it’s ABSOLUTELY time to privatize mortgage lenders Fannie Mae and Freddie Mac. “It makes no sense that these are owned by the government and have been controlled by the government for as long as they have,” He added, “In many cases this displaces private lending in the mortgage markets and we need these entities that will be safe. So let me just be clear— we’ll make sure that when they’re restructured they’re absolutely safe and they don’t get taken over again. But we gotta get them out of government control.” Mnuchin promised that he’ll execute the separation “reasonably fast”. Watch this....http://www.foxbusiness.com/politics/2016/11/30/steve-mnuchin-time-to-jettison-fannie-mae-freddie-mac.html Listen to what the freaking man is saying!!!!!!!!!!!!!!!!!!!!!!!!!!!! No mention of this court case, the Sweeney court case, the Delaware court case etc. He doesnt give 2 shits about them in my opinion. The guy just got done dealing with people protesting in front of his house due to fourclosures and lawsuits for robosigning. He is going o stay as far away from this court shit as he can. These are holdovers from an Obama administration. These court cases only exists because of the previous administrations unwillingness to find a solution. Everyone has said he is working hard on the GSEs. Anyone stop to think who he is working with? Himself? Unilaterally devising a plan to screw the shareholders but then look for private capital? I could go on and on. Like rros said before, don't lose sight of true North.

Thinking about this more and rewatching the Fox tape from November Mnunchins mind has been made up on this for some time, ie 4 months ago. This optically could hurt those negotiating with him but I doubt the threshold will be lowered much. If I can imagine he has been hard working on the GSE's as Cohn said he was, this will have caused him to divert his attention briefly but the entire housing situation and its future is no different now after this remand then it was yesterday.

FWIW http://seekingalpha.com/news/3244919-frannie-story-bofa

This is exactly what I am thinking. This case was an after though up until 4 hours ago.

Has anyone here bought since the election/mnunchin comments on TV based on this court case/opinion? I sure as hell did not, I guess i will see one day how foolish I am in my thinking. Was anyone here buying/speculating on this court case outcome and then how lamberth would rule in say 6 months to a year?

Just curious: have you always thought this or only after Trump was elected? For me it's the latter. If Clinton was elected I would have seen the courts as the only path to victory. Imagine this ruling under a Clinton administration. I think I'd have to bail at a substantial loss; the commons would be under $1 and FNMAS would be sub $3. Agree Clinton administration, ie different treasurer much different assesment and I would not have added like I did.

I added more FNMAH at 6.10. Like i said before my belief is that Mnunchin holds the fate of Freddie and Fannie in his hands. Court opinions could have sweetened or unsweetened the deal. Lets not forget the man has said they need to get out of govt control, he wants a solution quickly, and according to Cohn was already at work on them. In the end if the man fucks me he fucks me and all of his billionaire buddies etc. I wasnt looking at the courts for a solution. Remember when Mnuchin said he wasnt aware of the court cases? Me too.

Market not liking the opinion, thats for sure.