beaufort

I watched much of the Watt hearing as well. I thought he was in control. My memory is he made sensible distinctions between reform of the GSEs and housing finance reform. He made several references to the statute and his defined role. He also acknowledged that he has been in talks with Treasury re retaining capital. Questions better answered by Mnuchin, he left for Mnuchin. I see no reason not to take him at his word. As for the issue of why is he now proposing to end the NWS for buffer capital where before he went along with it, my view is that the facts have changed, and his views have changed. The political winds have changed. Conservatorship has worked in getting the GSEs to the point where they are well reformed and appropriate to the task of doing what they do well: providing insurance on MBS for credit worthy borrowers in an efficient manner. Now the next step is to make sure they don't pose a risk with their capital structure to taxpayers.

Re Snarky's scenarios: I don't see what the benefit is of wiping out the existing shareholders, both common and preferred, by spinning off the assets to a new corporation. Why spin off the assets to a new entity and have to deal with the ensuing fraudulent conveyance actions? I can see a situation where there is significant dilution of the common. I can see the issuance of new prefs. I also see the new charters as a way of appealing to the politicians that want to bring about the destructions of Fannie and Freddie. I hope there would be no compromise by giving the new entities propriety processes/technologies for nothing. New charters for competitors ("private capital" - unlike the capital on this board) and recapped Fannie and Freddie seem like a compromise that all could live with. It also seems to be shaping up that way in the proposals being put forward.

https://www.streetinsider.com/Analyst+Comments/Rafferty+Capitals+Bove+Notes+Potential+Game+Changer+for+Fannie+Mae+%28FNMA%29/12800715.html I was thinking about this new hire as well. I am not familiar with her reputation. Unrelated to the bill, Bove also highlighted that Celeste Brown has left her position as Treasurer of Morgan Stanley to become Deputy CFO at Fannie Mae. Commenting on why a rising star at Morgan Stanley would leave to join a company on the verge of being eliminated, he said: "My belief is that she would not do this unless she were given assurances that there was a bright future for her at Fannie Mae. Ms. Brown is special. She is unlikely to sidetrack her career to become a government employee dead set in the middle of “the swamp.”

Add me to the list of people appreciative of the efforts board members like cherzeca make contributing their specialized skill set to the analysis.

https://morningconsult.com/2016/11/29/rep-duffy-tops-list-take-wall-street-subcommittee/ "Like most of his Republican colleagues, Duffy is a critic of the 2010 Dodd-Frank Act, as well as Fannie Mae and Freddie Mac. In a 2016 op-ed about the film “The Big Short,” he characterized Fannie and Freddie as “the villains Hollywood refused to let you see,” in addition to their “crony, corrupt accomplices in Washington, D.C.”

I am getting restless waiting for the Sweeney court documents. @lawyers familiar with rules of civil procedure for subject court In what context, if any, will we, the pubic/non-parties, be entitled to know the contents of the documents? I would think by end of business day today Fairholme lawyers would have 40-50% of the producible docs.

Judge Sweeney's order is for document production to happen on or before April 17, 2017 in the Fairholme action for some 11,000 privileged documents. After documents are produced, are other plaintiffs able to use them freely or is there an implied undertaking that the documents will only be used in the Fairholme action absent a court order permitting usage in the other actions?

The higher par value prefs are better priced for sure.

agreed. i think fhfa is worried that a pagliara win for Ps at trial will be viewed significantly by judge sleet in hindes/jacobs. they are not exactly on point, but i dont see how fhfa can argue that HERA preempted delaware law relating to issuance of preferred stock if fhfa cant convince either sleet or delaware courts that HERA didnt preempt delaware right to inspect books I think what you say makes sense. That also explains the poor limitation defence re inspection of books.

I went through the Pagliara filing dated April 4, 2017 re inspection of books and jurisdiction. Unbelievable. Fannie submits to the Delaware jurisdiction for adjudication and then argues it is not governed by Delaware law. I think insurance companies are bad, but the cherry on the cake are government defendants. Here we are dealing with both.

I just bought more FMCKJ. I wouldn't worry to much about what the market knows. @cherzeca re Hindes/Jacobs re interpretation of DGCL s.151. How long after materials are made available to this court in July 2017 does it usually take for summary judgment on an interpretation of law?

I had trouble with the site all day as well.

Tax cut write down potential and draw according to BMO: Edit: wrong cut and paste. Correct link below.

The payment going through is disappointing. I am looking forward to document production in mid April from the order by Judge Sweeney. Let's see why tens of thousands of documents needed to be privileged.

I am enthused by the following from ROLG's article re capacity to issue senior prefs [edit: with the terms of the NWS]: However, it is clear that Perry majority held this in the context of Perry plaintiff claims that the NWS violated the conservator's duty to rehabilitate, and preserve and conserve assets. Hindes/Jacobs asserts a wholly different claim, that the NWS violated the conservator's power to issue preferred stock, a claim nowhere made by Perry plaintiffs and nowhere considered by the Perry circuit court. Hindes/Jacob's claim invites no second-guessing of the conservator's business judgment negotiating stock terms under a broad discretionary grant of conservator power to manage FNMA's business under conservatorship, but simply a focused analysis as to whether the applicable statutory law relating to permissible stock terms has been violated. HERA mandated that FHFA shall step into FNMA directors' shoes, and the FHFA's power to include any particular terms in an issue of preferred stock must be measured by the power FNMA directors had to issue preferred stock having such terms. These are Delaware corporate law shoes, and they are ill-suited to fit the terms of the NWS.

I added to FMCKJ last week. I view the higher yielders as interchangeable (FNMAS, FNMAT, FMCKJ) and the lower yielders as interchange as well (FMCCH, FMCCK etc). I also don't distinguish between Fannie and Freddie. I have added sporadically based on price since the election.

I won't be able to listen to the audio file for many hours/tomorrow. Is Hume's discussion regarding the misapplication of Delaware law in relation to who is in the class of shareholders that suffered a loss for breach of K and entitled to a remedy? For example, the loss is transferred to whoever holds the stock now, not who held the stock in 2012. Hope I am clear.

I have gone over the Perry appeal decision again. I like the anticipatory breach of contract claim for the preferred. I agree with Merhket in not having a view (I think that's the way he/she phrased it) on the dividend claim. I bought after the election and Mnuchin's November comments. For me this investment/speculation has always been about the political solution, backed up by the courts. I remain convinced of a political solution, because no viable alternative solution has been put forward. In the end, in a political solution, both the common and the preferred do well. In a legal solution for Perry, currently only the preferred has a chance. A political solution makes sense, perhaps with some support from other holdings in lawsuits around the country.

Does the Perry anticipatory breach of K remand apply to all preferred holders or is the class more narrow than that? IE will it matter when the preferred stock was purchased? Is remedy par?

"Corporate individual" I meant corporate person.

Question for US corporate lawyers. Takings claim The corporate individual (ie Fannie) held the property in the money that was taken over the years. Therefore, the remedy would be to make the corporate person (Fannie) whole, and damages would be granted to Fannie, and not individual shareholders. Please confirm or correct my understanding.

Back of the envelope approximate calculations for Fannie and steps to independence. Comments on whether this would work are welcome. Facts: 3T assets. 1.1B shares outstanding. 5 B shares outstanding including dilution from government warrants. 21B junior preferred stock. Assumptions: 15 P/E fair for FNMA. 2.5% regulatory capital required. 10-11B net income sustainable moving forward. Government has been paid back fully on its injections of capital into Fannie by way of NWS. Still retains warrants. Mnuchin ends NWS. Mnuchin raises strike price of warrants to $20 to exit ownership, then sells them. Now 5B total diluted shares outstanding. After dilution, sale of 3B in new stock to public for 60B total. 2 years of retained capital post NWS before any dividends are paid. I am going to ignore preferred dividends for the moment. Conclusion: 8B common outstanding 11B Net income 15 P/E Share price for common = approximately $20/share (needs adjustment for preferred dividends)

How long for a consent desk order to be pronounced by the court and take effect?