SnarkyPuppy

I wish the #fanniegate crowd would stfu and let this play out on its own

Seems to be consistent with MBA proposal. Henslaring sure seems delighted immediately after Mnuchin states this. i think mba plan wants explicit on all mbs and small bankers want it explicit on GSE mbs. big difference. Ah I see - that makes his push to FHA comments seem relevant

Seems to be consistent with MBA proposal. Henslaring sure seems delighted immediately after Mnuchin states this.

Is anyone confused with the lack of Fox coverage? Prior to the recent release, there were two significant media events which occurred on Fox- 1. Rosner invited on Tucker Carlson + Carlson tweeting about the GSEs 2. Maria interviewing Mnuchin -> hashtagging #fanniegate on twitter -> Mnuchin stating that the GSEs profits were used by the government inappropriately But total silence on this? It's very weird to me. I'm concerned that they are being silent for a reason.

Mnuchin today - brief but mentions FNMA, housing reform, allowing community banks to keep mortgages on their books / not forcing securitization ~31min mark https://www.c-span.org/video/?431638-1/treasury-secretary-says-lackluster-growth-debt-biggest-threat-economy&vod

Wonder why Fox has stayed silent on this after previously alluding to (and even tweeting the hashtag) "fanniegate"

http://www.breitbart.com/economics/2017/07/25/fannie-secrets/ lol this guy

Seems plausible, but could argue he's had enough info for a while and has stayed silent

http://www.rollingstone.com/politics/features/taibbi-government-misled-public-on-fanniefreddie-takeover-w494007

Completely agree. Just continuing to try to question the merits as I do with any investment

The key thing to understand is that the value of a company is the present value of all of it's FUTURE cash flows. All else equal, if a company earns $100 in 2016 and can reinvest those earnings at a 30% incremental return on invested capital, earnings in year 2 will be $130 (previous earnings power of $100 + increased earnings power from reinvestment of $30). In the future, the company which reinvests its earnings at a 30% return will have higher cash flows than the company which distributes all cash flows in the current year (in this simplistic example where the company MUST reinvest its earnings to achieve incremental returns on capital). The value of the business is the sum of all cash flows the company can earn and distribute going forward.

understand this, but wonder how much (positive) weighting to put on notion that congress appears incapable of doing anything at moment. feeds into thesis that administration is just giving congress rope on gse reform and congress is getting near out of rope Chris, with all due respect, judging by the Jumpstart Act Congress is never out of rope. Even if we get to 12/31/17 with no bills on the table a harsh action by Mnuchin or Watt could trigger a last minute reaction. Then, we will again see swift crap coming our way. My hope is that Corker is beginning to understand the WH is not supporting his efforts/goals as Obama did and that the FHFA has its own power to act and it is not in the same page he is. With the balance of power shifting a more reasonable Corker may decide to adjust accordingly. It is just a hope... Wouldn't he be aware of the shift at this point? Why is he so optimistic about reform being passed if he believes he's lost leverage? My sense is Mnuchin either hasn't been straight with him (sure bob, we think you're solution is great) or Mnuchin has decided that he can gain political capital by giving into any corker/warner legislation for areas with more public visibility - healthcare and tax reform - which will have more importance in determining Mnuchins legacy in the eyes of the public. Could make an argument that his incentives (maybe guided by trump) are to give in to housing reform and use that capital to gain votes on tax reform/healthcare. Healthcare and taxes are certainly important, but I can't believe Mnuchin would go along with a plan like Corker/Warner. It would pose great unknown risk to the market and more importantly would drive up rates, which would have a negative effect on home ownership, home values, construction, etc. Corkers a snake though so could certainly see him trying to stuff some last minute shit in a larger bill. Perception != reality. Rises in homeowner rates can be blamed on other things (Fed) and systemic risks to the housing sector will not be as transparent to public as failure to pass healthcare/tax

understand this, but wonder how much (positive) weighting to put on notion that congress appears incapable of doing anything at moment. feeds into thesis that administration is just giving congress rope on gse reform and congress is getting near out of rope Chris, with all due respect, judging by the Jumpstart Act Congress is never out of rope. Even if we get to 12/31/17 with no bills on the table a harsh action by Mnuchin or Watt could trigger a last minute reaction. Then, we will again see swift crap coming our way. My hope is that Corker is beginning to understand the WH is not supporting his efforts/goals as Obama did and that the FHFA has its own power to act and it is not in the same page he is. With the balance of power shifting a more reasonable Corker may decide to adjust accordingly. It is just a hope... Wouldn't he be aware of the shift at this point? Why is he so optimistic about reform being passed if he believes he's lost leverage? My sense is Mnuchin either hasn't been straight with him (sure bob, we think you're solution is great) or Mnuchin has decided that he can gain political capital by giving into any corker/warner legislation for areas with more public visibility - healthcare and tax reform - which will have more importance in determining Mnuchins legacy in the eyes of the public. Could make an argument that his incentives (maybe guided by trump) are to give in to housing reform and use that capital to gain votes on tax reform/healthcare.

Still concerned about any settlements which ultimately only benefit plaintiffs. Scenario where shareholders are wiped but subsequent wins occur (for instance, in SCOTUS) whereby a settlement occurs leaving retail shareholders with nothing. Probably a non event but I'm totally an amateur from a legal perspective

This is a good point and one that I think those bearish on Fannie/Freddie due to a bad law being passed are overlooking/discounting. If any legislation that makes its way through Congress wouldn't protect tax payers and prevent future bailouts, in the eyes of Mnuchin, then he'd likely put a stop to it before it became law. I wonder what Putin's position on the affordable 30 yr fixed for Americans is? :D

And another (very improbable outcome here) question: If the shares get wiped through some administrative change, and Fairholme wins a SCOTUS trial, does Fairholme's get paid? Do all shareholders at "bankruptcy" get paid?

Has anyone done an analysis to determine the likelihood of negative legislation passing each layer of the government? - Likelihood of successful voting in the House Financial Services Committee - Likelihood of successful voting in the House (simple majority)? - Likelihood of successful voting in the Senate (simple majority)? I guess the backstop to all of this is Mnuchin. I'm assuming this is like any new legislation which goes to the White House and would allow Trump (Mnuchin) to veto?

Hadn't watched this in a while. It is an excellent talk! This was the catalyst for me to start seriously considering the preferreds. Ultimately it comes down to his comments around the 25:10 mark in the video regarding "I believe there is no viable alternative...". We'll see how it ends.

Literally every news outlet. Here's the Journal: https://www.wsj.com/articles/house-set-to-pass-bill-rolling-back-wall-street-rules-1496914205 But hey, I'm sure you know more about the chances of the bill passing through the Senate in its current form than the author and main proponent of the bill. You should send Hensarling a note. Let him know everything is fine. I don't know more, but when you compare my level of inside knowledge (zip) to MSM's deliberate attempts to undermine this administration, with apparently all information they have at their disposal reported opposite of truth, mine rules. They will always report failure. I, on the other hand, look at the GOP votes and see smooth sailing. Bet that's the case too. You're quite literally out of your mind.

8)

confident of nothing Hah. Same.

@cherz So you're confident that corker/warner proposals are an impossibility given current state of affairs and requirements for future capital buffers? And if so, the only true risk is timing/recap being kicked down the road

There's just so many unknown future possibilities. To take what I mean to an extreme, why not cut a deal with large banks + Berkshire Hathaway to privately recapitalize and insure downside? He's friends with berkowitz, but he also likely has many friends in Wall Street. Not saying it's going to happen, but I just don't see how you can be confident in the outcome of where this is headed without the legal cases providing margin of safety/floor on the share prices.

The senior preferreds will obviously be cancelled. It's a matter of what the post-reformed GSE structure looks like and how it is capitalized. There is a strong argument from very smart people working on the assumption that there is no new capital without treating the old capital fairly. I'm just not convinced. If you believe this to be systemically true, without a doubt, with 100% certainty, these junior preferreds are a good bet.

@cherzeca To play devils advocate, do you foresee any risk that MBA proposals and Corker/Warner get what they want and hand over the business to TBTF banks? Or you are saying it's a systemic impossibility due to the $100bn capital hole as you describe it. And if it is a systemic impossibility, have you put your entire net worth into the preferred shares? Seems like a home run to me.