SnarkyPuppy

Phillips is speaking today at a conference. Parrot is also speaking at the same conference. https://mobile.imn.org/conference/Credit-Risk-Transfer-Symposium-2017

concur

The Trump administration and a bipartisan group of U.S. senators are working to address an issue that has gone unresolved for nearly a decade: how to overhaul Fannie Mae and Freddie Mac, the mortgage-finance giants the government took over in 2008. The Senate Banking Committee has begun behind-the-scenes work on the issue of how, exactly, to revamp the companies. The senators want to develop a framework to decrease the government’s outsize role backstopping the nation’s $10 trillion mortgage market. On Thursday, the panel will hear testimony from Mel Watt, the director of the Federal Housing Finance Agency, which controls Fannie and Freddie, in the first step of a process that could play out in the coming months. It remains unclear if policy makers can overcome philosophical differences and hammer out a final deal. Conservative Republicans have called for a private market with no new federal guarantees. Some centrist Republicans and many Democrats have said a federal role is needed to preserve liquid markets for the popular 30-year fixed-rate mortgage that drives home buying. The Trump administration’s publicly stated desire to jump-start an overhaul is giving a boost to Senate lawmakers, who aim to advance a bipartisan plan to revamp the companies later this year, according to Senate aides and advocates who want to see the companies weaned off government control. Senate Democrats have told their Republican colleagues that a Fannie and Freddie overhaul would garner much more bipartisan support than other GOP priorities, such as rollbacks to Dodd-Frank law financial regulations, these aides said. “Unlike some other issues that are on Congress’s plate right now, this topic has a relatively robust recent history of bipartisan work,” said Jim Parrott, a former Obama administration housing adviser. The rekindled legislative effort involves work by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.), whose staff have acknowledged that earlier, failed efforts to overhaul the companies during the Obama administration were unduly complicated, people familiar with the matter said. Their earlier plan, drafted in 2013, would have replaced Fannie and Freddie within five years with a new “public guarantor.” Trump administration officials and Senate Banking Committee Chairman Mike Crapo (R., Idaho) have made an overhaul a priority. “I’m committed to housing reform and we are committed to not leave them as is for the next four years,” Treasury Secretary Steven Mnuchin said on Fox Business Network last week. Mr. Crapo said in April he is “pretty optimistic” he can advance a bipartisan plan. The White House hasn’t advanced any proposal of its own. Craig Phillips, a deputy of Mr. Mnuchin’s, may shed some light on the administration’s preferred approach as early as next week, when he is scheduled to address the issue publicly for the first time in New York. Fannie and Freddie play critical roles maintaining the plumbing of the U.S. mortgage market. They purchase loans from lenders and repackage them as securities that are insured if the loans default. The firms’ regulator seized the companies through a process known as conservatorship during the George W. Bush administration, and the Treasury Department agreed to inject vast sums to support some $5 trillion in debt securities issued by the companies. The companies have thin capital reserves under the terms of their 2008 government-backstop agreements. And they are required to send most of their profits to Treasury in exchange for some $258 billion in potential ongoing government support. At Thursday’s hearing, Mr. Watt is expected to say his agency may need to change the terms of those agreements to allow the companies to retain earnings rather than to continue sending them to Treasury. Such a move would aim to avoid the possibility of another taxpayer-funded infusion triggered by possible future losses at the firms, he plans to say. “We cannot risk the loss of investor confidence,” he is expected to say, according to an advance copy of his remarks reviewed by The Wall Street Journal. “FHFA’s actions would be taken solely to avoid a draw during conservatorship.” Still, he is expected to stress Congress should decide the future of the housing finance system, not the FHFA. Any steps by the FHFA to allow the companies to retain earnings shouldn’t be construed as supporting a “recap and release,” or a simple recapitalization of the companies followed by releasing them from government control, Mr. Watt is expected to say. While bipartisan legislation potentially could advance through the Senate Banking Committee later this year, the outlook becomes muddy after that. It is unclear if Senate Republican leadership will devote time to the issue on the floor this year, amid competing priorities such as a tax overhaul and health care. Another uncertainty is what would happen in the House. House Financial Services Committee Chairman Jeb Hensarling (R., Texas), who has repeatedly called for liquidating Fannie and Freddie, may not be willing to compromise on that goal. That could put the House at odds with any Senate-approved legislation, which is likely to maintain some role for the government in the mortgage market. “It’s deplorable that the GSE’s are still in conservatorship for nearly 10 years without legislative action, but it’s still highly unlikely this Congress is going to act given the already overloaded agenda and a lack of urgency regarding the issue,” said Isaac Boltansky, an analyst with Compass Point Research & Trading.

lol.

Why did you post the chart? There's no after hours trading.

http://mobile.reuters.com/article/idUSKBN18633I

Some parallels to the Zinc saga where Pabrai was involved and had a relationship with management, so everyone assumed that he had some particular insight into what would happen. Turns out he was totally in the dark, didn't want to sell because of filing requirements, and got wiped out.

Could you please show me the Paulson filings? I don't have it immediately available, but I believe I saw it in Jim Hodges twitter feed. Can you to dig later if you can't find.

Very curious if some of you can humor me- If Berkowitz, Paulson (I think he only holds a small position now, saw a recent fund filing and it was 3% of the specific fund), and Ackman were not in this investment, would you still be holding the preferreds? There is no question that it's an input into my decision to hold.

read tim howard's blog. he basically pooh poohs the whole report The problem TH has is that he does not manage trillions (literally) like Larry Fink does. You also have to read his blog with a grain of salt. He owns stock from his time as an executive. I'm not saying he's dishonest, but it's important to always understand incentives.

"Ultimately, private capital in the mortgage market requires a transparent process that provides certainty and respect for the rights of investors, both in the current framework and in any transition to a future system." ? I interpret the language in the Blackrock proposal as discussing MBS investors, not GSE equity investors.

Amazing the action on the preferreds past couple of days. Mr. Market reacting exactly the opposite of how I would have guessed based on Monday mornings comments on Fox.

They won't have any problems getting capital. It would simply be priced appropriately at a discount rate commensurate with a high risk investment. The "rule of law" argument has failed miserably to date.

Agreed. But keep in mind the Administration does have the documents that might connect the dots. If there is one from the last administration that says something to the effect of "we need to take this from Fannie to pay for Obamacare or it will die" then that would be enough, in the court of public opinion at least, to say Fannie paid directly for Obamacare. From an accounting standpoint, and I'm a former accountant, money is fungible of course. I know Corsi is a whack job, but he mentioned that the White House told him that Obamacare paid for with Fannie money. This was well after Trump had been in office and had access to the documents. Trump was also more direct yesterday in his tweet where he said "Obamacare is dead..." In the past he has said "It will die..." "it is going to die...", etc. He knew about what was to be discussed in this morning's interview before it aired. Too much dot-connecting can be detrimental at times, but it seems prudent in this case. And it's kind of fun. :-) I can't believe the market is offering prefs at roughly 30% of par value in this environment... pretty amazing deal if you ask me. What are your opinions on Craig Phillips?

I think this is good news, right? 8) Mnuchin: "Obama Admin used Fannie, Freddie profits to pay for other parts of govt while keeping taxpayers at risk"

This continues to worry me. Receivership -> create new legal entity ala MBA proposal. Seems this Craig Phillips is not the best person to be in charge.

https://www.bloomberg.com/news/articles/2017-04-27/fannie-and-freddie-back-in-the-black "In the middle of the debate is Mel Watt, the Obama appointee who heads the FHFA and essentially controls Fannie and Freddie. Watt has the authority to order the companies’ boards of directors to suspend the dividend payments. He came close to doing so at the end of March, just before Fannie and Freddie’s last payment was due, according to people familiar with the matter. A group of senators wrote Watt a letter that week, warning him against stopping payment, and Watt decided to make it." and "Mnuchin put one of his counselors, Craig Phillips, in charge of the situation. In meetings, Phillips has floated ideas as wide-ranging as putting the companies into receivership, which could wipe out investors, as well as legislation to replace or supplement them with a new system, according to people familiar with the matter. Clarity on what the administration wants to do could be a long way off."

https://www.icba.org/news-events/latest-news/2017/04/19/media-advisory-icba-capital-summit-may-1---3

At this point, I think it's fairly obvious one of two things are going to happen (assuming the legal side of things continues to yield negative results): 1. Recapitalize & release the GSE's as is, but with capital requirements much greater than in the past. In this scenario, two likely outcomes: Preferreds trade at par +/- dividend yield, less time value for recapitalization period, or Preferreds are converted into common shares at favorable multiples (ala Citi deal) or 2. GSE reform occurs whereby the government guarantee becomes explicit (supported by an FDIC-like federal insurance fund), with provisions to allow FHFA to charter new guarantors/competition (as proposed by Mortgage Banks Association). Fannie and Freddie released under new charters - two likely outcomes: Rechartered FNMA/FMCC where legal structure is maintained. FNMA and FMCC re-emerge with some mix of capital requirements -> recapitalization, credit risk transfer, a 'federal insurance fund', and additional guarantors entered into the market for competition (all consistent with MBA's proposals - https://www.mba.org/Documents/Policy/17305_MBA_GSE_Reform_Paper.pdf). Preferreds trade at par +/- dividend yield, less time value for recap/reform period or Preferreds are converted into common shares at favorable multiples (ala Citi deal). Rechartered successors to FNMA/FMCC (language used in the MBA proposal) are established as new legal entities. Current capital structure is wiped out and a new set of GSE's emerge. This is the likely downside scenario. Also, in this scenario, there remains a potential decision by the government to respect the Preferreds liquidation preference in order to effect a clean break from conservatorship (i.e. end litigation). There are $33bn junior preferred outstanding at par. I believe the above options are all consistent with Mnuchin's statements and statements made by other individuals within the government who have spoken directly about the GSE's.

25:47

http://video.cnbc.com.ln.is/mnafG

I don't think anyone disagrees that mortgage reform is going to come sooner rather than later. The issue is whether or not some private resolution which excludes current shareholders is implemented. My biggest concern has always been mnuchin having some creative and complicated reform to restructuring how private mortgage insurance would work. Of course he'd have to screw over Berkowitz and Paulson as well.

... game set match?? are you joking? the roadblock to a fair outcome is far more likely coming from congress (direct and indirect as it relates to other agenda items) than from fhfa. if I had to bet, mnuchin and watt get along fine. if trump's approval rating was 60pct instead of 40pct, likely there would be more aggressive actions to change things. (this dynamic is also most likely why the HC bill failed, his popularity isn't high enough to allow him to get what the admin prefers). I thought everyone was in agreement Congress wasn't required for Tsy to act in a way favorable to shareholders. This filing seems to be explicitly a very positive sign - why is this wrong?

... game set match??

Opinions like yours puzzle me. For one it implies the same reasoning with these men as to why the govt will screw us - they're all unscrupulous and have zero constitutional or righteous bearing. They're all in for themselves. Two, the conviction should be that, since nothing similar to this taking, on this scale anyway, has ever been perpetrated by a US Govt, it's not gonna happen this time either, regardless of support, or lack of, from Berk, Paulson, Mnuchin and Trump. All they mean to the big picture is a presumably faster resolution, which is convenient and all, but in the end the same result will be had. I've been accumulating for 4 years. I wish I was a great trader but I'm not so they all sit in my accounts. Going nowhere. What do you make of the recent Perry ruling?