SnarkyPuppy

Too late. If we were placed in receivership the preferreds would be pennies and I wouldn't be here. But we weren't and there's no cause now. Other than that, pretty optimistic stuff. The word is getting out how wrong this is. In receivership, the liquidation preference of the preferred shares gets triggered. :) I still hold a substantial position because I think the preferreds will be made whole, but there's too many unknown unknown's right now in my humble (and probably wrong) opinion.

Mixed bag. 1st link is super negative for us. It's from 11/2012 (relatively new into the profit-era). Excerpts: "U]nder a receivership, the GSEs can continue to be run — that is, the regulator, FHFA, can still issue debt, buy mortgages and do everything else the GSEs currently do." "The law is quite clear. FHFA would continue to run the GSEs, with the option of a good/bad bank model to resolve bad assets, and the only way FHFA can terminate the receivership is to sell the charters back into the marketplace (see Section 1367(i)(6)© Termination of status as limited-life regulated entity)." "So let’s get the facts straight. Receivership would not end the GSEs. The fundamental difference between receivership and the current conservatorship is the ability to impose losses on creditors. " 2nd link is mixed. "Take away Fannie and Freddie’s capital arbitrage and set their equity capital requirements in line with other financial institutions of similar size. Equity of at least 5 percent of total assets should be their required leverage capital ratio." "Open up their charters to competition just like banking charters. End their exclusive duopoly privileges. " 3rd link is bullish IMO (co-written by Michael Krimminger and Mark Calabria) 1/2015. Some excerpts below: "While shareholders and other stakeholders typically suffer losses under these laws when a company or bank fails, the amount of those losses is determined in a fair and predictable process with rights to contest any disputed decisions. This is fundamental to an accurate evaluation of the risks and rewards of investing in or doing business with a company or bank. If stakeholders, including shareholders, cannot reliably recover their share of the value of the failed company, future investors and vendors will require higher premiums on investments and higher prices on goods and services to protect themselves against the resulting uncertainty. This will increase the costs of doing business and significantly reduce the ability of the U.S. economy to serve the needs of businesses and all Americans. A chief reason many other countries struggle to achieve their economic potential is precisely because they lack a predictable rule of law." "However, as implemented by Treasury and FHFA, the Companies’ conservatorships serve principally as the instruments for government management of national mortgage policy and enrichment for Treasury. The Companies remain the principal sources of liquidity to the U.S. mortgage industry and the dominant secondary mortgage market companies through their issuance of guaranteed mortgage-backed securities, and have produced billions of dollars of new value. Despite having been repaid far more than it injected into the Companies, Treasury has ignored the creditor protections required under HERA or, for bank shareholders and other stakeholders, under the FDIA by using the conservatorships to strip all value from the shareholders, rather than complying with the HERA requirement that it "preserve and conserve" the Companies for the benefit of all stakeholders. In addition to violating the fundamental element of creditor protection required by statute and the principles underlying all insolvency laws, Treasury has consciously prevented accumulation of any buffer against future losses - thereby ensuring that taxpayers will again bear the risks. Treasury has purposefully refused to return the Companies to a "sound and solvent" condition as required by HERA. In internal documents, Treasury officials have expressly stated that Treasury will not allow the rehabilitation of the Companies or any return of value to the stakeholders. " "Importantly, under the PSPAs, Treasury’s senior preferred stock could be redeemed if its liquidation preference was paid down with interest. While the PSPAs were certainly dilutive of the existing shareholders’ interests in the Companies, the fact that such privately held shares continued to exist in companies that continued to operate and generate substantial cash flows implied a continued right to recovery and were consistent with a potential return to full private control. In addition, despite the dilutive effect of the PSPAs, both Treasury and FHFA explicitly emphasized that there was no nationalization and that the rights of stakeholders would be protected. For example, then-Treasury Secretary Paulson explained that “conservatorship does not eliminate the outstanding preferred stock.” FHFA also confirmed that the “s]tockholders will continue to retain all rights in the stock’s financial worth; as such worth is determined by the market.” "Second, shareholders and other stakeholders were to incur losses consistent with their protection under bank insolvency statutes. The value of the bank was not stripped by the FDIC. The FDIC recognized that the shareholders were to be diluted, but only to the extent of the assistance actually provided by the FDIC. If the assisted bank returned to profitability, that was success, and after the repayment of the FDIC's assistance all future value would inure to the benefit of the shareholders. "

I think if we're all being honest, without Berkowitz (and potentially Paulson's) investment(s) and connections to Mnuchin and/or Trump, there would be almost no conviction. I've sold off ~50% of my position.

Yes, basically. Except it's the breach of implied covenant for the dividends and not the breach of K for liquidation preference. I hold preferred shares purely because of the political / rational solution which seems inevitable. But am I reading you correctly that you believe the appeals decision in aggregate was a net positive for pref holders?

I have a relatively concentrated position (won't go into detail why). I was OK with holding it through the run-up given the fact that I thought there was a floor on the stock- If Mnuchin failed, we still had the courts. if the courts failed, we still had Mnuchin. Therefore, there was a margin of safety on the stock price. We don't have that anymore. It's a difficult decision.

I've have orders ready to sell half my position every day of this week. Might pull the trigger today but it's a tough choice

Is anyone not concerned about the fact that Hensalring openly supported mnuchin + mnuchin pointed out specifically that he has met w Henslaring re: FNMA? "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."

Yes, again I agree it's a ridiculous website. And I wouldn't even think about responding to the person that originally posted it if Jerome Corsi didn't have White House press credentials. But he does (as of 3 weeks ago). So he is going to risk losing those credentials by immediately reporting falsely that he received info from the White House? Couple that with the 11,000 docs hitting Trump's desk recently. Add to it that the leaked info is something that has been discussed previously by those following the situation closely. Fair point. Definitely respect your views and I personally think you've added a lot to this thread. I just think when tensions are high we can all tend to exaggerate reality. It would be wonderful if this had happened - I just am skeptical for what I think is good reason. Will watch closely.

I think you're missing the point of why a White House leak is important. InfoWars is crazy, nobody is disputing that. The point is that quote that the White House has been leaking info to news outlets about Fannie profits being used to fund Obamacare. That's the big deal. If the White House is doing that (getting the stolen money narrative into the media...even if it's crazy media) then do we think they would also continue to accept stolen money from the GSE's? It doesn't matter if the White House is leaking to InfoWars, Fox News, CNN, or my barber. What does matter is the intent behind those leaks and that is a big deal. Capiche? That point is very clear to me - hence my comment that if it's true it's material. My point is that your source that the "White House is leaking info" is a ridiculous website which lacks any integrity and blatantly makes up absurd information on a whim (and any rational observer would concoude this is more than likely the case here). Capiche? Here's another piece infowars reported on, with evidence: "While the subjects of extraterrestrials and UFO’s is not something Infowars discusses (unless of course when David Icke is on the show and talks about the Reptilian Archons), I believe that ignoring the alien/UFO issue is quite asinine since there is a lot of evidence to show aliens are in contact with Earth and that is obviously of HUGE PREACTICAL SIGNIFICANCE! And with that being said, I would like to present some of the evidence to back this up, and probably the most shocking thing about this is that it shows that humans are neutral pawns in an extraterrestrial battle" http://planet.infowars.com/offbeat/the-evidence-shows-that-humans-are-neutral-paws-in-a-cosmic-battle-of-nordic-aliens-vs-reptilians Obviously I hope I'm wrong, but I think it is a disservice to our objective to put on any more tin foil hats than we already are wearing.

The infowars article and related videos are so poorly put together, they reference a May 2016 court decision as the catalyst for the implementation of the net worth sweep.

if you read the blog post link from schwab's post above and you read the executive summary of the joint congressional investigative report into the source of funding for the aca's cost sharing reduction program (the link is in the blog post) which talks about an investigation of treasury and HHS where the Obama admin did not cooperate then can anyone say for sure that FnF sweeps didn't pay for aca cost over-runs? Can you say for sure that they did?

I agree, he's a whack job. The 5 minutes I watched was the longest I've ever watched of the show. I hesitated big time posting this for that reason, but it's important to know if it turns out to be true. Reasons to think it might be true? Well, the theory that the 11,000 docs contained information connecting funding Obamacare with Fannie/Freddie profits has been talked about for a long time now... so it's not a new theory being pulled out of thin air. I wouldn't be surprised if Trump is leaking some of this info now that he has access to the 11,000 docs. Guess the AP wasn't given anything - https://www.washingtonpost.com/opinions/the-demise-we-hope-of-an-ugly-lawsuit/2017/02/27/b0e34b0e-fa02-11e6-9845-576c69081518_story.html?utm_term=.781f63d95a6e Also, http://www.infowars.com/hillary-caught-on-tape-birthing-alien-life-form/ Can we come back to reality now? Or should we keep relying on random internet warriors like Adam Splitter because his twitter handle says he has a "CPA/MS" -_-

Can't believe we are quoting infowars on this site but I have to admit it's a good link. Too early to tell but this could be part of the narrative shift. I would watch for this to appear on breitbart. Doubt it's true, but... Check out @JohnDee78791547's Tweet: Trump friend, and InfoWars writer Jerome Corsi, has been receiving info from WH regarding theft of GSEs marked for ObamaCare #Fanniegate http://www.infowars.com/watch-alex-jones-show/ Look around 4 hour 55 minute point and that's where it starts. It claims that "the White House has been alerting other media in the last 3 days... White House saying 'hey, look at this!'... It's some heavy reading." I watched 3 minutes of that video and the guy is a raging lunatic. I hope he's right, but that's my bias. Rational viewers would probably regard this as utter nonsense

Can't believe we are quoting infowars on this site but I have to admit it's a good link. Too early to tell but this could be part of the narrative shift. I would watch for this to appear on breitbart. Doubt it's true, but... Check out @JohnDee78791547's Tweet: Trump friend, and InfoWars writer Jerome Corsi, has been receiving info from WH regarding theft of GSEs marked for ObamaCare #Fanniegate -_- where is this reported?

The article is confusing in trying to link May 2016 to the net worth sweep which occurred in 2012. Did anyone else pick up on this?

Serious question- is anyone aware of how much of FNMA/FMCC Tim Howard owns (he must still own some from his tenure as CFO - he probably was crushed in 2008). Trying to understand incentives here.

A strong element of the thesis is that there is no viable alternative. If you throw this out the window, this 'investment' is even more speculative.

Buffett commentary this morning on GSEs: http://video.cnbc.com/gallery/?video=3000596553&play=1

Not bad. Simple expected value dictates that it's +EV at ~17% chance they go to par. But once again, you only get one coin flip.

Emily he is just being snarky. There is no such forum. No one can give you the answer to those questions Investing is an imperfect game of probabilities Make sure you hold preferred shares over common. The breech of contract claims are alive and as Hamish Hume has said this was always all about breeech of contract. The probability of a zero on the preferred shares is likely low There is just a very wide range of outcomes right now I strongly disagree that the probability of a zero on the preferred shares being "likely low". I still think that risk-adjusted, at 3-4x upside to par the preferreds may be a decent GAMBLE, but unfortunately you only get one coin flip here.

Let me know if you find the alpha forum

I think it's necessary to comment on this - while some are confident of the inevitable outcome, there is absolutely a very real chance of 100% loss subject to the whims of a few men in our government. I only have "play" money in this - I personally would not put any money I needed into this.

Mnuchin is apparently on Fox at 10am EST. My guess is this was pre-recorded on Thursday after then live interview but not positive

because they need to raise 75-100bn of equity and preferred only gets 20bn = big hole. therefore, it's essential to clarify the terms which is the likely scenario. the lack of respect for mnuchin and cohn's deal expertise is surprising to me -- these guys are animals to have climbed to the top at GS. Quite the opposite. Their expertise and ability to creatively arrive at a solution that I am not capable of thinking of that a) benefits taxpayers b) helps his buddies c) screws me is exactly why I'm considering selling.

The only reason I haven't sold is because of Mnuchin's connection to Berkowitz and Paulson (questionable whether he still owns). And if I'm being honest, it's hard to assess how strong of a relationship Mnuchin has with Berkowitz and it's impossible to know whether Paulson still owns anything. Further, while some have argued against this, I'm not comfortable that some form of large plaintiff settlement could potentially happen, leaving retail shareholders with the bag. Very strongly leaning towards selling, but this is of course very difficult given the fact that it's so obvious that he will simply convert the junior prefs, increase warrant strike, recap through a rights offering + retained earnings. But the idea of trying to figure out all potential negative actions is a hurdle I'm having trouble jumping over. Additionally, seems likely there will be a writedown in the DTAs causing another draw based on Mnuchin's timeline discussed yesterday. Because of the language in Corkers omnibus preventing effectively any modification of the SPSA (likely inclusive of the NWS), it's not entirely clear whether the NWS can be amended through a 4th amendment (I understand that the consensus on this board is that it can, but I'm not comfortable).