tthompson
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Posts posted by tthompson
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how is everyone thinking about the election's impact on GSE securities? my take is below.
the better Democrats do in Congress, the better
for president, it's not completely clear but I think trump is more constructive: a) greater chance for settlement in Nov/Dec since Hillary cant pardon, if needed b) greater chance for an announcement to build capital starting in Nov/Dec to help protect the GSEs (I don't think Obama will recap or release, those are too big of moves to make in a lame duck setting) c) he has some advisers who are pro-GSE and d) he's a businessman and will likely want to monetize the $150bn+ warrant value
anyone have strong views?
Sherrod Brown is the ranking Democrat in Senate Banking, so he is in line to become chair if the Dems win the Senate. That's huge, he's one of our biggest allies. It would also castrate Sen. Shelby, current chair and man behind the "gov can't sell its shares without congress" rider in the omnibus spending bill, who is our second or third biggest enemy.
In the House, Maxine Waters is the ranking dem on House Financial Services. If by some miracle the dems took the house, she'd be chair. She too is one of the GSEs biggest allies.
Even with only Senate Banking under control, this essentially eliminates the possibility of legislation winding down the GSEs. The concern at that point, as far as the shareholders go, would be that they go the opposite direction and effectively nationalize. That would be very hard to do given the size of the balance sheets and the absolute uprising there would be from congressional republicans, but if they were able to pull it off, I think they'd basically have to buy out the prefs. The commons don't have nearly as bright a future in that scenario.
However, assuming Hillary wins, it's very likely that her administration (Treasury and her economic staff) would be very anti-GSE. Larry Summers, Gene Sperling, etc.
Don't underestimate how much political resistance there will be to restoring them even if the dems are in charge. The system really was pretty screwed up, and few people want to see the kind of corruption that was going on come back. With a government guarantee as the basis for your business model comes the need to PROTECT that guarantee, and the only way to do that is lobbying and playing politics. No one in congress wants F&F to start that up again.
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The text of the Mulvaney bill is finally here. It’s available at https://www.congress.gov/bill/114th-congress/house-bill/4913/text
Key sections:
"(1) DEEMED REPAYMENT IN FULL.—Effective on the date of the date of the enactment of this Act, the liquidation preference on the Variable Liquidation Preference Senior Preferred Stocks of each enterprise is reduced to zero."
“(e) Termination Of Conservatorships.—The Director shall terminate the conservatorship of an enterprise under section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617) at such time that the enterprise attains, as determined by the Director, an amount of capital that is equal to or exceeds 5 percent of the risk-weighted assets of the enterprise.”
“(4) RISK-WEIGHTED.—The term “risk-weighted” means, with respect to the assets of an enterprise, that the amount of any such assets that are single family housing mortgages meeting the requirements of section 618(a)(1)(B) of the Resolution Trust Corporation, Refinancing, Restructuring, and Improvement Act of 1991 (12 U.S.C. 1831n note) are calculated using a risk-weighting of 50 percent, in the same manner required under subsection (a)(1)(A) of such section 618 with respect to single family housing loans.”
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On the right, Boston. Small world!
I just hope we can rely on Brown's ideology. I really got the feeling that Millett was looking for holes in Olsen, and was quite a bit lighter on the government.
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I was the guy in the grey suit in the front left row. I think we had this conversation there lol. I have the exact same read, except I lean toward Millett being more likely to go against us.
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Merkhet, were you in the court room or the press room?
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Welp the event was called off due to protests demanding principal reductions. So much for that. I did find out that Mel looks amazing for his age, but there wasn't more than one minute of discussion.
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I'll be at the Mel Watt discussion tomorrow, so I'll let you guys know how that goes. It is apparently open to the public if any of you are in the Boston area and would like to attend. It will be in Milstein East A, Wasserstein Clinical Building (aka WCC), and it will be at 5 PM according to the events office at the University.
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Jacobs stuck out like a sore thumb in that group. Reads to me like Defendants are worried and thus delaying.
Personally I think that any further delay should be tied to the salaries of the defendants....I bet you either get people walking of the job or this gets done mighty fast.
Perhaps at a variable rate! You could make it equal to their entire net income each year, and an increasing share of their entire net worth until it hits zero after 5 years.
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Bethany McLean has a great (long) piece out in Washington Monthly. One of the pieces being promoted in the print edition.
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
Posted
The link goes through to Brown's .gov site directly. You can type it in yourself: brown.senate.gov/download/mnuchin-letter-
I think it's legit.
Cherzeca, yeah, he's a major ally. Maybe he's thinking better to get it out in the open from a friend before he gets ambushed with it by an enemy in the confirmation hearing? Or it could be that dem loyalty is outweighing his interest in fnf.