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it's not equity capital. it is however often Tier 2 capital (total capital ratios) and included in TLAC, total loss absorbing capacity. it can be used as an additional layer of protection on top of equity capital and before the untouchables (govt bailout, senior debt, mbs debt, deposits, etc).

yes on CRT as that probably impacted the stress test results which likely is a factor in the required capital levels. Another factor is the breakdown between common equity, preferred equity, and subordinated debt. while Calabria perhaps prefers ~4pct total loss absorbing capacity it can be more manageable to mortgage rates if he throws some portion (1-2pp) into the latter 2 categories which carry lower required rates of return for investors.

4-handle = not good. ~5x stress credit losses, hard working Americans pay higher mortgage rates. large blowback likely. can't rule it out though. imo we're rooting for near the same end levels as watt but using more refined inputs / rationale.

Is there any rational / honorable reason why Calabria argues in court that the NWS via APA (Collins etc) was legal given his prior documented clear stance to the contrary? certainly I understand why he fights the constitutional angle.

Why? Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount. many reasons. there is still geniune hope to work with congress and so their opinions matters a small bit at least. whether fair or not there is a visible conflict regarding paulson and his admin relationship. mnuchin's responses and tone today suggests a serious negotiating posture. and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along. This was one democratic rep who wants to wipe out shareholders. Yawn the market's not yawning with some jr pref @ 40pct of par. Even with all of the justifications offered, the market is clearly saying -- despite the en banc ruling and a major pause in the sweep -- that the potential upside target price during this administration is somewhere below par.

Why? Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount. many reasons. there is still geniune hope to work with congress and so their opinions matters a small bit at least. whether fair or not there is a visible conflict regarding paulson and his admin relationship. mnuchin's responses and tone today suggests a serious negotiating posture. and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along.

imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

is the official deadline for the government to appeal the Collins APA decision to the Supreme Court next week or 90 days from the en banc ruling?

From what I can tell, I'm not rooting for the SC to take our case, even though I understand why it was filed. imo it's the least compelling of the stools we're counting on on: administrative settlement / solution, APA claim (collins), damages from lamberth / sweeney, and constitutional. if the FHFA structure is unconstitutional, fine, but it appears too easy to just apply forward relief; backwards looking, it seems arbitrary to say some decisions were fine but some deserve compensation. also, it could delay everything as everyone waits until june 2020.

45pct of par after the good recent news -- wow, I guess rather than feel frustrated I should feel grateful about where the security prices would be otherwise.

at this late stage with no news, the sweep is very likely going through. any guesses on whether this is a technical delay -- they wanted 1 more from 2q earnings -- or something more problematic like a change in direction from any recent news on the legal or political front? thank you.

if the SC takes this case, they would likely take the APA claim at the same time also.? that could lead to complacency and delay on any prior admin action until next summer (or never) after the court rules?

for what appears to be a simple exercise, they are taking their time, making us sweat. or punting again.

muscleman, good luck. we'll likely need it against the media, big bank team, selected politicians, and unexpected events -- it's rarely comfortable in this pool.

thanks for the legal answers allnatural and cherzeca. the list of things that could go wrong from here is unfortunately still long. that's why the shares are @ 50pct of par, no free $ out there. every day plenty of smart people wake up and decide its a great day to sell FnF securities.

the lawyer mentioned the lamberth case legal $ liability fell to the companies. he did not clarify on the sweeney cases. perhaps the liability to those are to the Tsy/govt?

at this point it's head-spinning to follow calabria's public commentary. it's unfortunate because his potential is so high given his skills. there is some chance however all the misdirection is on purpose with them either trying to manage the stock prices on a short term basis or buy time to adjust their potential plan.

settling the damages cases in lamberth and Sweeney sounds quite hard. is the Sweeney case similar to the lamberth one where any damages are paid by the companies, or is the target the Tsy? if it's the latter, I don't see why the Sweeney cases need settlement as part of this process. thank you.

if they need $100bn+, it would likely take more than 12 months of retained earnings plus 1 re-IPO to reach that number; there's a limit to how much IPO money can be confidently assumed to be raised. perhaps, and mnuchin has mentioned, an intermediate private capital round is potentially necessary in whatever theoretical plan they are working off of. I agree the plaintiffs ideally should be firm but not greedy in any potential settlement negotiation.

we will see but ideally the purpose of mnuchin's commentary to olick on CNBCTV about appealing Collins to the supreme court was a warning shot to the plaintiffs to avoid unnecessary greed in any potential negotiations.

It's important, imo, that if things do ever reach settlement discussions, that the plaintiffs resist any potential urge for excess greed.

both parties will seek writ of certiorari from SCOTUS. Ps lost relief on const claim 7-9 so it will want to have SCOTUS hear this, and fhfa will want to have SCOTUS hear both claims. I expect SCOTUS to grant cert on both claims. if it does, then the 5th C decision is held in abeyance pending SCOTUS determination. if SCOTUS doesn't grant cert, then it is unclear whether fhfa director is removable only for cause (circuit split), and the DCt holds a trial on Ps alleged facts on the APA claim ok, thanks. not good. waiting til may/june for a sc ruling puts too many eggs in 1 basket too late in the presidential term.

cherzeca, last ones please (i think):? what's the next step if no settlement - back to circuit court or govt appeal en banc to supreme court? if it goes back to circuit court, does it matter adversely to us that the judge is Clinton democrat? thank you

@IG Ps win on law. however in a trial, there are facts that need to be presented. one gets summary judgment only if there are no facts that could be presented which would justify the NWS under the law as enunciated by this opinion. I still haven't finished the opinion, but based on what I read so far, it is very hard to see how Ps could lose at trial. but you are correct, this decision did not in and of itself vacate the NWS edit: put another way, the DCt said that taking the Ps factual allegations as true, Ps lose. en banc majority essentially says taking Ps factually allegations as true Ps win. now are Ps factually allegations true? that is for the DCt to decide on remand. thank you. one more, please - unless the constitutional side is appealed and overturned at the supreme court, Calabria could / would get kicked out in jan2021 if a democrat wins the election? who the F knows. there is a split in the circuits...DC circuit upheld removable for cause en banc after a merits opinion invalidating it written by.....then judge kavaugh ok, thanks. seems like supreme court will need to decide this area whether the prez can fire the fhfa head for any reason.

@IG Ps win on law. however in a trial, there are facts that need to be presented. one gets summary judgment only if there are no facts that could be presented which would justify the NWS under the law as enunciated by this opinion. I still haven't finished the opinion, but based on what I read so far, it is very hard to see how Ps could lose at trial. but you are correct, this decision did not in and of itself vacate the NWS edit: put another way, the DCt said that taking the Ps factual allegations as true, Ps lose. en banc majority essentially says taking Ps factually allegations as true Ps win. now are Ps factually allegations true? that is for the DCt to decide on remand. thank you. one more, please - unless the constitutional side is appealed and overturned at the supreme court, Calabria could / would get kicked out in jan2021 if a democrat wins the election?