investorG

hello cherzeca, what is the rationale for offering a remand (what we apparently received) vs a full reversal where the en banc decides the nws is illegal? thank you

Well, maybe. But the stock going down is quite expected. I said yesterday "Today's GSE treasury plan is like when the market is expecting a high growth stock with no earnings to report a 200% revenue growth but it only reported a 190% growth." Whenever that happens, the stock goes down on a disappointing quarter. No difference here. good point muscleman. not long until the next scheduled observation point on Tuesday. they know their words, urgencies, priorities will probably impact the stock prices, and will likely want to either entrench this preferred selloff or refute it.

I was wondering why the preferreds were trading down this AM. and then I saw the Bloomberg article from early this AM (search for 'fannie' on Bloomberg.com). wow they are intent on fighting this with all they have, that headline certainly can scare away marginal people.

If you are a FnF operational purist or a common shareholder expecting a windfall, the report is a disappointment imo. the democrats will likely complain. not sure what the repubs will focus on. I have no idea how the preferreds trade in the short term with the receivership nugget and high expectations but there's some positives in the report, imo (listed below). it's a professional-style report with lots of detail. obviously the congressional hearing on Tuesday is highly relevant to flush out whatever priorities all sides have. and collins results of course. but mnuchin has said virtually nothing specific for 3 years and now we have a 53 pager. - the 3bn capital buffer may be raised soon (sr pref amount increased 1:1) - at some point the pspa is likely to be adjusted to end the sweep and replaced by periodic committment fee - clear on not waiting for congress - some chance of an intermediate level of equity capital to exit conservatorship rather than waiting for it all - included actual language of potentially scratching the sr pref (collins outcome perhaps a swing factor here) - while FnF might be a sifi in the end, no extreme focus on it in document - timing of some important proposals uses the word 'promptly' - potential use of private capital to provide initial slug of recap $ - potential use of convertible debt in some capital cushion manner; all else equal this likely reduces the equity capital levels needed to prevent a Tsy draw (the goal) + possibly sooner exit conservatorship good luck everyone.

the wide range of recap options likely raises the stakes for the Collins outcome.

the report is thorough imo. no firm conclusions on some of the recap items that affect us but the receivership drop in there wasn't too friendly and reminds us that the Tsy has leverage.

expectations seem too high for the plan, if it's released. this is not the forum where our goals - 4th amendment, Collins, or IPO discussion/timing - are likely to be addressed. good luck, everyone.

the hearing could also include a series of hedge fund attacks and rhetoric from both sides at best and jumpstart-like discussions or threats in a more negative outcome. this is the real deal, not a bunch of lobbyists and industry specialists, plenty can go right or wrong with lasting consequences. obviously, what's in the report, if/when it comes out, is crucial in addition to the hearing.

whoa. I am not a big fan of a senate hearing at this moment. would have preferred to see it earlier this year when more general terms could be discussed and/or at the end of the year to give more time for a potential 4th Amendment negotiation. good luck everyone.

thanks, this has some interesting points. however expecting a 75-100% rise from a report that has been read by many dozens or even hundreds of DC people would require a tremendous amount of confidentiality trust. rather, imo, what we're hoping for is there's a small group of DC people working behind the scenes with a small group of bankers on a 1h2020 capital raise.

oh, this argument again... the answer of course is because you can lose $ from here. the market doesn't hand out free gains or easy doubles. I can easily paint a scenario where the jr pref receives a major discount to par only after several more years and a handful of 25% drawdowns along the way. or something worse. of course there are other positive potential outcomes also.

unfortunately, mnuchin leaving is a real risk imo. better for his reputation to leave now if his opinion ends up that trump listening to Navarro over him (and many others) will sink the ship. I believe in the value of the FnF securities, that's why I'm here. However, frequently in situations like this one, if you ever win, the victory comes when you least expect it - and that doesn't feel like now. so imo it makes sense to not dismiss any risks.

They’ve been publicly bullish since end of last year, and you were quite bullish early this year. So now that the stock has fallen, you think their subsequent bullish comments are bearish? Aren’t you contradicting yourself here? Or at least confusing TA with FA no. If you check my prior posts. I made three trades this year. When I bought at mid 9.6 area and a few days later this ACG video came out, I sold the next day, and only booked a marginal profit. don't sweat the negativity, muscleman, your transparency is refreshing. you, me, the others, we're just educated and instinctually guessing. bets have been made on both sides and now imo it's up to 16 judges and mnuchin/trump/Calabria to show or not show if there's honor left in our government. I wish everyone good luck.

the capital requirements, if ever announced, will obviously be more than the 43bn in 2 year stress losses. however, imo, the continued drop in stress test losses each year (was 77bn in 18 and 100bn or higher in prior years) is - in isolation - helpful in terms of the pending capital requirement levels (once again, all things equal). apart from methodology changes, the lower stress amounts likely suggests that the quality of the companies' books are better on paper and also perhaps that the CRT are meaningful risk reducers.

no, do not add. 43bn in comprehensive losses is the relevant #.

maybe this helps? credit provisions are anticipatory, flow through the P&L and fund the loan loss reserve (the pool of money on the balance sheet set aside to cover future credit losses). when times look bleak, like the stress exam tests, financial companies materially increase the credit provision cost to build a higher loan loss reserve - this reduces or eliminates profits during that time. credit losses are the actual real time losses, they do not flow through the P&L but rather come out of the loan loss reserve that has been previously built up during the credit provision process. thanks for that. so do you add both together? so that the stress period shows both anticipated losses plus actual losses. or do you subtract credit losses from the provisions that set up the reserve against which the actual losses are charged? or something else? keep them separate, don't add them together. credit provisions flow through the P&L and build up the Loan loss reserve on the balance sheet. credit losses do not flow through the P&L and subtract from the loan loss reserve on the balance sheet. when times start getting bad, provisons > losses because you want to start building up the loan loss reserve ratio (llr/loans) for safety.

maybe this helps? credit provisions are anticipatory, flow through the P&L and fund the loan loss reserve (the pool of money on the balance sheet set aside to cover future credit losses). when times look bleak, like the stress exam tests, financial companies materially increase the credit provision cost to build a higher loan loss reserve - this reduces or eliminates profits during that time. credit losses are the actual real time losses, they do not flow through the P&L but rather come out of the loan loss reserve that has been previously built up during the credit provision process.

I'm not expecting a Collins reversal, unfortunately. It would have likely been already out by now, Willet gave the blueprint and the dissenters would have written a few page rebuttal copying from the other circuits. At best, we're hoping for a remand on the APA claim, and at worst, well, we've seen this movie before. the constitutional side doesn't seem helpful because there's no material relief even with a win. the preferred shares are down ~25pct in 2 months - so some others out there likely share this view, but not all, so naturally further volatility is to be expected.

As I look at the FnF non-govt common market caps hovering around $5bn, and jr prefs trading well below par, I don't know if I should be more embarrassed at myself for having non-gutter level expectations for the government or the actual government for waking up every day trying to screw tens of thousands of its citizens. The 2008 deal was the deal. conservatorship, not receivership; shares still traded. harsh on the shareholders and juicy rewards for the government -- as it should have been. The 2012 NWS was a travesty and it's a shame that it's now 7 years later there's no apparent urgency to right the wrong. It's hard to believe but at this point it is what it is. good luck, everyone.

We could see a trading bottom today. there's no urgency to buy and plenty of people urgently want out. It looks like it was the bottom, as per this weekly close. Which topped the 34 weekly ma. Likely, we will regain the 5 monthly ma for the Jrs. FNMAS sits at $11.27 and FMCKJ at $ 11.16 and continue the bullish run started on October last year. Hopefully, nobody has sold their shares. Recent comments by Gasparino on Calabria (thank you, Luke) may indicate the administration is still on the side of shareholders trying to put together the fact that c-ship is hard to terminate (or cannot) while shareholders must be made right. I can totally see the FHFA trying to achieve some kind of co-existence between Treasury (taxpayers) and us, with Treasury agreeing on sharing profits. This looks like a "second attempt". A new twist to throw us a bone. it may be premature for confidence that this week was the bottom as actual events / quotes carry more weight than speculative tweets.

yes. we can only dream of a deal where the sr pref gets taken care of some way and then a ~ $50bn infusion of zero coupon preferred from some big private players in 2020 that takes out the 33bn of jr pref (say at 80pct of par, so only ~25bn of cash needed) and uses the other 25bn to buy out half the govt warrants with the other half retired. govt wins with up front payment and no lawsuit overhang, jr pref wins to exit this mess, and common's dilution is materially reduced. @IG good god, man. I just wrote that everyone (jps) goes to common first. can you read? @Luke while this is likely the most profitable reorg ever be done, it is also the reorg with the biggest need in new money going forward, so flattening the cap structure is needed here...what drives this is the need to clean things up for the new money; what makes the new money able to be raised is the profitability lol. sorry, I misunderstood and read it poorly. while I prefer my plan better, ok on yours too. I just don't see conversion without IPO happening and I don't see a $20bn IPO occurring that leaves $80bn left to raise -- likely need a private infusion first, as mnuchin referenced.

yes. we can only dream of a deal where the sr pref gets taken care of some way and then a ~ $50bn infusion of zero coupon preferred from some big private players in 2020 that takes out the 33bn of jr pref (say at 80pct of par, so only ~25bn of cash needed) and uses the other 25bn to buy out half the govt warrants with the other half retired. govt wins with up front payment and no lawsuit overhang, jr pref wins to exit this mess, and common's dilution is materially reduced.

I'm throwing this out there, not that I necessarily believe it or not: Unless the Administration is looking for legal cover. If en banc forces their hand, then they won't receive any negative PR for ending the sweep. If anybody were to receive blame it would be those that implemented the sweep. If Admin ended the sweep now before the en banc came out, would that really be any different than Admin ending the sweep after en banc says the status quo is fine? After all, many courts so far have said the status quo is fine so what's the difference between Admin ending the sweep after, say, 5 courts say sweep is fine vs. after 6 courts say it's fine? It has been said (by cherzeca I believe) that the changes in recent weeks by Calabria were embarrassing from a lawyer's perspective. He and his legal team are very likely aware of this. However, they get to go on record for officially keeping the status quo for the reasons I stated in the paragraph above. It does cause a potential delay in the ruling but that might also buy plaintiffs and defendants more time to try to reach a settlement (I don't think Hume's article is published unless there have been some serious discussions about settlement). no offense but why is trying to keep your job for a full 5 year term embarassing from a lawyer's perspective? seems quite rational especially in light of the timing delay we've now discovered.

I choose your scenario 3. likely either kudlow/trump called it off for political purposes and/or the bankers said it was too hard for an 2020 IPO because the amount raised was too much relative to the remaining amount needed to be released from conservatorship. it's tough, as don Layton has said, to veer from the 4 year plan. mnuchin on june 10 started the downtrend with his comments to Bloomberg from the g10 summit in Asia. it was fairly random, he probably saw the stock price getting ahead of reality and decided to stop the train. anyway, in that interview he mentioned private capital as a mechanism along with IPO. so likely the best we can hope for over the next 18 months is the sr pref being dealt with and perhaps some private capital raise with buffett or private equity that makes it hard for a potential new administration to reverse. in sum, it's likely mnuchin waited too long and missed the window. my fault for misjudging. I only hope he has the courage in his remaining time to right the wrong from the NWS. after all, the admin mainly hired people who had spoken out against the NWS.

that's interesting but those securities likely wouldn't trade @ par in the secondary market. would probably need to raise a pile of private $ in perhaps a low/zero coupon convertible preferred with the proceeds used to redeem the existing jr pref and also possibly some of the govt warrants. interesting thoughts but probably not where they or hume are focused now.