investorG

doubtful; 6% Roe isn't likely going to get the enthusiasm necessary for such a large potential capital raise. as another poster says, the guys in charge are likely to see through the outside recommendation extremes (on both sides).

I'm pretty insensitive to price, given the range of outcomes. I'll have to pay a higher price as uncertainty is resolved, but the risk/reward should only improve. That's funny, as I'm sensitive to price given the range of outcomes! :) Really? If FNMA is $9-18 next year, I'll wish I'd have added today whether the shares were $2 or $4. while possible, it's unlikely those price targets you mentioned are achieved. Entry points should matter. Maybe not. What's your price target? But it's also unlikely you'll be able to buy at prices much lower than today (at the same risk/reward). Return is what matters. I accept that I'll get a lesser expected return on the dollars I invest after a favorable en banc ruling than were I to invest today, but it'll be a positive expected return nonetheless. A double digit stock price, imo, requires the warrants to go away / be reduced, among other things. which is possible. otherwise, the private equity or IPO investors in a potential deal likely won't be comfortable giving away $100bn+ (~10bn existing combined FnF shares including warrants) of the combined pro forma market cap to the current commoners + govt. there's uncertainty with congress and perhaps a new administration in 2021 which means new money likely would want a large margin of safety to plow in the many tens of billions needed.

Your right who says its moelis? You reference it in a previous reply to Midas. ;)But every common shareholder is wringing that report in their hands and the vast majority of the reason why many have invested. 2nd most argued reason is treasury maximizing their return. I can tell you right now treasury without a doubt will maximize their return and I bet it will fundamentally come separate from the legacy common holder. As a result its not treasury vs prfd but prfd vs common in a conversion scenario and at the bargaining table. A nice sweetener for a prfd conversion would be a favorable conversion ratio and warrant with a lower strike price of common. I'm guessing at this point that Tsy values getting their plan completed > maximizing their return. while Tsy might attempt to do both, one way to increase odds of a potential deal getting done is to give new shareholders a larger portion of the pro forma market cap, perhaps at the expense of Tsy's share (warrants). after already making > $100bn, is it absolutely crucial to the decision makers whether the Tsy makes another $70 vs $40bn in a potential deal?

imo Calabria leading the charge is optimal from an optics standpoint. He speaks clearly, is smart, and doesn't have some relationship baggage that others carry.

I'm pretty insensitive to price, given the range of outcomes. I'll have to pay a higher price as uncertainty is resolved, but the risk/reward should only improve. That's funny, as I'm sensitive to price given the range of outcomes! :) Really? If FNMA is $9-18 next year, I'll wish I'd have added today whether the shares were $2 or $4. while possible, it's unlikely those price targets you mentioned are achieved. Entry points should matter.

Let me articulate: Trump comes to believe privatization will hurt his election chances and so puts off the process, advocates of the big banks vs those of the hedge funds can never agree as to the How, court rulings delay the process, the (overvalued) market crashes and puts off the IPO, etc., etc. I can see a process that doesn't get to recapitalization. If you assign the conditional probabilities of FNMA/FMCC exiting conservatorship at 70% AND the preferreds paid out at par at 90%, you've only a 63% chance of getting your double today. Look, the market may not be perfectly efficient, but it isn't dumb either. There are enough bright people with enough money to buy the shares up if they knew it was undervalued. I agree with you that things are looking up (and why I asked if anyone was adding to their position), but I believe it is still a speculative bet. True. There are black belts involved in this trade, it's not fully inefficient to provide anything easy at this point.

the current decision-makers at Tsy and FHFA appear to want lower FnF share and profits over time. if the capital requirement is ~2.5pct of total assets, that translates into ~ 125bn of capital needed. some of this amount could come from retained earnings / additional preferred issuances, taking the theoretical amount to be raised in common stock below $100bn. Ideally, this could be accomplished in a series of transactions, perhaps totalling 3 over 18 months - private equity infusion, re-IPO, follow-on. ironically, the goals of releasing FnF from conservatorship and maximizing the govt's current investment appear contradictory. in a potential deal, the more the govt receives of the pro forma value of FnF end state, the less new investors would get for their $75-100bn commitment, making it more difficult to complete a capital raise. and vice versa. thus, I'm guessing calabria is not incentivized to get the common stock price juicing higher in advance of any potential capital raisings. the moelis govt windfall amount estimates and pro forma FnF valuations are likely well too high in light of the leaders' stated goals. good luck everyone.

as to your "block" question, the "trump appointees" almost all share a lineage to the State of Texas AG's or SG's office. I expect that if you have read Judge Willett (from Texas SCt and before that Texas AG or SG office, forget which), you will know what they think. there will be pushback from judges like Higgenson, and how far the majority goes will be disputed and likely negotiated before decision finalized, but I do believe there will be a majority finding in favor of Ps at least to some extent ok, thanks. there's 16 members. I'm guessing we don't win in a tie so we can only afford 7 against us. You mention Higgenson, and there's also the 2 who voted against the APA claim in the original case. that leaves a slim margin for us as there are additional Clinton (1) and Obama (2) appointees who likely vote against.

regarding the Collins case, is it likely the trump appointees would vote as a block? does being a part of the 'federalist society' make it more or less likely to support the plaintiffs? While - like others here - I hope for a decisive, Edith Jones-led smackdown of the NWS, I wonder if the community has once again tilted over-optimistic regarding a court case.

imo it's more likely than not that Calabria knows exactly what he's doing and that he's aware of the plan that otting referenced. If a capital raise is coming (which is currently unclear), and you were a potential investor, what would you rather: quasi-certainty that there won't be any competition or a low stock purchase price / higher pro forma % ownership relative to the current common/govt/jr pref holders. I'd probably pick the latter. So it might be a goal of his to not pump the common stock price. so as I read you, junior holders may expect an end result to be some sort of semi-coercive conversion into common. that conversion rate may be expected to be into common based upon outside investors purchase price, so junior holders have an incentive to see a low selling price so that upon conversion the junior holders get more common shares. also, a depressed selling price arguably increases the chances the IPO is successful. I say arguably because while a low selling price should flesh out more buyers, on the other hand it means that more shares have to be sold. I think it is too early for this type of game theoretics. once the bankers are hired the process will take on its own dynamic and I believe the principal dynamic will be that treasury doesn't want to fail...which may argue for a depressed selling price. but my first principle in connection with an offering is dont shoot yourself in the foot, and the more Calabria speaks the more gunfire I hear. I'm not sure how it all plays out but I do think it's likely he's thought through how all of his words and actions will influence his goals, whatever they may be.

imo it's more likely than not that Calabria knows exactly what he's doing and that he's aware of the plan that otting referenced. If a capital raise is coming (which is currently unclear), and you were a potential investor, what would you rather: quasi-certainty that there won't be any competition or a low stock purchase price / higher pro forma % ownership relative to the current common/govt/jr pref holders. I'd probably pick the latter. So it might be a goal of his to not pump the common stock price.

I wish it was that simple. the banks via the Republican establishment prefer their piece -- competition and explicit guarantee -- done through congress at the same time, not after, any tangible actions to help shareholders. that is why we likely wait until later this year, and hope for a collins victory for potential negotiating leverage. I'm guessing that if we go down the recap route, the first chunk is taken down by private equity (or Buffett) for privacy and validation purporses before going to the public markets.

One idea, offer the new investors a deal they won't want to refuse. which likely means a larger % ownership of the pro forma companies to provide them a margin of safety to offset for the lack of future earnings clarity. this is likely why the common stays low; when including warrants each $1 rise is ~ $10bn of mkt cap that new investors wouldn't receive. and the jr pref may get a haircut on their par value in any potential deal, perhaps depending on the outcome of the Collins appeal. imo the moelis plan set unrealistic expectations relative to the goals of current political leaders. it did however raise attention to the situation, which I believe was its main purpose. good luck everyone

wow this is thorough and professional. and fairly direct. one question - does the use of the words 'successor entities' on page 4 bother any of you? does this mean receivership is actually still an option? As it mentions gse's in the same sentence I convinced myself it was referring to additional guarantors. But I'm still nervous! I don't think it's referring to other guarantors. hopefully by using those words it means if their charters are changed in the legislative route. it's never easy...interested in others' views on this?

wow this is thorough and professional. and fairly direct. one question - does the use of the words 'successor entities' on page 4 bother any of you? does this mean receivership is actually still an option?

if the SBC sought therapy, it would be diagnosed as passive-aggressive. I dont see a bill getting reported out of committee with any bi-partisan support, and even if passed by senate without bi-partisan support (which I highly doubt), it will go nowhere in house. so this is just more waiting for Godot. question is whether the potus directive reported this morning will result in a meaningful analysis that can be turned into an actual administrative reform plan, or will this just be more sound and fury signifying nothing. today's directive could be a friendly reminder to crapo to stay on the horse because there's another potential game in town. there's a good chance the timing isn't random, maybe they didn't like yesterday's tone at the hearing.

I recommend watching today's hearing. it was likely an eye opener for crapo. he and the bank lobbyists know they need to change his outline to get Sherrod's vote. so the question is will they. if not, dead end. if they do, the odds of this passing congress materially increase. why might waters go along? because if calabria is confirmed, he will likely start off nice but if waters torpedos a bill that he and mnuchin and sherrod like which codifies a lot of consumer and small biz protections then he might turn to his libertarian roots over time.

this has been my concern since otting's 2-4 wk timeline failed to materialize. the likely timeline: otting's comments leak. congress tells wh privately they will go fast. wh says publicly they want to work with congress. crapo outline released. mnuchin writes brief support statement. 2 days of productive Senate hearings. today's hearing went better imo. Calhoun was strong. lots of utility talk, less Demarco agenda. barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes. that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point. so things changed vs january. mnuchin is likely giving congress 1 last shot. crapo likely knows time is of the essence, and things will likely move quickly. this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome. + Begin retaining capital in the interim once Calabria is in his seat which shouldn't disrupt any reform efforts. while possible, there's a better chance they leave the sweep intact until they lose a court ruling or congress fails imo.

if crapo wants to stall admin action, he might keep in the multiple guarantors in his bill because that would likely lead to a party line vote and some potential dead ends in the full senate and house. alternatively, if he wants Sherrod brown on board, he will likely transition away from big bank centric ideas (apart from the govt mbs guarantee) and this increases the odds of a bill passing this congress.

this has been my concern since otting's 2-4 wk timeline failed to materialize. the likely timeline: otting's comments leak. congress tells wh privately they will go fast. wh says publicly they want to work with congress. crapo outline released. mnuchin writes brief support statement. 2 days of productive Senate hearings. today's hearing went better imo. Calhoun was strong. lots of utility talk, less Demarco agenda. barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes. that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point. so things changed vs january. mnuchin is likely giving congress 1 last shot. crapo likely knows time is of the essence, and things will likely move quickly. this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome.

I couldn't watch, but prof. levitan addressed this committee in 2011. about explicit guarantee. did they drag him back to make same point 8 years hence? levitan was solid. politely warned of the race to the bottom from multiple guarantors and instead proposed merging FnF into a utility with broader credit risk transfers. however, the republicans, warner, and tester -- easily enough to pass committee -- wanted nothing to do with him and were mostly zandi-demarco.

I hope it never makes it to the Senate floor. Time is of the essence. If the bill barely makes it out of committee with only 1 or 2 Democrat votes, it is dead in the House anyway. Still, I share your fear that if this whole process takes too long, we run into election season and the whole thing gets shelved. Then we have to pray that Trump gets re-elected, and even then he could put it all off until 2023. exactly. each month of delay matters a lot with the election overhang. my guess is mnuchin is fairly aligned with crapo's outline because he wants to create a lasting and permanent solution that will work through multiple cycles, even if the bill has some warts. but on the other hand he likely wants to avoid wasting 6 months if the bill's House prospects are dim. the best solution, then, to me is the dual track of working with congress while building some capital - but the market is saying clearly that the sweep remains intact and so that's that.

one issue though is that if the crapo bill doesn't crash and burn until late this year then with the election a year away does that block out admin reform. this might be the big bank lobby's strategy. @IG, you haven't seen a housing bill make it out of committee and onto the senate floor in years. last committee vote was 13-12 for corker-warner as I recall and it went nowhere. (this is my best recollection, please correct if wrong). why do you think this two pager gets fleshed into a bill, voted out of committee and then taken to the senate floor for a vote (under circumstances where, unlike before, Ds control house)? I think it will pass committee because the bank lobby is likely telling crapo to do so and - based on watching the hearing - all of the R's will pass it with probably a couple moderate dems like warner and tester. schatz is fairly smart on the issue and might vote for it too if he gets some things he wants when the outline is filled in. mendendez, warren, and some others probably won't vote for it. whether it gets a full senate vote, it's more of a guess but once again the bank lobby might pressure mcconnell?

one issue though is that if the crapo bill doesn't crash and burn until late this year then with the election a year away does that block out admin reform. this might be the big bank lobby's strategy.

anyone have opinions on today's hearing? it just ended. I'm guessing the crapo bill will get filled in and pass the committee. it might even pass the senate. the NAACP man's reaction to Senator Warren's questions suggest that the $5bn raised from the 10bp gfee carveout for affordable housing would likely need to be increased a good bit to get maxine waters' support in the House. imo what the process needs is for mnuchin and calabria (if confirmed) to get out of the dugout and use their big mortgage brains to slice through all the various agendas put forth on twitter, op-eds, and senate panels to move things forward.