investorG

lazy commentary imo. it seems clear now why watt's utility or Moelis (administratively) hasn't been acted on or advanced in 2018 even though jump start expired -- Mnuchin wants the MBA plan with the govt g'tee. they tried to get going on it with corker about 10 months ago (see joe light articles and preferred stock pump) but they decided the landscape was too difficult with henserlang and the House right wingers in charge. well that's possibly going to change in 2.5 months, and so now the repubs should be more aligned with toomey as the player and so its just convincing (bribing) Maxine waters.

thanks for this allnatural. I quit twitter awhile ago. I don't think josh is part of the conversation, but at least he is closer to it than we are. seems to me that if polls are prescient (ha!), Rs will keep senate and Ds will retake house. does everyone agree with me that this is a recipe for no GSE legislation passage? does anyone think any legislation will pass with this political profile? legislation is quite doable. 2 of the 3 parties are aligned. throw 5-10bn of annual affordable housing (a slice of the g-fees) and Dems could be good to go too. pat Toomey, if in charge of the senate committee, is a highly capable man (crapo less so).

yes, likely. but not until the legislative route fails in either late 2019 or 2020. it's legislative or bust for the next 12+ months imo. this is complex and really important stuff, in their view it needs to go through congress rather than a few figures building a (reversible) solution administratively. they should tweak/end the NWS now though.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close. Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely. they might not have a choice. It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress. What's left is carving out some $ for affordable housing to get the Dems on board. And where does that plan leave legacy shareholders? the current market cap of all common and jr preferred shareholders is maybe around $10bn? that is very small relative to the role the minority shareholders have played the last 10 years, the current earnings profile and future valuation of the 2 companies. all we need is a true American leader, a politician or judge, who has the power to do the right thing.

rather than commenting on what i'm hoping for or think is best (mel watt's utility proposal), i'm attempting to observe what seems to be actually happening in the most practical manner possible. of course i could be mis-reading it all.

there is a lot of money from Treasury's current warrant value (or other areas) that can be carved out for explicit affordable housing mandates that might appeal to the Democrats even more than the status quo. this is likely why Mnuchin keeps saying that housing reform needs to be comprehensive and involve HUD also. the system will need someone like Fnma and Fmcc. There's no guarantee they will be the final major players but it's like running a 100yd dash and they get to start halfway there. it appears the security level MBS govt backstop is the key that mnuchin wants. this ensures consistent global financing, even in bad times. so he's going to have to wiggle to make other players in this process happy.

there is a lot of money from Treasury's current warrant value (or other areas) that can be carved out for explicit affordable housing mandates that might appeal to the Democrats even more than the status quo. this is likely why Mnuchin keeps saying that housing reform needs to be comprehensive and involve HUD also.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close. Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely. they might not have a choice. It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress. What's left is carving out some $ for affordable housing to get the Dems on board.

I disagree. Actually, no (serious) one is buying the administrative solution given where the shares are trading. Reform has failed for 10 years in Congress because during 8 of them there was no Treasury leadership for action, and the remaining 2 there was too wide of a gap between the House Republican idealogues and Democratic senators needed (60 votes). going forward, those 2 dynamics are likely to change in 2019. the reality is it appears like it's going legislative for at least a year, even if everyone here wished otherwise.

recent commentary in the FnF Twitter/blog universe is fairly weak. it's like they think the guys in charge are lying with some secret alternative strategy. it seems quite clear that mnuchin wants to do this legislatively. It's not impossible to get done, it's permanent, and the backstop MBS-level govt guarantee is important to consistently have access to the global capital markets (as a replacement for the implied guarantee on the 2 entities, which everyone wants gone). imo people should just accept this is the primary plan and focus their writing energy on more relevant things like stopping the NWS immediately or creating a new $15bn buffer instead of $3bn.

Phillips' comments seem good. hopefully they are 'all in' to get this done in 2019 rather than just talking points. His bullets appear to confirm the Mulvaney OMB plan from a few months ago and don't seem aligned with the House republicans' ginnie mae lovefest. muted reaction could possibly be a) disappointed people who were still clinging to near term administrative action and b) supply overhang from hedge funds like highfields (gse owner) closing and possibly forced redemptions from owners like fairholme (see their performance). hopefully they go hard in 2019 on this. assuming they throw in some affordable housing $, it is not impossible for Congress to get this done next year with base case Pat Toomey and Maxine Waters leading and getting a lot but not all of what they want. I take it we should be rooting for the Democrats to take the House then. I just don't see Phillips's comments as being all that special, other than a reiteration and crystallization of Treasury's stance. The charter repeal and explicit guarantee are Congress-only items. It is starting to look like the administration won't act alone after all, except for perhaps a panic move in mid-2020 if they fail to get anything going in Congress up to that point. What would happen if a shareholder-friendly court decision happens before then? I always thought Treasury had incentive to act on its own and quickly, but unless getting their own FHFA director installed is extremely important for that, they are otherwise just dragging their feet. Speaking of the new FHFA director, why hasn't Trump nominated anyone yet? He doesn't (and shouldn't) have to wait until January, and given how long the Democrats are dragging confirmations out, Trump should have had his pick in months ago. Does anyone really want another "acting FHFA director" saga? it seems big to me, the most specific Tsy (power player) has been about getting these two companies back into private hands. I believe we're one large buyer (and volume to clean up the overhang) from a material move higher. guessing, I'd expect a FHFA announcement soon after the elections.

Phillips: administration advocates end of conservatorship and a return of Fannie and Freddie to private ownership. #MBAAnnual18 with private ownership an official goal of OMB + Treasury, they should start the capital build yesterday with the 10pct moment having been hit -->> be bold, do the right thing, and replace the NWS sweep with the capital backstop fee!

when including dilution and lower earnings from higher competition forward looking, its probably more like 75-100bn value to the govt from warrants.

Phillips' comments seem good. hopefully they are 'all in' to get this done in 2019 rather than just talking points. His bullets appear to confirm the Mulvaney OMB plan from a few months ago and don't seem aligned with the House republicans' ginnie mae lovefest. muted reaction could possibly be a) disappointed people who were still clinging to near term administrative action and b) supply overhang from hedge funds like highfields (gse owner) closing and possibly forced redemptions from owners like fairholme (see their performance). hopefully they go hard in 2019 on this. assuming they throw in some affordable housing $, it is not impossible for Congress to get this done next year with base case Pat Toomey and Maxine Waters leading and getting a lot but not all of what they want.

Later this month Treasury releases its semiannual currency report. We will see if Mnuchin has changed his stance re China as currency manipulator. Not too long ago he was squarely in the moderate camp looking for an amicable solution. He now appears to be aligning himself with the more radical side at the WH. Is he being pressured to get in line with the 'war on China'? Point being, relying on Mnuchin's original view on Fannie and Freddie may have become quicksand. 'renewed his push' ? more like 'dribbled out his stale rhetoric'.

trillions? kidding aside, I don't know how the lawyers for the govt can tolerate arguing for such injustice.

I'm thinking that the plaintiffs don't want a trial, they want a settlement. That involves delaying, and next Monday's conference could be very important. What could they possibly be conferring about? If the Democrats take the House in November then that could give the plaintiffs more leverage, pointing out that legislative action is even less likely with a divided Congress (if for some reason the administration is delaying in hopes of Congress passing something). Even though I don't see it as likely, a fair and broad settlement for all parties probably sounds good. On your second point, it might be easier for the Senate R's (or D's) to find a compromise with Maxine Waters than the House R's find one with the Senate Dems (60 senators are needed) -- as we saw in the current congress.

does anyone know why the plaintiffs keep agreeing to delay requests in the government's legal responses in various cases? I understand why the plaintiffs' lawyers would say yes but the end customer should be less interested in extending time??

the sequence would be difficult and more tilted towards the back end of the process - he'd likely need to know the final legislative solution before putting up the $.

at this point, I assume all important decisions run through Mnuchin. We are reliant on him (or someone above him) standing up for what's right among the many strategic choices he will likely make in the coming months and quarters.

Depends on how they settle them. A conversion to common offer at a generous ratio can get it done with no cash cost at all, but it would also take an end to the NWS, a recap plan, resolution to the warrants, etc. for the juniors to accept. Cash is much cleaner and quicker (though much more expensive). since it's complicated, a settlement isn't likely over the near term. the cases should continue and in the mean time the sweep should stop and be replaced by the backstop commitment fee. that would provide time to get things done in 2019 in a thoughtful and non-rushed manner, while limiting any theoretical legal liability to the govt. The sweep is actually a variable dividend. So what you are saying is that they should cancel the Sr. preferred shares. That is the only way to terminate the sweep. Isn't there a restriction in place from Corker's Jumpstart 2.0 till Jan 2019? if we have learned anything, they can do what they want. another amendment could tackle this issue however they see fit, ideally over the holidays (similar to last year).

Depends on how they settle them. A conversion to common offer at a generous ratio can get it done with no cash cost at all, but it would also take an end to the NWS, a recap plan, resolution to the warrants, etc. for the juniors to accept. Cash is much cleaner and quicker (though much more expensive). since it's complicated, a settlement isn't likely over the near term. the cases should continue and in the mean time the sweep should stop and be replaced by the backstop commitment fee. that would provide time to get things done in 2019 in a thoughtful and non-rushed manner, while limiting any theoretical legal liability to the govt.

I agree. Thanks, Bruce, from a lot of us. In addition to a potential positive outcome, I hope it happens soon enough before his fund redemptions possibly become too much to handle. This is another reason why Mnuchin has been so disappointing this year in his rhetoric (at a minimum); he's way smarter than us and clearly understands the sliminess of the NWS yet he's remained hidden in the corner this year rather than leading with a balanced tone.

with all due respect to both Brian Brooks (who probably is an excellent lawyer) and Coinbase, if FNMA is to raise many tens of billions of dollars to recapitalize, there needs to be a black belt Ceo in place with material expertise in real estate and capital raising. The compensation caps would need to be adjusted by congress, which is another reason why mnuchin and phillips are likely trying for the legislative route in 1h19 before any comprehensive administrative action. Looking at it from Trump's angle, I think it's best for him if it goes legislatively and the warrants pay for the wall and/or infrastructure. In the mean time, if our leaders want to do the right thing, please replace the sweep with a commitment fee over the holidays!!

if Mel finishes his term, it's likely due to mnuchin quietly requesting that the congressional republicans hold back fire. With the 10pct moment coming in 10 days, here's to hoping a plan has been in place for the 4th quarter that could include some finalization of capital requirements and/or another amendment that replaces the sweep. most likely these could occur late in the fourth quarter but that doesn't mean the stocks need to wait for then for action. good luck everyone.