investorG

i am watching congress dysfunction over the dodd frank amendment bill. bipartisanship agt to mostly to help small banks is fragile and may not survive a reconciliation process. if congress cant pass this modest bill then forget about housing finance regarding the dodd frank bill, imo it will get done. there were 67 votes in the senate, not 60, creating a little wiggle room. hensarling is likely posturing, he'll throw in a few large bank goodies and perhaps lose a few D senators and call it a day. on the kudlow news, not even a little bounce? my best guess is that potential institutional buyers are aware that ackman / berk / perry are selling and they think they'll get better prices in the near future.

I'm fairly surprised there was no modest bounce from the kudlow news over the past two weeks given his past social media comments + being plugged into a position that theoretically has actionable power on the matter.

This was Mnuchin's comment about FnF when asked what Treasury's near-term priorities are. Less taxpayer risk would have to mean more private capital. Unfortunately current shareholders are not going to contribute any more future capital unless there is a rights offering of some sort. "Restructured" can have ominous overtones as well. Could that possibly mean anything other than the capital structure? And why would the capital structure need an overhaul anyway? Had a listen to this. I didn't read too much into it as to me it felt like yet another political statement of "saying something while saying nothing at all". The choice of words restructuring does jump out but as has been commented retiring the sr. prefs could be a restructuring, exercising the warrants could be a restructuring depends on how fast and loose Mnuchin used the word. The delay could be for a number of reasons. If i put my political hat on, I'd be trying to get all the funding I could from congress i.e. for infrastructure, and then only falling back on the $100B from warrants for other uses or funding if I need to. Basically trying to get all you can before using the warrant money. I doubt this will gain traction before the 2018 mid-terms. I would guess that Watt's potential end of term in Feb '19 will be Mnuchin's leverage to get something done. I've started to read that the ultimatum for Dem's will be either you do something bipartisan before Feb '19 or Trump puts in the most capitalist, free-market Director and Dem's get nothing. I'd project that this will get resoloved after the mid-terms and before Feb '19. What's another 11 months? there's a reasonable chance the warrants (tied to infrastructure or wall maybe) are a political weapon that they are simply waiting to fire closer to their planned re-election campaign. this would be another reason for mnuchin to keep delaying.

I'm not sure a change of charter is possible without Congressional action, which I highly doubt is forthcoming. that's why he's punting until 2019 - he likely wants / needs congress to be the vehicle for reform. he's said this many times. phillips also said it a month ago (it's no coincidence the securities have been in a downtrend since). Reluctantly, I choose to believe them rather than think it's a smokescreen for something hidden that's positive for us. true administrative action, if it occurs, is likely a late 2019 event if the congressional route fails in both 18 and 19. this is not a priority for him, sadly. a bullish view in 2018 imo requires some unexpected court win.

This was Mnuchin's comment about FnF when asked what Treasury's near-term priorities are. Less taxpayer risk would have to mean more private capital. Unfortunately current shareholders are not going to contribute any more future capital unless there is a rights offering of some sort. "Restructured" can have ominous overtones as well. Could that possibly mean anything other than the capital structure? And why would the capital structure need an overhaul anyway? hopefully he wants the charters changed to remove any implicit guaranty, which is reasonable. or some problematic alternative meanings.

yes, emily, it appears he's punting til 2019. on the positive side, if what he said is true, he has likely prevented a bad bill for America from happening. and he's not gunshy about lowering expectations so that the pumpers can quiet down. overall, though, he's taking the easy way out by postponing action. he likely wants to see some more court cases play out and maybe deal with a different cast of congressional characters / leaders next year. lots of people have decided not to wait for justice and i expect others will soon do the same.

Emily, I agree. It's not like we expect final solutions implemented any time soon. It's just that he could have taken the narrative since jan-1 and actually 'lead' on the subject - wasn't there talk of treasury principles last year? - but he's chosen another path of waiting or working behind the scenes only. I'd like to think I'm a long term holder but when I see 10m+ shares of FNMAT trade, I see obviously some people who either have given up on justice or are forced sellers for business reasons. All that said, in the end, we may have misjudged his intentions, and entered into a dead end investment. Time will tell.

some chance that's perry selling after his court case ended. the rest of their hedge fund had been rolled up a while back. perry, ackman, berk, etc - they have businesses to run and investors to report to and communicate with. mnuchin's lack of leadership / taking the easy road on the matter since the jan-1 ending of jumpstart has likely rightfully discouraged many long term holders and reduced conviction. perhaps many of us misjudged his intentions. on the other hand, if he's interested in a fair outcome for all parties, it would have been fairly easy for him to telegraph that in the past 2 months but he's chosen a different path - likely with a long term view but penalizing to investors without endless time frames.

thanks, this is nice to hear. no bounce though. I'm guessing there's a real chance ackman has been selling his common position. he's cut staff and also some legacy headache positions. his remaining investors might want him narrowly focused on traditional areas. the price is low, at some point a big fund complex might step in with a big block to clear him out.

The NWS didn't just accelerate payments to Treasury, it allowed them to keep the entire liquidation preference when it otherwise would have been paid down and eliminated by now. Treasury has come out around $200B ahead so far of where it would have been without the NWS, assuming a dollar-for-dollar cash value for their liquidation preference (perhaps a bad assumption). You're right that if the administration wants the GSEs revived they can pretty easily do it. Doing that without pissing off a large number of Rs is the issue. Hensarling and Corker, while on the way out, still wield a lot of power. A court decision would have been really helpful in allowing the administration to say "look, we have no choice." It's all about political capital: releasing the GSEs will cost a lot of it given the R control of Congress. If the Ds gain control of both houses in November the equation changes significantly: Trump can use the release of the GSEs to get the Ds to pass legislation he wants. I still think the RNC resolution has to mean at least a little bit of "something." Why else would it exist? I would really like to know who wrote it and who approved it. One possible upcoming tell is the RNC Spring meeting and subsequent release of resolutions. nice post, well said. I personally wouldnt over-emphasize the RNC resolution's importance since no one has picked up on it, despite many opportunties. it appears as if someone from moelis called a buddy at the RNC to put it in a document.

not a lawyer but it was addressed that the SC choice to not hear the case doesn't validate the lower court rulings, they are separate. and yes at this moment the original bailout amounts are intact.

to the lawyers on the board: although they are longshots in their own right, would the other outstanding cases in the 3 appeals courts + rop/bhatti be hurt by this supreme court ruling (ie is it viewed as a 'blessing' of the dc ruling)? thank you. muscleman, i think it's sweeney (which is years away from any potential positive outcome), delaware appeal, and maybe some pennies from the lamberth remand as remaining legal options. plus the longshot perry look-a-like suits mentioned above sprinkled around the country. a denial of cert does not touch the merits. if a circuit wanted to rule for Ps (big if) then it would know that its case conflicting with perry would result in a likely grant of cert by scotus. but generally other circuits are inclined to say hey this is an administrative law case, i'll just decide the way the dc circuit decided cause they handle more such cases thank you. one more, please: will the collins appeal (new Orleans), saxton appeal (st louis), and rop lower court case have oral arguments like robinson appeal (failed), Roberts appeal (Chicago, pending), and Bhatti lower court cases have had?

if we assume base case a) nothing legislative this year and b) nothing positive judicially this year, what are the odds that some admin action is taken vs waiting for 2019 --- over or under on 25pct chance of admin action in 2h 2018?

mnuchin has said this before, I believe, last year. perhaps Calabria said it as well at some point?

is the Washington federal request for an extension a couple days before the due date common or suspicious of something else going on?

to the lawyers on the board: although they are longshots in their own right, would the other outstanding cases in the 3 appeals courts + rop/bhatti be hurt by this supreme court ruling (ie is it viewed as a 'blessing' of the dc ruling)? thank you. muscleman, i think it's sweeney (which is years away from any potential positive outcome), delaware appeal, and maybe some pennies from the lamberth remand as remaining legal options. plus the longshot perry look-a-like suits mentioned above sprinkled around the country.

I believe Phillips made clear he wanted to level the playing field. raising the g-fees is a way to accomplish this. other potential benefits of throwing this in there are a) it ramps up the estimated 10year revenues to Treasury to close to 200bn (from ~ 140bn last year), which raises the opportunity cost of shutting them down without warrant value (if they do indeed want them out of conservatorship) and b) it possibly creates more economic room for a healthy fee paid to the govt for an explicit guarantee.

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done. to me, either: a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed. b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

low odds of the warrants included in the funding. quite low. it would be shocking, actually. On another front, from the latest AB article... . couple of weeks... from the horse's mouth. thanks. sounds like he's trying to get some momentum. if they get traction, we'll see what happens. if not, decent chance that mnuchin would wait to see what congress looks like for 2019 before launching admin action.

low odds of the warrants included in the funding. quite low.

They sold 22M shares of FMCKM. Those multiple 1M share blocks over the last few months must have been Fairholme. it appears he did cut around 40pct of his shares. part of this went to raising the fund's cash levels, and part to other positions (and maybe for redemptions?). but remember this is 2 months stale data (nov30), whereas his letter is fresh as of this week. lots of preferreds have traded lately, he could be much bigger or smaller at the moment.

luke, what is this from please? thank you.

Yes, that is what it would take. The existence of the lawsuits is proving to be rather important, I think. There are many forms the bribe could take: Shares in the post-receivership FnF (if they even exist) Payouts to all shareholders, common and junior pref Payouts to only junior pref holders Payouts to only series of junior prefs owned by plaintiffs Payouts to only shares owned by plaintiffs I guess the second to last is the only scenario where it matters what series you own. #1 could also be a decent possibility. unclear on the others.

Yes, that is what it would take. The existence of the lawsuits is proving to be rather important, I think. There are many forms the bribe could take: Shares in the post-receivership FnF (if they even exist) Payouts to all shareholders, common and junior pref Payouts to only junior pref holders Payouts to only series of junior prefs owned by plaintiffs Payouts to only shares owned by plaintiffs I guess the second to last is the only scenario where it matters what series you own. most likely, if we get there, canceling the sr pref, sending them through receivership, and the cash flows after expenses waterfall to shareholders over many years. but this throws out a lot of $ for the govt, barring a legal turnaround, and so it might be hard to get through. NPV well below par even if they are made 'whole' eventually. but still, in my eyes, a fair deal if NPV is 60-75pct of par. and i'd guess berk, Paulson, and perry would be ok with that too after all this energy and time. ackman, imo, should be happy for any win at this point in his career.

And its own mini-Jumpstart in section 802(b)(1). Section 802(b)(2) ties Watt's hands: So receivership plus seniors in place equals zero for all commons and junior prefs. This is what Corker calls fair? hopefully its a negotiating starting point. and then in the end, the sr pref is canceled. my view, fwiw, on today is that mnuchin is undecided on whether a compromise can be found with corker in the next 6 months that appeases all parties. if so, we'll find out soon enough what happens to us. if not, then maybe the watt utility plan is a potential fallback, either in 2019 congress (if dems take over) or administratively (as a last resort).