investorG

I don't have an answer to this but i'm confident mnuchin has a plan, good or bad. my best guess is watt was ready to drive alone in the summer. and then mnuchin told him not to. and then watt didn't act but kept talking about it ---- so logic tells me there's some plan that watt and mnuchin know about.

if they go this route, which I believe is possible but not probable, then most likely they throw a bone to the jr preferred and common -- there is lots of flexibility to how they handle it. especially in context to the current combined market caps of ~5bn for common + ~ 7/8bn for jr pref. I personally don't think mnuchin and trump - two people who have made it big through capitalism - are sitting up thinking about trying to squeeze every last dime for the govt from minority GSE shareholders.

important changes have been made. in the prior 9 years, the congressional republicans advocated literally shutting down FnF, while the democrats were supporters of the companies. currently, listening to the tone of the 2017 hearings, the republicans have moved much closer to center. they only seem to want more competition / private capital and an end to the prior regime of implicitly guaranteeing the 2 companies. so I don't think it's non-sane to suggest a legislative solution is greater than 50pct odds. for those who think an administrative solution is the only workable outcome, I believe this is a 2019-2020 event. while i'm hoping for a 4th amendment asap, mnuchin will likely try hard legislatively in 2018 and then possibly wait until a fresh congress (perhaps with democrats in control) in 2019 for another try. as our opponents have correctly said, administrative solutions are frail and easily reversible under new Treasury / FHFA regimes = inferior outcome.

What is difficult is getting them out of conservatorship without rewarding evil speculators. Treasury does not want that no matter who the ocassional pencil pusher, Geithner, Lew, Mnuchin is. if we are talking about hedge funds buying assets cheap, then mnuchin is an evil speculator. this is precisely why i believe he will look at the issue without any of the anti-speculator bias that clearly prospered among nitwits like lew. I hope you are right, Chris. What I really meant is that once in government, you become government. Thus, Mnuchin is not really Mnuchin anymore. He may have morphed -and his views- into government and government views. Everyone goes in thinking they can change things. Then, deep state gets you. right. i'd say we have already seen this as mnuchin has transformed from the guy post-election who said gse reform was easily/quickly done into the guy who says that it is a 2018 item. two things seem interesting to me: as mnuchin has waited a year to address gse reform, or fixing as he says, the jumpstart act will have expired and FnF will have paid back treasury money at original 10% rate. so gse reform should indeed be easier to in 2018, especially if corker and hensarling are properly viewed as lame ducks going out on a limb here but perhaps duffy (the subcommittee chair) is viewing 2018 legislation as a springboard to the overall financial services committee chair in 2019. he's young, ambitious, speaks well, and also is a trump fan. while he's not going back to the old system, he seems engaged and maybe even flexible (compared with the old guard at least) by going along with the narrative that some govt guarantee is needed. in the end, though, we really need to hear from mnuchin unchained from the tax reform straightjacket, when he feels freer to speak his mind.

for message board and twitter vocalists aiming for the old system, implicit guarantee, they didn't need a bailout, etc--- it appears time to give up that ghost. an explicit paid for guarantee is the future, I believe. probably on the securities, possibly on the guarantors. utility model. I don't think its unrealistic to expect legislative action in 2018, understanding others like tim howard disagree. the House financial services committee having 3 of these in 3 weeks (another one next week) suggests to me that mnuchin - phillips instructed them to get up to speed on the matter. any thoughts on whether we can get a 4th amendment (which settles lawsuits) prior to legislative reform action / failure? a dta writedown + jump start expiration could be a catalyst in early 2018?

But how does this jive with the RNC resolution? The resolution means there is at least some support in Congress for actually respecting shareholder rights. What remains to be seen is how much Trump and Mnuchin actually care about what the resolution says, and in Trump's case how much input he had into actually crafting it. based on the last couple of congressional hearings, it does not appear the RNC resolution (moelis plan) has caught on inside the legislative branch, unfortunately. i'm not sure how much mnuchin / trump care about us minority shareholders. my hope and bet is that they do care, out of American principle and due to relationships, and that in 2018 they will express this view.

What is difficult is getting them out of conservatorship without rewarding evil speculators. Treasury does not want that no matter who the ocassional pencil pusher, Geithner, Lew, Mnuchin is. I believe mnuchin will push whatever plan he prefers irrespective of legacy treasury views. I do expect eventual additional competition in some form, based on prior statements and republican views; this likely should not prevent the common and preferred securities from performing from current levels. when the implicit guarantee for the companies likely goes away, and things likely shift to an explicit govt backstop paid-for guarantee, it's hard to not offer other companies the option to compete. the question is, if things are regulated in a utility format, is it reasonable to expect other entrants to realistically compete with FnF. while we all want immediate results, I think it's best to judge mnuchin's rhetoric and actions starting on jan1 after jumpstart and after tax reform wins or fails -- it's no secret that they need to avoid upsetting as many republicans as possible to get their most important priority (taxes) done, and that most R's do not favor recapping and releasing FnF absent material reform first.

if the debate ever does shift to how large of a retained portfolio, that likely means we've cleared some earlier more dangerous hurdles -- like the ones that will be mentioned this Thursday aftn when the large bank guys get their turn in front of the House financial services sub committee. good luck everyone! i'm betting that a whole new attitude comes out after jan1 and tax reform is resolved (win or lose). time will tell.

$6mm FNMFN (jr pref) traded @ 21pct of par today. common is likely capped when these types of levels exist bc relative value investors will sell some common to buy the pref.

repurchasing equity capital doesnt create equity or regulatory capital jr preferreds are carried at par on the balance sheet. if you retire some or all at 2/3 of par, then the remaining 1/3 value drops to common equity. ie a buffer. true only if buying back debt help me out here. assume 100bn assets, 80bn debt, 5bn preferred, 15bn common on the balance sheet. the 5bn is repurchased for 3bn cash. so assets goes to 97bn. debt stays same at 80bn. doesn't common value go to 17bn? equity capital doesnt go up if no equity is issued and equity is retired last comment on this. while total equity doesn't go up, common equity would. and it's likely the common equity ratio which would be used as a targeted capital ratio in a potential recapitalization -- similar to the banks (but hopefully lower). so it would in theory start to build a capital buffer if the jr preferreds are voluntarily tendered at a discount to par. to me, that's the only thing that's reasonably possible over the medium term which also likely settles some of the lawsuits. but if the 1500 documents are benign, or they can simply be accessed by an adjacent case, then the govt might not be inclined to settle (among other reasons).

repurchasing equity capital doesnt create equity or regulatory capital jr preferreds are carried at par on the balance sheet. if you retire some or all at 2/3 of par, then the remaining 1/3 value drops to common equity. ie a buffer. true only if buying back debt help me out here. assume 100bn assets, 80bn debt, 5bn preferred, 15bn common on the balance sheet. the 5bn is repurchased for 3bn cash. so assets goes to 97bn. debt stays same at 80bn. doesn't common value go to 17bn?

I'm not saying they're connected events, but I do find it interesting that Stevens announced his retirement at the same event that he announced Trump's GSE plan is coming within weeks. The Treasury Department will likely release principles on housing finance reform – centering on what to do about Fannie Mae and Freddie Mac – within weeks, according to David Stevens, president and CEO of the Mortgage Bankers Association. Speaking at the MBA’s annual convention in Denver, he said the principles will avoid specificity so as not to box-in legislation being drafted in Congress. As you mention, I doubt they are connected. one sentence would be nice: in line with the traditions of American capitalism, the rights of junior shareholders should be taken into consideration. after all, it's those junior shareholders that allowed the govt to get paid back while avoiding the consolidation of $5trn of liabilities on the nation's balance sheet.

repurchasing equity capital doesnt create equity or regulatory capital jr preferreds are carried at par on the balance sheet. if you retire some or all at 2/3 of par, then the remaining 1/3 value drops to common equity. ie a buffer.

if the Sweeney case is settled, do the 1500 documents go away permanently or can one of the other peripheral cases access those? after listening to the congressional hearings, and under the assumption that mnuchin - phillips at least attempt to work on a legislative solution, i'm guessing the time line for any potential resolution is longer than berkowitz, perry, and Paulson are aiming for. And thus they might shave their expected return for a quicker solution. a voluntary tender offer for the jr preferred around [2/3] of par could build a nice $10bn+ buffer for the two GSEs. and possibly it could resolve some lawsuits.

we're 75 days from jump start's scheduled expiration, among a lot of other interesting news. yet I just purchased some preferreds @ 21% of par. the joke's on someone --- either me or the steady sellers.

likely - there has been a good amount of re-loading supply over the past several weeks, often in the series he owns.

I think the remaining docs have to be at least as interesting as the prior docs and likely more so. But so what? All of the actors have left and DOJ is just playing things out. Sessions has shown no interest in changing course. ok fair enough. i'll use that as a base case. but if it's really bad (explicit commentary on GSE DTA windfalls paying Obamacare cost sharing subsidies?) then who knows. sessions (and mnuchin indirectly) now owns this, having defended it for 8 months; they might prefer the documents remain hidden even if it wasn't their misdoings. also, as tom cotton said a few months ago, it's difficult for congress to evaluate reform costs with these cases still outstanding.

based on what we know now, does anyone guess that the remaining documents are potentially toxic enough to warrant settlement talks prior to handing them over early next month? at this point, I guess a settlement would be either a voluntary tender closer to par and/or an agreement to retire sr preferred post jan1?

this escalated quickly. Corker's comments crossed the line this week and so a response was certainly incoming. but this is not repairable at this point and corker will likely become popular with the press.

possible but doubtful. you're likely stuck with him. Depends on the new terms for the buffer. A 5 to 10 bill buffer that is permanent and has no strings and is not renamed to something fanciful or placed in special accounts will be a positive. It will represent an incipient recapitalization no matter how they try to represent it. Just because it will be permanent capital sitting in a capital account. Anything other than this, could be very negative. Say, a buffer that resets (starts at 10 bill and erodes every year like it has been happening with the 3rd amendment and replenishes after a certain threshold. Or a buffer that sits on a specially created account or a buffer that can only be used under specific, narrow circumstances). Briefly, a clean buffer of a good size would put us in the right direction, end of the conservatorship, and make Mnuchin more believable re his view of getting the companies out of government control. It will also be in line with Watt's recent comments that no company can be safely operated without capital. a 'buffer' would have a hundred caveats. i'd rather skip the 'buffer' and move to the main course, a 4th amendment, some time in 2018. in the mean time a move to annual rather than quarterly dividends would be thoughtful.

possible but doubtful. you're likely stuck with him. while watt knows far more than you and me about the GSEs, mnuchin knows 10x more and almost certainly will be the driver -- watt is most likely along for whatever ride, just like always.

if I remember correctly, the key thing that has now changed -- and likely one reason why watt did the sweep this q -- is finally fnma has caught up to fmcc and it can be said that all $$ has been repaid including interest under the original 10pct deal, pre-sweep. to me that gives much more flexibility in a potential 4th amendment.

Why would Trump replace someone who said he is a 'moron' with someone who thinks he is a 'moron'? Trump demands absolute loyalty. Corker is out of favor. time will tell. I think trump actually likes corker. tillerson won't likely leave right now but the damage is likely done and so i'd expect a transition in early 2018.

possible but doubtful. you're likely stuck with him.

there has been an onslaught of supply across the preferred lists recently, someone big is moving on.