investorG

it's not a slam dunk and many will exit but the reasons would be a) the low price b) potential court victories and their impact on stock price even if still in conservatorship and c) Tsy might want to move the ball forward at some point for progress / collect their billions for pet projects.

Yes but Tsy might want to monetize their position at some point. hopefully. could be ~ $100bn left for them in some form that they can't access if they sit still.

ok. so it needs to go away or get converted to common. or a combo of both.

it wouldn't get counted if it moves to non cumulative but it would stop being negatively counted. it goes to a wash and so snarky's original view of 60bn of retained capital plus 140bn of raised = 200bn which is the threshold needed.

I'm not sure if calabria's numerator is core capital or book capital for his required levels. but if you're right and it's core then yes Tsy would have to flip it to non-cumulative which at the time of settlement / restructuring should be fine to yellen assuming that she really wants to get them moving towards privatization. the bigger road block for her would be how much sr pref to forgive if necessary.

the math seems right but i don't think you can raise 140bn of equity with 265bn of sr pref on top even if its non-cumulative as you have suggested.

the math doesn't work without a Collins win or yellen sr pref write down. the boulder is likely too big. or i guess yellen and zandi could rip this up if she really doesn't support it. seems like tim howard is banking on that.

a) would need to settle lawsuits before can raise the $140bn in october -- which is up to yellen as you point out and isn't clear. b) I dont think you can raise $140bn in october with the 260bn of sr pref on top of it -- that would also need to be reduced via yellen or SC thru collins.

mnuchin really went heavy on us. I can't comprehend his level of greed and I hope the SC is watching and is savvy enough to observe and react appropriately such that all sides can win.

it would have been relevant for yellen to signal her approval of this deal since calabria will likely be gone later this year and in theory this arrangement isn't fully binding on yellen / zandi perhaps in july.

That's awfully optimistic given Senior Prefs remain and liquidation pref keeps increasing. I think it would be a pleasant surprise if we're not red. The only thing I know for sure is that there will be massive volume and volatility in both the common and preferred. And while I have close to 0% success predicting security price movements, I actually wouldn't be surprised if the preferred does even better than +30%. Because here is what Mnuchin's punitive blueprint provides for options right now*: Fast Recap or No Recap. So given those two choices, Fast Recap is the one that preferred investor plaintiffs and the companies will choose. I think a settlement occurs before SCOTUS ruling and then capital raise begins. *Based on the assumption that SCOTUS ruling is uncertain. Some, of course, think it's a lock, but we've been disappointed too many times for me to take that view. I dont like negotiating from a position of weakness resulting from the agreement (as opposed to the litigation merits, which I think is a position of strength). I hope Ps agree. See my post right after yours and also consider that, compared to Tsy, plaintiffs will now always be in a position of weakness because a) we want a recap way more than Janet Yellen does and b) playing out the case for several more years will cost a lot in increased liquidation preference and dividends. If your upside is limited to par value and the value of the lawsuit will not accrue to you anyway, why would you keep fighting? a) lamberth - berkowitz might hold out for that if yellen's offer is weak. could get $40. b) its a race to conversion or dividend resumption for the jr pref -- the sooner the sr pref goes away the sooner the latter (and perhaps the former) occurs.

That's awfully optimistic given Senior Prefs remain and liquidation pref keeps increasing. I think it would be a pleasant surprise if we're not red. The only thing I know for sure is that there will be massive volume and volatility in both the common and preferred. And while I have close to 0% success predicting security price movements, I actually wouldn't be surprised if the preferred does even better than +30%. Because here is what Mnuchin's punitive blueprint provides for options right now*: Fast Recap or No Recap. So given those two choices, Fast Recap is the one that preferred investor plaintiffs and the companies will choose. I think a settlement occurs before SCOTUS ruling and then capital raise begins. *Based on the assumption that SCOTUS ruling is uncertain. Some, of course, think it's a lock, but we've been disappointed too many times for me to take that view. You'd have to assume Yellen is eager to get on with this process to take this view imo (or be super confident on collins constitutional which i'm not). bc she could stall for years if she wanted, although the bankers would likely be pushing for her to settle so they can raise big $$ and collect fees. I did a simple balance sheet analysis a few weeks back that no one commented on, but it broke me out of my inertial thinking that started in 2014, which was: "We have to win the lawsuits and get paid the overage." But when it became clear that Mnuchin was not going to settle, I had to rethink what may happen. And when I did, I understood the dynamic clearly for the first time that since writing down the Sr Pfd mostly accrues to the Tsy-owned warrants anyway, what matters much more to preferred shareholders is that the NWS ends and that there is a method to pay down Sr Pfd. Any writedown of the Sr Pfd is cake, of course, but much of the benefit moves from one pocket of Tsy to the other pocket. Common shareholders are hurt badly without a writedown of Sr Pfd, but that's the reason most of us here are only or mostly in preferred. So if you are a big preferred holder plaintiff like Berkowitz, who has been in the trade for 6-7 years with little to show for it, are you willing to sacrifice a potential big legal win that is years away and only changes the timing of your upside to par, but not the magnitude, in order to get a recap done ASAP? I think Berko says, "Hell, yeah!" it depends on what yellen offers -- i agree we are incentivized to settle but only if it's not for peanuts relative to our legal prospects at the time.

but if we get a remand and yellen / zandi want to wait 18 months for that to be resolved / appealed etc. then they can. the sep 30 report can have fluff, more recommendations than actions. if for instance plaintiffs asked for the moon in a settlement. we are incentivized to settle ASAP, along with the investment bankers. we have some leverage if collins goes well and vice versa. the stakes on collins are even higher now. if yellen wants to stall then at least we'd stall at a higher price level if collins goes well.

That's awfully optimistic given Senior Prefs remain and liquidation pref keeps increasing. I think it would be a pleasant surprise if we're not red. The only thing I know for sure is that there will be massive volume and volatility in both the common and preferred. And while I have close to 0% success predicting security price movements, I actually wouldn't be surprised if the preferred does even better than +30%. Because here is what Mnuchin's punitive blueprint provides for options right now*: Fast Recap or No Recap. So given those two choices, Fast Recap is the one that preferred investor plaintiffs and the companies will choose. I think a settlement occurs before SCOTUS ruling and then capital raise begins. *Based on the assumption that SCOTUS ruling is uncertain. Some, of course, think it's a lock, but we've been disappointed too many times for me to take that view. You'd have to assume Yellen is eager to get on with this process to take this view imo (or be super confident on collins constitutional which i'm not). bc she could stall for years if she wanted, although the bankers would likely be pushing for her to settle so they can raise big $$ and collect fees.

Yes, good job summarizing it. I agree. Wonder where prefs trade tomorrow? Being dependent on a Biden Administration (Yellen) is awful. JP are dependent on not to be trusted Ds only if scotus doesn't come through. friends, this has always been a legal special situation so basically SC rules on collins in June and that gives Yellen and plaintiffs 3 months after to settle before the Sep30 deadline to congress? if we win remand then we have some leverage and if we lose then we have just sweeney and lamberth minor leverage? i dont follow your reasoning. if scotus gives P a win then that effectively eliminates SP (either right away on const claim or after SJ on APA claim). congress can do what it wants, but if you are a JP, your laser focus is on scotus. congress can always act....or not like the past decade A report is due to congress by sep30 on how they are thinking about restructuring tsy's investment. I assume we won't win constitutional collins and APA remand would take well more than 3 months to resolve. also the bankers would be itching to do 70bn dollar deals which can't happen until legal resolved (which is many years probably for lamberth). so after the SC ruling in june and before the sep30 deadline (see tsy blueprint release), that would be a window to settle the legal cases (in return for a potential adjustment in sr pref) with us having various levels of leverage depending on how collins is ruled.

Yes, good job summarizing it. I agree. Wonder where prefs trade tomorrow? Being dependent on a Biden Administration (Yellen) is awful. JP are dependent on not to be trusted Ds only if scotus doesn't come through. friends, this has always been a legal special situation so basically SC rules on collins in June and that gives Yellen and plaintiffs 3 months after to settle before the Sep30 deadline to congress? if we win remand then we have some leverage and if we lose then we have just sweeney and lamberth minor leverage?

This plan seems unworkable, $400bn needed to be raised or retained, unless we win Collins or Yellen slices the sr pref. edit: Calabria's tone seemed pissed.

zero coupon (or close) non-cumulative would allow a) tsy to get paid back in full eventually if they win court cases and b) new 3rd party capital to come in easier and quicker bc exit conservatorship and turn on divs sooner with proceeds not used hurriedly to pay down the sr pref which can stay outstanding for longer at a non-punitive div rate. I hear you on Tsy motives but at some point the greed is outrageous (i'd argue it already is, on the back of US citizens). Anyway, doesn't matter what we think with only 6 days left sadly it is what it is.

what about making the sr pref non-cumulative and changing fixed dividend to 1%. in theory could pay sr pref down over much longer time period while still turning divs back on in a few years. $2.2bn per year is more manageable.

ok, thanks. I do see what you say, it's in the 3rd amendment only. So the benefit of the sep30 2019 letter agreement was to reduce odds of receivership by showing some phantom common equity?

Do you have any links to support the view that div would be based on liq preference? I'm not saying you're wrong just that your view is inconsistent with what I've read. They also use the book amount not liq pref in the core capital analysis in 10k's. edit: regarding common not appreciating, it could be due to expected dilution with anywhere from 100-300bn needing to be raised.

In a going concern (i.e. non receivership) scenario, is the amount needed to "retire" the Sr pref the $194bn currently on b/s or the higher liquidation preference (220bn+) which still builds under the letter agreements? the bloomberg article cited the latter but I view it as the former (outside of receivership). If I'm correct then the letter agreements are not an accounting gimmick but rather actual capital raised, once again assuming they are going concerns.

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation. My best gin waiting in the fridge in case we have a happy ending LOL I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement. all hat no cattle for that putz. three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that? He merely said it simplifies things. As in, he expects all plaintiffs will throw in the towel on all lawsuits. no, why we would we trade in lamberth? It's $40 potential. Ideally we'd settle that at some point in future for some value. Like an earlier conversion to common or even better some ratio of paydowns as capital is built -- half sr pref half jr pref.

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation. My best gin waiting in the fridge in case we have a happy ending LOL I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement. all hat no cattle for that putz. three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that? He merely said it simplifies things.

Yep and the expropriation claim. Not sure on timeline for that one ie. if it's been set down for trial. We need a trial date. I recall Holdenwalker saying 500 until trial for Lamberth. Not sure about accuracy. Expert evidence is due 90 days before trial. Don't expect settlement until all of the evidence is in. We still have our MOS, but it will be a pretty terrible outcome if there isn't admin reform in the short term, for example, today. scheduled for summer 2022. and I assume 3 years for appeals. the sweeney / schwartz case is out there too but it appears bogged down in some sort of appeals.