investorG

after the 'moron' comment, i'm guessing corker might end up as scty of state.

My view is that Mnuchin/Watt will jumpstart the process with the creation of a buffer. Perhaps, a recap in disguise. Unless it is Corkerized with strings attached. Whatever shape this buffer takes will speak volumes. This, may or may not act as a push for legislative reform. If it does, reform may fall in line with the buffer tactic. If it doesn't, the buffer may prove to be just the initial step of a wider Mnuchin/Watt move. Meanwhile, and as time passes, Corker gets closer to the exit door. Watt has explicitly wrote multiple times that a buffer would not be a step towards recap/release. How do you balance that against the requirement for Watt to sign off on an administrative recap/release? I believe watt has been told by mnuchin to leave recommendations on housing reform to Tsy; after all, mnuchin's told us he's the expert. that's likely why watt muzzles his inner support for the GSEs and hides behind the FHFA neutrality, even when Senators and Congressmen berate him for doing so. the problem is that today's hearing showed an outrageously diverse set of goals, making legislative reform nearly impossible -- but mnuchin is going to try, which pushes out the timing. there's a chance mnuchin waits for 2019 to see if congress switches to Democratic control, which could make things easier for him. I guess in the mean time we'll have to wait for mnuchin / phillips' principles, likely in early 2018. overall, even with timing delay, the securities prices' represent great value imo.

watt suggested 2-3pct capital requirements to get out of conservatorship. he also hesitated when asked if mnuchin was against a capital buffer. both of these seem somewhat good news.

I have a different take, one that I haven't seen expressed yet. Trump is unpredictable and he may indeed make the GSE's a talking point to beat up the previous administration, but his essential #1 priority is tax reform. His administration needs to make good on a campaign promise to produce the first major tax reform in over 30 years. Given the GOP failure on Obamacare, tax reform is now also the top priority, and possibly the only remaining source of survival, for the GOP congress as well. The hallmark of this administration and congress will be tax reform, and the metric for judging success will be the new corporate tax rate. The lower, the better, and Trump wants 15%. To complete tax reform and meaningfully lower corporate rates, CBO scoring is required. In this process, every dollar counts. This is where politicians scrape for every dollar of savings that can be assumed (without causing a media backlash), and find every possible source of future revenue. Both work to further the case for the lowest possible corporate tax rate. Would $100bln in extra revenue from selling the GSE warrants help achieve the top domestic priority of lower corporate taxes? Hell yes. Does the administration & GOP have a huge incentive sell the warrants? For sure. Will GOP leaders allow ideological hatred for the GSE’s to get in the way of a tax achievement essential to their survival? No, especially after their complete failure on Obamacare. For these reasons, I believe the $100bln revenue from a warrant sale is likely included in the projections of the tax reform plan currently being assembled by GOP leaders and the administration. They can’t disclose it yet. It is incredibily market sensitive, and the GSEs warrant sale is only one part of a much larger tax reform plan that isn’t completed. But the leaders know about it and the plan to sell the warrants. Of course, this may be wishful thinking from someone with a very meaningful position in Jr Preferred. But if true, it goes a long way in explaining the apparent overnight change in how members of the GOP view the GSE’s. Their sudden embrace of Moelis and shareholder rights gets them out in front of a future warrant sale. Now the interesting question: If the $100bln proceeds from an assumed warrant sale is part of tax reform plan to be scored by the CBO, how long can this super-sensitive information be kept under wraps in the Leak Capital of the World, Washington DC? Probably not long. Leaks may force an all-at-once public disclosure of a warrant sale. Ryan said the tax plan outline will be released on September 25. certainly possible but imo if it's going to be linked with something it's more likely infrastructure where ~100bn really moves the needle.

IMO it makes little to no sense to own the commons at this point. Things are trending in the direction of the Moelis plan which estimates the commons will price at $9-13 in 2020. Similar absolute upside as the prefs, potentially more timing risk than the prefs, and more downside risk than the prefs. Only benefit of the commons IMO is upside optionality but seems unlikely with a dilutive restructuring looking like the most probable outcome. Prefs might even get a taste of the common upside depending on conversions. Ackman's position is reflective of where things were a few years ago. Not sure why anyone would own commons at this point, aside from mixing a small amount into a pref position for upside optionality and consideration of govt incentives. I'm sure you will continue to only look at the unrealistic upside for the commons and ignore everything else I just wrote, and it is a shame that unsophisticated speculators are riding along and will probably end up doing well. Fanniegate in general has done nothing but hurt our positioning. not sure where to start on this one except to say that I believe there's no certainty on anything in this situation. in light of expected intense media scrutiny on any potential deal, it's not irrelevant imo that -- if the warrants are engaged -- then the taxpayers are on one side of negotiations and trump / mnuchin billionaire buddies Paulson and berkowtiz are on another (among other sides as well).

wrong math. FMCC is included too in the $100bn projection (guesstimates).

I have a lot to lose. I will still wait for that small town rally, maybe Macon, GA or Madison, WI or wherever where Trump speaks about the goodness of Fannie and Freddie, their need for capital and the rewards from warrants and tells the crowd to go buy some shares. given trump and mnuchin's ties to Paulson and berkowitz, I believe it's best if the public figures driving this process are people like Mick Mulvaney, Craig Phillips, ICBA, Sherrod Brown, the RNC, etc. of course Trump and Mnuchin would be involved but it's important I think for consensus to build over time, which is why I'm encouraged by the recent news. this way, FnF's opponents don't get as riled up for action like they do in instances such as Nov-2016 when a frenzy occurs.

this investment takes guts, imagination, and time. having to explain this in an investment meeting is challenging. it's easier to simply say 'too complicated' or 'too much out of my control' and move on to the next one. sell side analysts like KBW give the buy side decision makers mental cover to avoid. hence, I believe, why there is such a great opportunity here for the rest of us, even acknowledging the risks.

Where's the smack my head emoticon... Right next to the "I can't believe I didn't load up in September 2017" emoticon ;D We know how well that would have worked prelamberth, pre dc appeals, which is when a lot of ppl did in fact load up.My point is there's more uncertainty and randomness than our irrational brains lead us to believe i'm guessing you have a big position here, hardincap. it's often those with the least to lose who speak so confidently.

great news day today. RNC release. And Mnuchin takes what I believe is the smarter long term course of action to avoid a repeat of nov-2016 hysteria / media. for the common shares, there is a lot of resistance in this 2.90 - 3.15 band, but I'm encouraged from the above news + Phillips' comments about getting them out of conservatorship (over the long term) and the nomination of Tim Rood's partner as FHA commissioner. good luck everyone!

limbo. we wait for the proposals and any potential action. but from a better starting position.

if desired, there are technical workarounds for this situation

good guess. and the business partner of Tim Rood -- who is sympathetic to us in public appearances -- got nominated for FHA job. combine that with Ben 'they can get paid back but not immediately' Carson, those appear to be good supports to Mnuchin / Phillips.

apparently craig phillips talked about bringing GSEs out of conservatorship over the longer term at the conference yesterday. To me, this is huge news, and the first update since the very early days of mnuchin about their plan.

Unless Mnuchin continues to keep a poker face on this. I personally don't buy the fact that Mnuchin has a secret plan to help shareholders and think anyone who believes so is dealing w bias. I don't think it's intelligent for Mnuchin to not settle w shareholders, but he may see the legal liability as a payment to be made after this administration is gone. Craig Phillips + obvious that MI must believe they have a shot here are both scary indicators. With that said, corker news is directionally pointing the other way. I don't think he is focused on helping out shareholders directly but the question is do we benefit from his plans indirectly? I believe the combined market cap of the public common and preferred shares for the 2 companies is less than $15bn (?) and so the dollar amount requirements which lead to a fair outcome are not high relative to current market cap levels. let's say berkowitz wanted 2/3 of par, for instance, and everyone else did too -- that's only a couple years of earnings, no biggie.

I agree in general but it's a big market with lots of $ involved obviously, so it makes sense big teams are formed. I am not sure what mnuchin's specific plans are but I expect him, at the right time, to push hard for his goals.

Ryan has said tax reform is the top priority this Fall. Mnuchin reiterated it is the top priority this morning in his interview with Maria Bartiromo. It's shaping up to hopefully get done soon. hopefully it does in the next few months but it won't be easy.

seems to me that this is fake news. while I don't know the accuracy of the news, it's safe to say that they have not tipped their hand in any fashion towards honoring the rights of shareholders during conversations with industry participants -- because if they did, the share prices would be materially higher than current. our hope is that this is a strategic move to avoid noise at the current time. my thesis remains that someone with power, whether judge or politician, will stand up and act in the American way by -- at a minimum -- compensating the minority shareholders for their role in providing the companies' time to pay back the loans and interest while avoiding consolidating the $5trn debt on the federal govt's balance sheet. good luck everyone, and I hope you all have a great and safe weekend.

yesterday's trump-schumer deal was likely a positive. first, it was a start on working with (gse-friendly) democrats. second, it likely clears valuable congressional time for tax reform. nothing good is potentially happening on gse reform until taxes are addressed.

add immigration reform to budget, debt ceiling, taxes, infrastructure, and healthcare that Congress will likely address before housing.

my baseline, which could be misguided, is that the collective goal of mnuchin-watt is a stall until early 2018 without upsetting anyone. under that lens, the tip-toeing around an obviously reasonable move (creating a buffer) makes sense to me at the moment (even though it's frustrating to wait). ditto on TSY-FHFA still fighting the lawsuits. we also need to get past the point where FNMA has repaid the full sr preferred with interest, which I believe is close but not there yet. However I will say that under my scenario, the share prices would naturally be higher than they are now due to eager anticipation, so maybe I'm wrong. either way, let's all cross our fingers for a well oiled tax reform process that concludes by year end. good luck everyone, and have a nice holiday weekend.

tax reform is his major priority by far, he doesn't want to do anything to jeopardize it by upsetting some republican congressmen. in his mind, he'd like to see FnF issues stay well in the background until tax reform gets done. conveniently his options increase on jan1 as well.

This hints at what I believe to be a substiantial risk- settlement with only certain shareholders (plaintiffs) while concurrently stopping the shares from trading. Would wipe out retail shareholders and wouldn't allow other funds to buy up the shares and sue. I'd be interested in all of us discussing Snarky's concern of a private settlement with plaintiffs only and leaving out retail investors. possible, but I believe it's low odds. lots of small bank investors invested in the jr preferred. also, screwing the public shareholders while rewarding a billionaire would generate lots of news stories that would irritate trump's base. for those invested in the cheaper jr preferreds (some of my allocation is there), there is some risk that different series are treated differently, based largely on issuance date; in addition to liquidity and dividend rates (which are unlikely to matter), that's one reason for the large price discrepancy among various preferreds, I believe.

anything that suggests an imminent retirement of the sr preferred, especially from antagonists, is good news in my opinion. especially relative to the current securities' prices. It's a lot more complex. The 10% dividend and the 100% dividend are tied to the financial commitment by the Treasury. You can't simply do away with the Srs. as they are part of an integral mechanism. Will the commitment fee he proposes take the place of the dividends by the Srs. and continue to support Treasury's commitment? And where is the capital going to come from to replace that commitment? What will Watt do when capital reaches zero? Will Watt order a recapitalization plan or declare a receivership? This opens up more questions than the answers it provides. All he is suggesting is Treasury has been paid off. Or is about to be. while I can't prove your assumptions are wrong, I believe you are taking a quite pessimistic view rather than a base case reasonable scenario that I simply interpreted as sr preferred gone, commitment fee replacing it (which dents earnings), and a multi-year capital build (that probably incorporates some conversion by jr preferred) from retained earnings and outside sources. he mentions the warrants which I don't believe works in a receivership.

anything that suggests an imminent retirement of the sr preferred, especially from antagonists, is good news in my opinion. especially relative to the current securities' prices.