investorG

One can almost bet their life that lawsuits (Perry, Berkowitz, etc.) won't settle for anything less than 80% par at a bare minimum. They are likely tired, I'd guess they'd likely settle now for something solid but below 80pct.

Measured approach doesn't seem the MO of this administration lol. And we haven't seen much of master plans at work either. More like abrupt surprises, in my view. Cohn just told some bankers next 2 to 3 weeks is crunch time for tax reform. I do not expect Watt to broadcast any of his moves in advance. Just simply come out with an offer Treasury/Congress can't refuse. Similarly, I do not think Trump will wait till next year to cut the cord on Obamacare. On January 1st the WH would be feeling they have wasted an entire year getting nothing done. That is not Trump. And it is him who -in the end- will move the needle. mnuchin is measured to date -- tax reform process will likely look a lot different than HC. I agree on obamcare, trump likely wont fund indefinitely -- but congress will likely fund the CSRs starting in September or October as part of a stopgap measure to avoid a complete exchange meltdown. if premiums go up 40pct on avg nationally (that's what happens if csr's go away), the blowback for R's would likely be too high to manage.

while I think deep down mnuchin and watt would agree that shareholders have been screwed, it's apparent that they are taking a long-game and methodical approach to this process. Tsy+FHFA's flexibility increases on jan-1 and even though many of us want to see bravado, they can't mess up tax reform, and the CSR payments for the next couple months at least will likely need to be paid for by Trump. I do not see something trivial like a DTA writedown due to tax reform derailing their master plans (they could find a creative solution), and so while I would like capital to build immediately, it's less important to me than seeing incremental positive steps like today's language change while not stirring anger in our opponents at the current moment. the court cases, I believe, are lottery tickets at best, but do provide some important cosmetic leverage for any final deal (see tom cotton's comments in a prior hearing). I think the common and preferred securities are materially under-valued but admit the need to take some leaps of faith to see any potential positive outcome. good luck to everyone.

thanks. technically watt appears to have punted. but does have some material changes in the verbiage and charts relative to 1q, so some movement.

Seems to be consistent with MBA proposal. Henslaring sure seems delighted immediately after Mnuchin states this. i think mba plan wants explicit on all mbs and small bankers want it explicit on GSE mbs. big difference.

I recommend setting expectations for those to get tossed also. maybe the supreme court would be a small hope, if they took it on. anyone have new ideas on what to expect from watt during the earnings releases? my odds are below. a) strong adjustment to the sweep (1pct chance) b) minor adjustment to the sweep but with plenty of negative verbiage (this is not recap/release,etc) (55pct chance) c) no adjustment (44pct chance)

under the assumption that mnuchin supports a fair FNMA+FMCC utility with greater private capital involvement -- which may be wrong -- then the main purpose of the lawsuits would be for the plaintiff shareholders to buy time and cover for him to craft his plan in 2018 while still having a small sliver of legal leverage. while the stock prices can go lower, imo they don't price in a lot of legal confidence.

imo to call anything safe we need a judge or someone in DC who can influence things to take decisive action rather than just retweet flooding. people are selling the sh*t out of these securities every day at these low prices, I assume some at least have good reasoning why this makes sense even if it's not apparent to the rest of us. just thinking out loud but does the news today regarding the initial 08 bailout actually lower the odds of a settlement because it's unlikely that anything besides a whole reversal of HERA (which is unlikely) would prevent future lawsuits from flying? Mnuchin could just keep the blinders on pushing for his favorite solution without regard to the lawsuits?

I heard intros. A few spoke about paid for explicit fed guarantees. Any subsequent discussion about whether they were referring to mbs level guarantees or GSE backstops? they want explicit guarantees (catastrophic reinsurance) on the GSE issued MBS, to be paid for by a portion of the G-fees. I do not think they want all mbs to have explicit guarantees and they aggressively pushed against participants being involved in both the primary and secondary markets, even if it involved passive investments in either segment. basically it was an amazingly reasoned discussion today and the most important part was I think the Dem power players who actually have an idea of what's going on (brown, menendez, and heitkamp) showed which side they are on.

for those who missed it (including corker/warner), today's senate hearing was characterized by deep appreciation for the 2 (and no more) GSEs by the 6 community bankers. the Democrats are also supportive and unlikely to go along with anything radical that the elitists come up with.

mkt so far giving no credibility or value to the perry remand potential.

what's the point in reissuing? rub more salt in the wound they opened?

It depends on whether Corker takes the attacks on him personally or not. That's my main concern as to how doggedly various groups are chasing down Corker. There's a saying that an animal that is backed into a corner is much more dangerous than one that is not. FWIW, I do understand the need to put pressure on him. I'm mainly concerned about stepping over the unseen line and turning him feral. there's a decent chance he wants a job inside the wh still. if pressed, I think trump both likes corker and is sympathetic to FnF shareholders

I wonder if corker / warner's true motives are hurting shareholders or just hoping for more competition and other changes which benefit the banks? If it's the latter then there's likely still room for a win-win if shareholders' expectations are reasonable. I know many will say the former, and that's possible, but are their negative comments (hedge funds, etc) only a mechanism to achieve their goals rather than their core feelings?

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows: 1. explicit, paid-for catastrophic guarantee. 2. private capital in front of #1 and not 1/2 percent as in the past. 3. pre-funded fund to deal with failure of mortgages, not bailing out the companies. 4. access to secondary markets by entities of all sizes (regional banks) 5. counter-cyclical nature of GSEs enabling credit during downturns. 6. build off of the existing infraestructure. #1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past. I agree even though the market doesn't. I wonder if the weakness at these low price levels is a delayed timing thing or more of a bad outcome thesis.

Senator Tom Cotton is a smart, independent man and also close to Trump. I recommend checking out his portion of the Senate hearing yesterday where he questions the witnesses on incorporating any potential lawsuit costs into the reform equation.

did anyone else hear corker talk about building off the current infrastructure? obviously he wants the standard explicit guarantee, competition, etc, but that sounded a little less antagonistic.

my expectations for this week aren't tremendously high. even if watt withholds some cash, his language with congress suggests that he will caveat it with anti-shareholder, pro-congressional commentary. however, I don't understand why henserling's commentary can damage the securities at these levels while ben carson's of a few weeks ago (investors can get money back eventually) seem overlooked. we know carson works and speaks with mnuchin, and that trump/mnuchin are most likely required to pass the legislation that the opponents might come up with (Barring a veto-proof margin on a divided topic). anyway, it is what it is for now. some people are giving up even at these low prices. maybe they know things we don't. in the mean time it would be nice, and well worth the wait, if someone in power besides Capuano mentioned the rights of shareholders. good luck everyone!

Great point, investorG. I don't think that fact is lost on Carson (very, very familiar with management that backed the blueprint). And it's awfully convenient this plan came out when it did just before Mnuchin, Calabria, and others are ready to tackle the GSE issue in the 2nd half of the year... I think it pays to be cautious. That has been the case... for years... something coming at us out of left field... and Carney and Joe Light hiding behind the scenes waiting to strike. What undervalued said. i'm focused on the news not the stock price and last week was a major positive in my opinion, regarding the blueprint and carson's comments. of course there's pitfalls ahead with likely court losses, congressional republican proposals, and with trump in general. but if you can't get a little excited over something positive happening, what's the point?

I need at least $230,000 for school and have 10,000 shares @4.05. When should I exit or keep them till they hit $20.00? What would be safer as you say 'all the things that could go wrong' . You all are very smart and deserve every penny you can make here. My hats off to those who have held this since 2008. This has already been answered. This is an incredibly bad idea and you should not be in this investment for college. What ? All this analysis is not good? I see a $19-$20 valuation for commons, why not? You can do all the best analysis you want but shit happens. https://en.wikipedia.org/wiki/Murphy%27s_law. You want to focus on the downside not when everything is going your way and is perfect. If you think everything will goes your way and is perfect, why don't you put all your money in 0 or 00 on a roulette wheel at your closest casino. It pays out 35 times way higher than this. Your $40k will turn into $1.4 millions. comparing this to a roulette wheel is laughable. there are NO guarantees this won't go to 0 but you don't need me to go through all the reasons why this investment is different than a casino. Despite all the criticism on this board, I admire Emily's aggressive attitude and bluntness.

now that a solid blueprint is out, they should partially fund the infrastructure plan they're rolling out with the warrants. there was a headline of ackman mentioning this a couple weeks ago. the banks could moan a bit but there's 4-5bn of underwriting fees to be had from selling $200bn of primary and secondary shares, which is a jackpot in the current environment.

I'm confident that watt would not lead down the 'blueprint' path on his own without explicit support from congress (whenever) or mnuchin (in 7 months). I agree with flynnstone that this blueprint is powerful because it's hard to argue against. it should be a major player in the debate. the opponents will likely cite that it's still too much govt involvement (those who want full privatization) and also it's theoretically possible for another govt bailout. but looking at it objectively, I like the proponents arguments better, hence my investment.

Good discussion so far. I dialed in, but kept getting interrupted by work and missed this slide. Was there any mention made behind the though process of equitizing current junior preferred shareholders only to re-issue another 25B in preferreds? Is it simply the rate differential that can be achieved? if you don't offer a conversion and also no dividends during capital building phase (which makes sense), then preferred stocks remain low-priced in the mean time, which is not the goal of moelis. they may have used the 25bn in preferreds on the back end to achieve selected capital targets while at the same time maximizing the headline figure of 75-100bn for taxpayer gains.

I believe the analysis on pages 36-37, in conjunction with other assumptions like half get converted, simply assumes jr preferreds will get par value equivalent at the time of the IPO in the form of common shares. hence, if the stock is issued at a lower price (ie page 36 rather than page 37), then the jr preferreds receive more common shares and a higher ownership %; and vice versa. it's complicated but in the end this pits preferred shareholders against commoners and the govt in terms of pricing the IPO; therefore I believe, if this plan gets adopted -- which is many steps away obviously, a fixed conversion ratio would likely be applied in advance of the IPO. currently, the jr preferreds have little leverage due to the court outcomes thus far, and thus they would be more of a taker than maker of a deal. it makes sense to me to have a healthy combination of common and preferred, fwiw.

the moelis presentation is huge -- these guys are pros -- and I advise paying attention. +1 it's about time some financial restructuring sanity was introduced in the debate relating to $5T financial entities! the thought occurred to me during the presentation: this is something that certainly speaks to financial pros like mnuchin and that blackstone guy he hired, whether or not corker/crapo get it totally, this is exactly what he's used to seeing at GS -- a tight presentation, hard numbers, and well-rehearsed answers to expected questions. this plan will be hard to argue against as the debate picks up, and we finally have a hard-core voice on our side in moelis.