investorG

How much is owed under the original deal if you applied the NWS as an over payment? not sure exactly but from what I've read the sr preferred would be fully retired by this year end if the over-payments from the original deal counted as pay downs.

mnuchin flops again, says sweep should continue per new Bloomberg article and his spokesperson. back to the courts. I'm (wrong so far) counting on a strong American out there in a position of power to make a difference.

Finally someone is thinking. The idea of r-ship has been floating around and it makes perfect sense to start with a blank slate to raise large amounts of capital. Once in r-ship the conservator has the power to create a limited life regulated entity. If assets exceed liabilities, the assets may be transferred over to the new entity. No shareholder will have rights in the new entity (ie commons are wiped). This is all stated in HERA. The details here is, once in r-ship the liquidation preference of the jr prefs are triggered and are entitled to par or remaining equity before liquidation/transfer of assets. Perry appeals ruling confirmed such rights are intact. Bankruptcy court doesn't look at GAAP financials, but will look at tangible equity. Conveniently enough, gov't senior prefs have a liquidation value of 1 billion and equity over left after 15% DTA hit is roughly 20 billion and you have 19 billion jr prefs for Fannie Mae. I think jr prefs are called before assets are transferred to new entity. Sure they can not give anything and we go to court again, but the laws governing this end game looks straight forward. We won't know for sure what will happen, but I think the plan will slowly get leaked and the gap between common and prefs will widen to reflect that. would you please explain the underlined portion of your post? Sure, reading the SPSA the liquidation preference of the senior preferred for Fannie/Freddie is 1 billion. The fly in the ointment is if Mnuchin determines the treasury wasn't paid back and 117 billion is still outstanding then we are all screwed. https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2008-8-7_SPSPA_FactSheet_508.pdf Ironically the senior preferred have the same language in terms of liquidation preference as the jr prefs. So if assets are transferred to a limited life regulated entity, the senior prefs must get par or what's left of the equity. Anything left over will presumably go to the jr prefs. It's probably in the jr prefs best interest to go through r-ship and get called immediately then stick around couple years trying to rebuild capital slowly. the scenario you seem to predict is that they keep the 187bn sr preferred outstanding and they enter receivership but first they call or tender the jr preferred --- certainly possible but perhaps not the most likely outcome.

would you please explain the underlined portion of your post? (snipped quote for readability) This is directly stated in the SPSPA. https://www.treasury.gov/press-center/press-releases/Documents/seniorpreferredstockpurchaseagreementfnm1.pdf Section 3.1(a), top of page 6. but the current liquidation preference is far greater. unless they adjust the agreements, I do not see how the sr preferred drops from 187bn to 2bn if they enter receivership.

Finally someone is thinking. The idea of r-ship has been floating around and it makes perfect sense to start with a blank slate to raise large amounts of capital. Once in r-ship the conservator has the power to create a limited life regulated entity. If assets exceed liabilities, the assets may be transferred over to the new entity. No shareholder will have rights in the new entity (ie commons are wiped). This is all stated in HERA. The details here is, once in r-ship the liquidation preference of the jr prefs are triggered and are entitled to par or remaining equity before liquidation/transfer of assets. Perry appeals ruling confirmed such rights are intact. Bankruptcy court doesn't look at GAAP financials, but will look at tangible equity. Conveniently enough, gov't senior prefs have a liquidation value of 1 billion and equity over left after 15% DTA hit is roughly 20 billion and you have 19 billion jr prefs for Fannie Mae. I think jr prefs are called before assets are transferred to new entity. Sure they can not give anything and we go to court again, but the laws governing this end game looks straight forward. We won't know for sure what will happen, but I think the plan will slowly get leaked and the gap between common and prefs will widen to reflect that. would you please explain the underlined portion of your post?

at the milken conference, mnuchin said his target for housing reform legislation is late 2017 or early 2018.

nice proposal, thank you icba. confused on the warrants into sr preferred comment in your pasted attachment -- was it a typo?

question regarding the court case timing: perry and Sweeney seem 2018+ the Cincinnati and st louis appeals courts, along with hindes in Delaware seem like 2h 2017 possible rulings. what about Collins in texas -- both the fhfa constitutionality part and also the standard nws illegality request --- could either one of those or both come at any point?

Money is fungible, how would you determine where the Dollars for a specific expense is coming from? The whole idea makes no sense to me, unless you talk about money laundry. if you read all of corsi's reports, including a couple with govt data, and then the 200 page joint congressional report on the CSR payments, I think you too will think there's a real chance the GSE profits were used for the Ocare subsidies. I believe spekulatius is correct. HERA enables all payments to go to Treasury's general funds. It's in the law signed in 2008. Once in general funds the money gets lost. That money -whether dividends, legal settlements or DTAs- will be no different than any other money Treasury receives. This Ocare payments strategy should be abandoned, in my view. The more transparent theme regarding the NWS has always been "never to share a dime of profit with shareholders". There is even a Treasury memo about it. it's possible you are right, that's why I say there's a chance it was directed to CSR payments. but once again I would say if you read the 2 joint congressional reports and corsi's reports, including the mar13 one (can be found on gselinks.com), I think you'd have some suspicion over the timing of the congressional request, then withdrawal of the CSR funding at the same time of the GSE DTA windfall, combined with the ridiculous stonewalling of the congressional investigation by the prior admin. it's also possible that the current admin knows this but doesn't want to hurt people if their plan is to eventually stop the sweep. but maybe you're underestimating the power of the anti-gse opposition and thus anything that tilts opinion in favor of the GSEs needs to be used, imo.

Money is fungible, how would you determine where the Dollars for a specific expense is coming from? The whole idea makes no sense to me, unless you talk about money laundry. if you read all of corsi's reports, including a couple with govt data, and then the 200 page joint congressional report on the CSR payments, I think you too will think there's a real chance the GSE profits were used for the Ocare subsidies.

Morgan Stanley's treasurer is leaving for FNMA.

imo the only way repealing and replacing Obamacare can happen concurrently is to sway public opinion. otherwise the democratic senators would stand united and it's hard to reconcile what Murkowski/Collins/cotton/others in the senate want with the freedom caucus especially when a key reason is a tax break for medical corporations and investors that frees up flexibility on tax reform plans. I believe there's a real chance that corsi's reporting on the GSE profits funding Ocare through the Treasury is somewhat accurate -- especially after reading the joint congressional report from last year. If this view is right, then an aggressive but perhaps reasonable strategy for the admin would be to expose this, say they won't continue the CSR payments, drop the appeal of the House R's suit, and then leave it up to congress to either pony up 130bn over ten years or repeal and replace with more unity in the R party. watch sessions' interview on fox news yesterday at the end on the CSR payments, my take from that was he believes the appropriation should come from congress (even though he left open the door for it to possibly continue as is).

funny (or not) how sorkin mentions the hedge funds but not all the community banks, pension funds, and yes the US govt which owns 80pct... legislatively, either the warrants are used to partially fund infrastructure / tax reform or we'll be waiting a long time for action, perhaps not until 2019 -- which would leave the courts and administratively pausing the NWS as the only 2 potential catalysts for 2017.

fwiw from some press clips, it appears mnuchin and sean duffy were together today in Wisconsin at the trump rally. rep duffy is in charge of the house subcommittee on housing.

if we're being objective, at this point it's fair to say he's off to an underwhelming start. he violated his ethics agreement plugging lego batman, over-promised on legislation timing, and continues to fight aggressively against the GSEs in court (see today's treasury filing in the Delaware case). I am not seeing leadership or strength at this point. on the plus side, it's still early. like to hear opposing views if you have one, thank you.

link... https://www.ft.com/content/2e48c5bc-238c-11e7-8691-d5f7e0cd0a16 He acts like he and his team of 100 treasury workers are developing medicines rather than plugging some numbers in a spreadsheet that will have enormous amounts of guesstimates due to economic growth impact assumptions. at best he is simply stalling to see if healthcare reform can pass first to make his job easier.

before any fresh capital would be raised, much less 50bn+, it is highly likely the warrants language would need explicit change to set firm terms on amount and exercise price.

judge selection for the other regional appeals court case seems crucial --- millett and brown both gave the relevant respective judgments, it comes down to the 3 individuals who will read the case, read the dc circuit rulings, and decide which to support.

it could absolutely affect his 2018 re-election prospects from a primary challenge or less likely the general. and it would be helpful to the admin reform efforts if he dropped his aggressively antagonistic stance. the courts for many years have inexplicably proven incapable of delivering justice, so what do you expect these passionate advocates to do -- simply play nice and sit on relevant info when the other team is aggressively dirty?

this is likely an important juncture. On one hand, Trump doesn't want to be accused of pushing an already failing Obamacare over the cliff, and so he might continue the appeal and the payments for a defined time period until his plan is expected to pass; likely extending the NWS. On the other hand, Trump believes it's un-American to change the terms of a deal 4 years later to sweep 100pct of corporate profits and bypass Congress to fund insurance payments to healthcare companies (even if the courts say the sweep is legal). He exposes the issue.

Perhaps it will take some time but there are likely important signs along the way -- for instance the reform principles that Calabria mentioned by this summer and also the inclusion or not of the long term GSE swept profits in the full OMB budget scheduled for May release. The current price levels, to me, represent low expectations of positive resolutions -- even the GSEs' main antagonist, the large bankers' organization, kept FnF alive among other competition in their recent proposal paper.

I suggest you read or watch the transcript of mnuchin's confirmation hearing ---- facing a panel of people who would have made it easier on him if he was negative regarding FnF, he instead defended them and also his option to act outside of congress. he could have been lying but many here are not betting on that.

typical GS strategy --- plan a ridiculous amount and come out publicly when he has his full arsenal of info. what we saw on nov30 was basically a person giddy with excitement (he had just gotten the job) over-sharing in a major way -- i'm confident he regrets that exchange even though I think it's what he believes.

nice job, josh -- very clear and high level explanation in a limited time window

while I am disappointed in the 4q16 sweep going through and also quite surprised at the current securities' prices, I believe it's fair to judge the administration's actions after the govt funding bill has been finished (scheduled for late april) to help prevent a repeat of 2015 jumpstart language insertion. the Gorsuch confirmation is also important not to disrupt. I wish everyone peace in the rocky waters and good luck.