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I think 2:1 is a pretty low ratio for what most preferred shareholders would expect. Obviously, it's going to depend on where the common trades, but as of right now, I wouldn't be happy with anything less than 7-10:1. Could be willing to go lower if much of the uncertainty regarding their future, court rulings, and recap are ruled out, but that would also result in a higher common $ which makes a lower conversion ratio make sense. the preferreds lost relative advantage this week imo (outside of future positive court rulings). their negotiating leverage declined and the odds of the warrants being exercised are higher meaning preferreds are fighting more against trump / taxpayer in dividing the equity. but clearly the 2:1 ratio I used would be further down the line and any potential progress would be reflected in the common price, hopefully, relative to where it is today. and fwiw 1/3 of my position (currently, it changes often) is in preferred, so i'm not against preferreds.

if you are anti-GSE what did you hear that excites you besides nothing is imminent? not trying to be difficult, just curious. thank you

many of us are focused on the weeds but put yourself in a big portfolio manager's shoes looking at the forest. mnuchin seems in control, which is crucial. fnma has 1.1bn shares. 5.5bn with full warrants. if 20bn of jr preferred is exchanged @ 2:1 ratio (for 25-pars, 4:1 for 50) that's another ~1.6bn shares (20bn / 25 par x 2) = 7bn shares x 3 = $21bn / ~ 10bn earnings = 2x P/E ratio. there are lots of negatives you can throw on like timing, additional capital to be raised, deal execution risks, future earnings stream uncertainty, and many more. but 2x can absorb a lot of bad news, and that assumes full warrants exercise for free. while my eyes are open that any scenario could occur, based on all that I see the securities represent excellent value.

i would not get your hopes up for any short term news positives. fast traders might want to exit. the sr preferred can't be touched til 2018 so the best case for 2017 is likely a stop in the sweep imo. but if you're a long term investor, those who don't care whether it takes 1 or 2 years, with the market at its highs, wouldn't you want to take a look here given the current valuations? court case optimism is quite low (unlike prior to tuesday when the prospect of a 35pct 1-day drop scared people) and mnuchin sounded today like a man who knew what he was doing.

did the comment on fox news throwing the court issues over to DOJ suggest that Sessions can decide to change course if he doesn't believe in what the DOJ is fighting for (maybe the 12k documents are shady)? not in the perry case as much where the courts have said the fhfa can do whatever it wants but in some of the other courts? mnuchin made it seem like he and treasury are just along for the ride in the courts. thank you

imo he demonstrated much greater command and confidence which is good. short term money should get out but longer term money in.

that seems like a good plan with balance. let's put you in charge.

while you are likely right it would have been a 0, it's also likely that all the big banks would have gone to the same fate without the govt injections, mbs buys, etc, so it's unfair to cherry pick imo. in addition to the dividends sent to the taxpayer, there's likely 200bn of equity value here ---- most reasonable investors would say divide it up fairly between the taxpayer and the shareholders, especially since they explicitly chose to keep it listed in 2008 rather than either liquidate or have govt take on 100pct (and add the debt to it's books).

unless you owned pre-08 and if you are comfortable with the liquidity difference, does it make sense to switch from the high yielding (in theory) preferreds to the cheapest ones under the thought that preferred holders' bargaining power is lowered, raising the odds of a conversion to common in a potential plan rather than restarting dividends? thank you

Dear Mr Mnuchin, When interviewed, please ask everyone to stop vilifying the GSEs. As you know better than everyone, these are amazing companies providing crucial benefits to America, now and in 2008. In addition, please acknowledge that in the real USA, shareholders have rights that should be balanced with customers, employees, and in this rare instance the taxpayer --- even if prior administrations, congresses, and the courts hide behind some technicalities. Thank you and good luck to you!

i very much hope you're right but a 4th amendment that reduces the 187bn before jan2018 seems difficult based on the headline language at least. and if he adjusts the dividend retroactively to a fixed % instead of all profits, but keeps the 187bn steady, then he'd have to send $ back to the company, which might be a home run as a down payment on capital build but politically difficult. i fear when he said they can do this quickly on nov30 he meant with congress' (or the courts) help. still, any supportive language and a stop of the NWS forward looking could be material from these price levels.

jumpstart said treasury can't sell, transfer, relinquish, liquidate, divest, or otherwise dispose the sr preferred for 2 years at least (from dec15). i assumed that changing the terms from NWS to some fixed dividend where excess payments above that dividend rate were paydowns would reduce the current outstanding senior preferred and thus would not be allowed til jan2018. i guess he could say the dividend is not a true NWS but rather a fixed dividend where anything above and beyond lets capital build while at the same time keeping the 187bn constant --- is this what you're thinking? another thing he could do, possibly, is foreshadow that he's going to take material actions in jan18 if congress doesn't act in 2017, which could move the ball forward in congress in 2017 to the utility model. please let me know what you're thinking relative to this response. thank you.

today's ruling unfortunately lowers the expectations baggie for the rest of 2017 to a potential stop of the sweep. the warrants aren't going anywhere. the sr preferred can't be touched til 2018 without the courts or congress. congress is log-jammed. offsetting the above negativity are securities that trade at non-demanding valuations. I am mainly disappointed that Ginsburg wouldn't even allow to remand to see the documents. good luck everyone.

is it safe to say that this 3rd request for additional documents, if agreed, would be the last one submitted before a decision is made, ie they have to cut it off at some point? or would they try to look at some of the 12k documents and then include those in a 4th request to the perry appeals court? thank you

healthcare in march, taxes thereafter. i suspect housing reform will not pass congress this year (crapo hinted at this) unless they move fast. if this is true, two questions ---- what's a realistic expectation of what mnuchin-watt can/will do this year on their own, and will he wait for perry appeal or vice versa to act? edit: my best guess would be: --- he should and will stop sweep on his own --- he will likely propose his plan to congress --- he will wait on the courts outcome before a 4th amendment / warrant adjustment on his own any good thoughts?

you gotta start somewhere ----- in press release it cites 'scheduled' sweep. scheduled has not been used in prior releases.

the denominator in the capital equation may be risk weighted assets rather than total assets, which would likely reduce by ~half. the real tim howard says 70bn base case capital needed with 100bn on the high side. i don't see how any of us could know more than him.

motion was UNOPPOSED meaning the DOJ has a new sheriff in town there is a lot of excitement about these 4 perry filings tonight. would you mind explaining why it's so important? isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling? thank you The important part of the motion regarding the 48 documents is that they are to be unsealed. Meaning available for other plaintiffs, available to the media, and available to us. This motion was unopposed. oh, wow, that is interesting. so in theory most of the 12k documents should at some time become public, rather than just viewed by the lawyers. thank you

motion was UNOPPOSED meaning the DOJ has a new sheriff in town there is a lot of excitement about these 4 perry filings tonight. would you mind explaining why it's so important? isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling? thank you

whether it happens this week or sometime in march, it will be disappointing if the 4q profits are swept. simply say we're stopping the sweep and we hope this serves as a jump start for bipartisan reform discussions --- this should not be controversial.

imo mnuchin is under serious heat to make things happen, in general. cohn has impressed Trump, likely creating an internal rivalry for attention. last night, when trump spoke before mnuchin's swearing in (can find via trump's twitter feed to facebook link), he said something like 'a lot of people wanted this job' implying mnuchin better deliver. he also mentioned mnuchin works 24 (28 even) hrs per day, which may simply be the President's expectation for him.

Now it's just a matter of playing the GOP Congress against Mel Watt & vice versa. Fat lady hasn't sung yet, but she's warming up. I always thought these comments from Watt in January of 2015 were very telling, but I dont recall it being reported on or discussed. Watch the 2 minutes beginning on 1:44:00, ending 1:45:29 https://www.c-span.org/video/?324024-1/hearing-sustainable-housing-finance&start=11007 He basically says, 'when i got to FHFA, the organization had many visions to lead to the wind down of the companies but I stopped that since that isnt our job. Our statutory mission is to ensure safety and soundness in the market in the present ' So I'm tempted to think that Watt wont put himself out of a job, he did leave congress for it, and I further think he is a fan of the GSE's. He doesnt seem like a fighter to me, I think he wants to be told what to do, either by congress or by the Tsy. However, the extent to which D's want to use him to fight anything coming out of the Trump admin is unknown. it's all about the deal, imo. admin wants gse reform, congress wants dodd frank adjusted, and watt wants some unknown ask that should be accommodated.

the president is loyal but if people get too greedy then they risk his ire. some of you may disagree but my intuition tells me the preferred players wouldn't try to screw others in any negotiations in a potential political solution (unlike in legal where there could be a pro-preferred only outcome). there are plenty of profits for all parties involved, including the taxpayer, if the gov't stops its unjust stealing.

can't know for sure but look at their appointments so far and i'd say its important. bloomberg is reporting that cohn (who based on his pedigree is probably dominating inside the WH) has taken over the tax cuts issue (likely due to mnuchin's comments on cnbc in nov, and the subsequent naming of the 'mnuchin rule' by wyden of no absolute cuts for the wealthy) leaving the competitive heat on mr mnuchin, if confirmed, to get the housing situation done right.

I just don't think an immediate recap makes any sense. There's nothing wrong with them coming out with a plan that takes 3-4 years until complete resolution. It would make zero sense to call the prfd's as that only worsens the capital picture. Why would they structure some payout for prfd and reduce retained earnings when they can convert to common and avoid div payments? The more I look at this, the more I see value in the common shares as a key. Maybe I'm 100% wrong and just don't get it. When I look at the massive dilution to common as a potential path and what the gov would make, ramifications etc. as opposed to a much more intelligent plan that makes the gov just as much money, why not go with the plan that encourages future investment, higher pps and protects all shareholders. Because most of the preferred require outdated dividend payments, and FnF can't just continue making $billions$ and not pay them. Best to replace them, in time, at realistic rates. absolutely they could continue making billions and not pay them. they are in a big capital hole currently. redemption of preferreds are very unlikely in the menu of options. it's going backwards from a goal of more capital. there's some small chance, imo, of a tender offer for preferred only if it's at a discount to par, since that would generate core common equity capital on the balance sheet. but i doubt the big preferred holders want that given other possibilities; if clinton had won this tender offer option was possible in order to settle the lawsuits imo.