investorG

i respect all of you but i come out differently. if you weren't against the GSE shut down (a very popular recent stance) then you didn't get a proposed seat at the important table ---- mnuchin, blackwell, ross, icahn, mulvaney, carson, (cooper -- almost). paulson out there too. trump also courted GSE opponents like corker and hensarling during the transition. he is likely going to propose tax cuts and infrastructure that likely will cost, even on dynamic scoring, well over a trillion dollars for 10 years. our debt is already 20trn and rising. based on the above proposed team, along with ackman's visible support, is he really going to go out of his way to stiff the common holders by requiring max capital raised max quick with full warrant participation, after being told by his team of the theft by the prior admin?? i'm with flynnstone's view of the situation, something where everyone wins is a good aim. monday's vote is obviously important. good luck everyone!

unclear. it appears the R's can't stay til Saturday. so it comes down to the D's at 2am agreeing to vote on Mnuchin some time on Friday rather than take the full 30 hours which would last til 8am on Saturday. based on actions to date, the Dems won't allow it and thus delay.

first things first -- mnuchin still needs to get in which isn't over til it's over

I actually think this is a black and white thing. If equity is revived in any way, shape or form the Jrs. are automatically at par. Period. That is the big picture. No matter who whines. Then, comes reform. if dividends aren't turned on until a ~3pct capital threshold is met, and the companies are allowed to reach that through a combination of capital raises and retained earnings over a couple years, then they wouldn't trade at par. there's a reasonable chance, despite your current attitude, that you would be asking for a conversion option if / when the warrants are adjusted or eliminated in a potential positive scenario; as a reminder, of the 76bn of net profits from the 2008 bailouts, 68bn has come from the GSEs vs $13bn from Citi and $5bn from AIG, 2 often-cited (and mis-guided imo) comparisons.

a) non-cumulative dividends remain turned off for a while until capital thresholds met. b) more potential upside vs par. these are 2 excellent reasons, if that is the path chosen. if the warrants are altered or eliminated, as is fair, perhaps some might change their opinion on the desirability of any potential conversion option. remember, you can switch to common any day but the big guys --- driving any negotiations --- can't.

or sit on the ask to prevent undue attention from a share price rise drawing attention in a tricky nomination process

most likely: -- overly pessimistic (imo) dilution concerns from things like random street account reports, which holds back the common but not preferred -- perception, perhaps accurate, that common needs mnuchin more than preferred, people want to see confirmation first also potentially: -- some news of a plan has leaked and it's more preferred positive -- court ruling coming that helps preferred but not common i have no material emotional preference to either, and have rotated frequently, but i would remind those only in love with the preferred that the combined (FNMA+FMCC) ~10th largest company in the US has a common equity float of less than $10bn and any likely dilution levels are circular based on the price at which the stock is sold. I don't assume that any potential plan assumes to cram down all of the needed equity right away. moreover any potential 'overhaul' would be highly scrutinized given the President's ties to paulson and Mnuchin's to Berkowitz, suggesting to me that a 'fair' deal between preferred and common is a base case view in a positive scenario for justice. the uproar over excessively favoring preferred at the expense of common (and likely the govt through potentially revised warrants) would be likely not worth it. good luck everyone the next 50 hours!

I don't see any reason to believe that the commons would "catch up" to any set strike price. The only purpose of raising the strike price is to recap FnF in a way that doesn't make it obvious that the government is giving back the dividend overpayments. The commons could very well rise because the warrants would finally be gone, but it would take more certainty about the future of the capital structure to have the shares really take off. I got a ratio of 7:1 by looking at the current stock price. The par to common price ratio is about 6:1 right now but I would want a better deal due to the preferred dividends having been off for so long. What do mean catch up? You'd have 5B shares at a market cap of $150B - $30/pps. The exercise price just means that Fannie Mae keeps the money raised per share up to that price, then the gov receives anything above. Recap of $65-$75B in 3-4 years easy. New prfd issuance of 10% = $15B Exercise price $10 x 2B shares = $20B or $30B if raised to $15 3-4 years retained earnings @ $10B = $30-$40B You don't think Berkowitz or any prf'd holder would want $75 instead of their $25 par? Even if they issued another 1B in additional common shares, you're still at $25 and co. raises another 25B. We've got an admin. that wants to preserve the companies, has said it's a top priority, has mentioned stakeholders, appears to respect property/shareholder rights and knows housing is an economic key. Does the idea of just diluting the hell out of common really fit? Obama/HRC I'd say sure, they'd steal every penny for the gov, but it just doesn't seem to fit under Trump. good plan. please submit to the big guys. also keep in mind that ackman and his public visibility are important in the treatment of common vs. preferred in any potential positive plan for justice. he would call out any outrageous preferential treatment in what would likely already be a scrutinized scene.

Page A-6, Section 7(b) (partial): It appears a forced conversion would be inconsistent with the first sentence in section 3(d). And we already know that the major preferred holders are willing to fight for their contractual rights in court, so a "we're going to do this anyway, see you in court" stance by the government is unlikely. forced conversion is highly unlikely. in the positive scenario for shareholders, if it comes, either a voluntary conversion at some ratio is offered (with the stick of no preferred divs turned on until full capitalization is reached) or there would be no conversion and prefs would get divs at some threshold point. i doubt dividends would be turned on initially. common capital is superior to preferred capital in the current regulators' eyes. that is one reason why conversion is possible. from the preferred holders' point of view it's a chance for either liquidity and/or further upside potential past par over time. basically now there is a mini-freakout among common when they see the preferred run without them. there are random guys writing about 10pct capital ratios which is scaring some on excess dilution fears. i will revert back to what's good for one is good for the other and root for smooth sailing on the confirmation path. good luck, everyone

that's a major reason why the current p/e is 0.5x -- dilution risk from warrants + additional capital.

true, the trump admin can improve the shareholders' situation for justice by a good deal but not all the way, congress is needed. one potential view is that the admin will tie GSE reform thru congress to other financial reform that the traditional R's (henserling, corker) want, sort of a tandem deal. for instance, I don't think the president cares too much about the Volker rule but perhaps he'll go along if they don't obstruct his priorities.

bingo. the lack of creativity by investment professionals in regard to the warrants is astonishing. if/when trump sits down to decide on amendment 4, after being briefed on the contents of most if not all of the 12000 documents and given the financial return to date for the taxpayers, what's he going to do?!?! Despite litigation status, do Trump/Mnuchin already have access to majority of docs? Also, from a legal aspect can Fairholme reach out to Sessions and DOJ following his confirmation or is that not allowed during active litigation? We know the players who'll be making the case for prf'd shareholders, but I wonder who makes it for the common in the event Icahn is no longer an owner. Ackman can certainly get a meeting, but there seems to be no relationship. if they keep the warrants in some fashion, then you're on trump's / taxpayer team in common. if they don't keep the warrants, even better (in most scenarios). if the shares were higher it would require bigger thinking than this simplified analysis imo. but at a 5bn - 25bn mkt cap (with decent odds it's not the high end)?!?!? those selling imo are betting on either confirmation troubles or immediately pending negative court news, which clearly are risk factors.

there's a reasonable chance that ackman's proposal is stale in terms of any future negotiations. different time and situation vs a few years ago.

bingo. the lack of creativity by investment professionals in regard to the warrants is astonishing. if/when trump sits down to decide on amendment 4, after being briefed on the contents of most if not all of the 12000 documents and given the financial return to date for the taxpayers, what's he going to do?!?!

yes sir, the market is pricing in some risk of him failing.

while the mnuchin hearing will receive most of the attention today, the MBA proposal has a lot to like imo, especially coming from a non-ally. they support the GSEs remaining as utilities with some competition. some parts about the common platform and how to handle the pspa's need some tweaking but relative to the current securities' prices, i read this as a solid starting point for discussion.

reversal seems basically out as an option in perry. chuck cooper's letter to the court explicitly asks for remand.

so the plaintiff lawyers will now see 50 documents soon. what has to happen to see the other 11000? do they have to be looked at by a judge? thank you

assuming the 8 documents were the juicy ones, this greatly reduces the chances of perry reversal --- correct or no?

yes sir, IF the q&a is benign (it still isn't out), IF he gets confirmed, and IF they execute the plan (ideally with the support of congress such that investors don't fear a future random reversal in div policy). unless preferred is potentially used for a recap (which i doubt), then outstanding preferred likely wouldn't have dividends turned back on until certain capital thresholds are met. likely there would be a voluntary conversion option from preferred to common.

risky strategy. would have preferred less disclosure in this instance.

the warrants might be legally legit but imo it doesn't mean they are set in stone. especially when looked under the lens of taxpayer returns on various bailouts + future ways for taxpayers to benefit financially on an ongoing basis rather than with 80pct of the companies for free.

can a plaintiff legally press 'pause' on a case that is under consideration by a court? can they tell the judges to hold off? or is there no middle ground and you have to either let it play out or fully withdraw? thank you.

thank you. on a separate note, whatever odds a person gave for the warrants remaining intact a week ago, i would guess those odds should be lower now after watching the first week of the new administration. the decisiveness and respect for law.

will the writ ruling likely come out at the daily 11:00am opinion releases window for the federal court or randomly during the day as many others have? thank you.