waynepolsonAtoZ

Still, swapping from stocks to preferreds has difficulties. Selling commons to buy preferreds might make sense in some scenarios, but not all. It's more than possible to get burned based on the timing alone.

Plus, The Donald is in crisis. Who knows what Pence thinks of FnF?

If Mnuchin is the reason you post. Good luck!!!

Did you bother to read Watt's written testimony and listen to the hearing? "Just know that no progress will be made as long as Watt is there. He is the roadblock to what Mnuchin wants. Getting rid of a politician in that seat and placing a finance person in the seat is the plan. If you heard the testimony last week, Watt said many times that he is clueless about housing finance reform. If so, I would say to him "then leave, as that is all is there left to do"." Watt is not the problem. Note this Josh Rosner piece. https://www.scribd.com/document/348114356/05-11-17-GF-Co-GSE-Reform-FHFA-Watt-on-the-Hill I would argue that the oligarchy is the problem. That means Mnuchin and the rest of the GS crew, etc. Of these, Watt is by far the best of the bad pack of dogs.

We can't handle this [raging sociopath] determined to undermine our cushy (and ineffective) political system'

Wayne, "way optimistic" really? I'll still stick to an EOY ETA. Year-end is when the book equity capital is zeroed out. I'm really just responding to the real Tim H's timing, i.e., June 2017. Once the dividends have been announced, which they have, I think there is a zero chance that they will not actually be paid into Tsy. Thus, I think the real Tim H was "way optimistic." Not paying an announced dividend would be a really radical thing to happen. I know I am a kool-aider but whatever. I didn't disagree with anything you said in the first paragraph of your post. Thus, shareholders won't be talked about, but in order to attract new capital existing shareholders will be treated more or less fairly.

I would like to opine that the real Tim Howard's interpretation, i.e., ending the dividend as of next quarter is WAY optimistic. Not sure what will happen though viz-a-viz actions by Watt or Mnuchin.

I mean, January 1, 2018 matters as there will be no book equity capital at all. 2028 matters as the SPSPAs are scheduled to end. So, the mere passage of time. There's no real mystery to it. And, I agree with Watt that a draw would matter although I agree with Corker that it wouldn't be the end of the world. Still, why run the risk? Also, Corker misunderstands, he was talking about running his business with very little cash on hand. That's different from not having some book equity capital. If you run out of cash and you have zero book equity capital the smallest shock can create a financial crisis for the firm.

Corker maybe is taking things to personal? He does blame the hedge funds, after all, for digging up dirt on him. It may shape his thinking a bit. It doesn't help him in terms of looking credible.

As a former regulatory staffer (admittedly, public utility industry), I gotta say I'm glad Watt is "on our side" [in a loose sense in that he is saying that the NWS can cause problems via zeroing out capital, which could lead to a draw.] The SPSPAs are a joint product of Tsy and FHFA, with Tsy taking the lead, but Watt can at least try to get them moving in the right direction. It will be interesting to see what Mnuchin shows when he puts his card on the table. I haven't watched the video yet though, so it will be interesting to see exactly how Watt came across on the stand.

Watt has been consistent about what he's been saying for about a year. Mnuchin has not. I think the problem with Mnuchin (and Phillips) is that they've possibly been captured by the AIG and GS crowd that hates FnF. Which is not to say that the situation with Mnuchin is hopeless--I do think that something will happen before the end of the year.

While it's true that the thing to watch is whether Watt promises to keep the NWS dividends to Tsy, it's relatively unlikely that he would do so. As Director Watt said a year ago: "The most serious risk and the one that has the most potential for escalating in the future is the Enterprises’ lack of capital. FHFA suspended statutory capital classifications when the Enterprises were placed in conservatorship, and Fannie Mae and Freddie Mac are currently unable to build capital under the provisions of the PSPAs. The agreements require each Enterprise to pay out comprehensive income generated from business operations as dividends to the Treasury Department, and the amount of funds each Enterprise is allowed to retain is often referred to as the Enterprises’ “capital buffer.” This capital buffer is available to absorb potential losses, which reduces the need for the Enterprises to draw additional funding from the Treasury Department. However, based on the terms of the PSPAs, this capital buffer is reducing each year. And, we are now over halfway down a five-year path toward eliminating the buffer completely. Starting January 1, 2018, the Enterprises will have no capital buffer and no ability to weather quarterly losses – such as the non-credit related loss incurred by Freddie Mac in the third quarter of last year – without making a draw against the remaining Treasury commitments under the PSPAs. There are a number of non-credit related factors that could lead to a loss and result in a draw on those commitments: interest rate volatility; accounting treatment of derivatives, which are used to hedge risk but can also produce significant earnings volatility; reduced income from the Enterprises’ declining retained portfolios; and, the increasing volume of credit risk transfer transactions, which transfer both the risk of future credit losses as well as current revenues away from the Enterprises to the private sector. A disruption in the housing market or a period of economic distress could also lead to credit-related losses and trigger a draw. It is, of course, impossible to predict the exact ramifications of future draws of funds from the PSPA commitments. But let me offer a few observations. First, and most importantly, future draws that chip away at the backing available by the Treasury Department under the PSPAs could undermine confidence in the housing finance market. The remaining funds available under the PSPAs provide the market with assurance that the Enterprises can meet their guarantee obligations to investors in mortgage-backed securities even while they are in conservatorship and don’t have the ability to build capital. In effect, the Treasury Department’s financial commitment to each Enterprise under the PSPAs is a source of capital that supports mortgage market liquidity. However, under the terms of the PSPAs, these funds can only go down and cannot be replenished. Future draws would reduce the overall backing available to the Enterprises, and a significant reduction could cause investors to view this backing as insufficient. It’s unclear where investors would draw that line, but certainly before these funds were drawn down in full. Investor confidence is critical if we are to have, as we do today, a well-functioning and highly liquid housing finance market that makes it possible for families to lock in interest rates, obtain 30-year, fixed-rate mortgages, and prepay a mortgage if they want to refinance or need to move. If investor confidence in Enterprise securities went down and liquidity declined as a result, this could have real ramifications on the availability and cost of credit for borrowers. Second, future draws could lead to a legislative response adopted in haste or without the kind of forethought it should be given. I have been clear that conservatorship is not a desirable end state and that Congress needs to tackle the important work of housing finance reform. However, because of the intricacies of our housing finance system and the extremely high stakes for the housing finance market and for the economy as a whole if reform is not done right, I continue to hope that Congress can engage in the work of thoughtful housing finance reform before we reach a crisis of investor confidence or a crisis of any other kind. While it’s not my place to meddle in political discussions, I’m also not hearing much discussion of housing finance reform in any of the presidential campaigns." https://www.fhfa.gov/Media/PublicAffairs/Pages/Prepared-Remarks-Melvin-Watt-at-BPC.aspx

God knows, in The Donald era Corsi is a very credible source! Watt always said he would defer to Tsy on the SPSPAs, so this makes sense.

Freddie, $2 billion of total comp income albeit with no deriv gains (small deriv loss). Good outcome.

Which would be more accurate and correct. Gov't funding is just inflows and outflows of cash, you can't really say that "the sweep funded the Affordable Care Act," although it might be a little bit true.

Single-family serious delinquency rate for Freddie 92 basis points, lowest since June 2008. http://www.freddiemac.com/investors/volsum/pdf/0317mvs.pdf http://www.freddiemac.com/investors/volsum/pdf/0608mvs.pdf

Only game in town is, I guess, a bit of an exaggeration Something could happen by year end, which is when book equity goes down to zero.

I encourage you to rethink the idea that Mnuchin is committed to telling the truth in a confirmation hearing.

So, Craig Phillips was a toxic private-label MBS banker. Morgan Stanley, not GS. I think the dream of a change in heart by The Donald's crew is over and done with. On to Sweeney land.

I don't think so. The trad Rs are taking over the Trump Administration. Mnuchin was a toxic private label guy at GS. Hard to imagine he loves FnF. Interesting to see what happens at Sweeney's on the 17th. I think that's almost the only game in town now, which is ok.

Well, they announce each sweep amount in the 10K/10Q and then the sweep actually takes place at the end of the quarter.

Fake News. FHFA Director Watt has said he would defer to Tsy on changing the SPSPAs. He would like to have FnF recap however.

"Chris - do you agree with this fellow's legal analysis?" What can he say about his legal analysis?

"When I add, I always add the lowest cost stuff." I like to have a few shares of FMCKJ/FNMAS just in case I need to raise some cash quick.

"but you may be right --- if I am wrong and watt is acting as a roadblock, " Watt's ok, he just isn't going to take the lead, leaving that role to Tsy. Mnuchin and the rest of the GS guys are the obstacles. And, I seriously doubt that Mnuchin is all that much better than Hank Paulson, Geithner, and Lew. Better, definitely, but still not super great.