waynepolsonAtoZ

"Any opinion on above and non-class action shareholders getting left out in the cold?" A troll (possibly Rob Schain) was pestering me about that sort of thing. Really pathetically idiotic. I guess somebody is looking for some more shares to buy, LOL.

"Can he on his own cancel the warrants or change the conversion rate/price?" Treasury can exercise the Warrant to own 79.9% of the GSEs' common stock by paying $8,000 for each company. Treasury can exercise the Warrant anytime between now and September 2008. However, they weren't satisfied with that and now get 100% of the total comp. income of the GSEs. Treasury and FHFA can change those terms via a 4th Amendment, although not until January 1, 2018.

Thanks. I should have asked for volume data. Also, should have asked for data for the S&P500 and NYSE indexes (to show the drops were not market related). Anyway, just really simply its easy to see what happened before and after Cship was announced, before and after delisting, before and after August 17, 2012, and before and after Judge Lamberth's order. This isn't the whole story, but it may be indicative of what happened. In this context, FMCKJ going back to redemption value shouldn't be viewed as an unjustified windfall for hedge funds, but rather a return to normality. My data here is for FMCKJ (that's the one I follow most closely) June 20, 2008 $24.63 Sept 5, 2008 $13.56 Sept 8, 2008 $2.87 June 15, 2010 $0.98 June 16, 2010 $0.70 delisting announced July 16, 2010 $0.30 all-time low (I think big players probably had unloaded by then) August 16, 2012 $2.83 August 17, 2012 $1.03 NWS announced Sept 30, 2014 $10.30 Judge Lamberth's order announced (presumably after markets had closed for the day) October 1, 2014 $4.34 Just a really simple (reduced form equation) analysis might be that FMCKJ was trading at $24.63 on June 20, 2008. Down $10.63 (24.25 percent) day cship was announced Down $1.80 (x percent) day 3rd Amendment was announced Down $5.96 (x percent) day Judge Lamberth's decision was announced Going back to normal ($25 redemption value) should surprise no one given that Freddie Mac has recovered from the financial crisis (in terms of net income).

Does someone have easier access to pulling stock price data going back to 2008 for the GSEs? They had different tickers before delisting. It may be pretty easy to pull the data, but I thought I'd access for assistance if possible. I'm traveling the next few days. I'm thinking about doing a simple version of an "event study" re FMCC, FMCKJ, FNMA, FNMAS. So, using FMCKJ as an example: 1. Issued at redemption value. 2. What happened shortly after Paulson had his famous meeting with the investment banks. 3. What happened at September 7-8, 2008. 4. What happened upon delisting around the fourth of July 2010. 5. August 17, 2012. 6. September 30, 2014. GSE investors got pounded by $xx billion around these various dates. GSE invrestors will be restored if Trump or the courts follow through. But its a recovery of value not a windfall profit. I'll have to be more precise about specifying the "critical events" and "critical time periods" once I or someone else has pulled the data.

Watt has already said he supports recap (or rather he just says it should be looked at). He hasn't prejudged things, but he's said the right things. http://www.housingwire.com/articles/36314-fhfa-director-watt-this-is-the-most-serious-risk-facing-fannie-mae-and-freddie-mac

Here is the language for FMCKJ (ii) The consent of the holders of at least 66 2/3% of all of the shares of the NonCumulative Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Non-Cumulative Preferred Stock shall vote together as a class, shall be necessary for authorizing, eÅecting or validating the amendment, alteration, supplementation or repeal of the provisions of this CertiÑcate if such amendment, alteration, supplementation or repeal would materially and adversely aÅect the powers, preferences, rights, privileges, qualiÑcations, limitations, restrictions, terms or conditions of the Non-Cumulative Preferred Stock. The creation and issuance of any other class or series of stock, or the issuance of additional shares of any existing class or series of stock of Freddie Mac (including the Non-Cumulative Preferred Stock), whether ranking prior to, on a parity with or junior to the Non-Cumulative Preferred Stock, shall not be deemed to constitute such an amendment, alteration, supplementation or repeal.

Each series of the preferred requires a 2/3 vote for conversion. Why would anyone vote for conversion if it could lead to massive dilution ex post?

#2 would have been 100 percent likely under BHO or HRC. Under The Donald it is somewhat less than 100 percent likely. That's an improvement.

"b) increasing govt warrant strike (done at current FNMA price of $4 would be about $20bn capital to FNMA)" So, rather than Treasury selling warrants in the market at the market price and receiving the proceeds from doing so, they would donate the warrants to FnF and allow them to reap the proceeds? I always assume that Tsy will keep 50% control and sell the other 29.9% in the market for the best possible price. Paying a common dividend would smooth the way. Then, FnF will need to raise $100 b or more of common. Obviously, at $4 per share the earnings dilution would be massive. At $20 per share the earnings dilution will be a lot less bad (but still a lot of earnings dilution).

"GSEs will have to attract growth not yield investors." Tsy will want to maximize the value of the warrants, which means paying a small common dividend and paying the pref dividends. My assumption is that Tsy will keep control, but will start selling off some of the warrants in the market. FnF need $100 billion or more of book equity capital via new issues of common stock. Building book equity capital would take a long time (granted but for the 3rd Amendment, they'd have over a $100 billion of book equity capital by now).

Buffett F& F http://www.warrenbuffett.com/buffetts-lesson-of-fannie-mae-freddie-mac/ I think his point isn't on point. NWS would have been bad for cum preferreds too. It doesn't matter at this point that FnF preferreds are non cum.

"Assume that warrants are kept and that the exercise price is raised." I'm sorry but the exercise of the warrants for 79.9% of the GSE common stock won't help to recapitalize the GSEs. +++++++++ How is it legal for this preferred stock purchase agreement to be valid beyond the December 31, 2009 expiration of Treasury's authority? Treasury received the preferred stock and received warrants for common stock as of Sunday September 7, 2008 and will not need to purchase any additional shares relative to this agreement. Can the government exercise its warrants whenever it wants, even if it is disadvantageous to the companies? Yes. Treasury can exercise its warrant for up to 79.9% of the common stock of each GSE on a fully diluted basis at any time during the 20-year life of the warrant.

"among all of the buffett wisdoms and witticisms, the one i like best is to invest like you have a punchcard, 20 stocks that you buy over 40 years. at this point, fnma would be on my buffett punchcard." Mr. Graham has a classic article on special situation investing. He would want more certainty, he was almost talking about "risk arbitrage." Regarding uncertainty, I bought my preferreds in July 2010. He's right, I didn't see 8/17/2012 coming. I did see FnF becoming very profitable, which should have been enough. Now, we are back on track again it seems. Mr. Buffett is a critic of noncum dividends. However, given 8/17/2012 it wouldn't matter if the preferreds were cum not noncum. Going forward, it shouldn't be an issue. Theyve made a huge amount of money since 8/17/2012--noncum preferreds should do fine.

Agreed. Mnuchin has his issues. http://www.thewrap.com/steven-mnuchin-treasury-secretary-donald-trump-5-things-to-know/ But he passes the laugh test, which is not the case with many of the other nominees. Linda McMahon, lol. Ben Carson, lol. I'm guessing by the way that the first things the Rs do is get rid of the filibuster. http://www.salon.com/2016/11/10/after-eight-years-of-using-the-filibuster-against-president-obama-republicans-now-want-to-get-rid-of-it/

I look for Trump and/or Putin handing over the 12,000 or so documents to wikileaks on January 21, 2017.

Those are the federal court of claims cases.

Millstein will be a consultant for someone, that's for sure. Maybe not for Treasury though. Tsy has the equivalent of a "golden share" at this point. There will be confusion about how Tsy can be "fully repaid" even though the SPS are still on the books. There will be confusion about why Tsy shouldn't exercise the warrants, i.e., jounalists love to hate hedge funds. There will be confusion about the idea of giving back money paid to Tsy after the fact. I don't think that will happen, even if there ever is a damages case.

She says FnF will have zero capital as of the end of 2018. Actually, they'll have zero capital as of January 1, 2018.

To the extent people are interested, here is my 2010 paper where I say that FnF are already regulated like public utilities. Like_Public_Utilities_Regulating_Fannie_Mae_and_Freddie_Mac_ELECTR5643.pdf

"I think you will see fnma and fncc merged, attaining huge synergy savings, and a utility-like regulatory regime where rates and return on capital are subject to approval." To the extent that there are any synergy savings, they could be fulfilled via the securitization platform they are building. There may be other synergies, but easier said than done. I wouldn't hold my breath waiting on a merger that FnF doesn't want. Merger savings from "synergies" always comes up in public utility merger proceedings, and there are very many utility mergers that have failed to go through because the commission wanted the utility to commit to very large merger savings and pass them through to ratepayers. I'd say that the GSEs have a utility-like set up already, although it's different obviously. I did a paper on this in 2010. I'll post the attachment when I'm on my "work" computer. Long story short, FHFA sets the GFees. DeMarco raised them a lot (idea being to provide a price umbrella for private label securitizers). Voila, now they are profitable. Of course, costs returned to more or less normal levels, but the result is that they returned to profitability. I don't think the standard rate base * rate of return plus op ex formula works all that readily for the GSEs. But, basically setting GFees high enough so that the GSEs make a "normal return," ie, one that is representative of their forward looking cost of equity capital does make sense. Obviously, a lot of people starting with Bernanke and Hank Paulson have talk about the "public utility model." As a footnote, Bernanke was a GTA at MIT for a former colleague of mine. Bill Taylor was an econ professor at MIT at the time, he left to go to work at Bellcore, which he loved as it was like being a college professor but without the students. Then, ATT was broken up in 1984, lol, and he turned to consulting (legendary as an expert witness).

"In other words no seat at settlement table for wash fed" True. Years down the road, there may be a settlement in Judge Sweeney's court, but that's not very relevant in the near term. God only knows, Lamberth's successor on the Cobell v Salazar case was extremely eager that the parties settle (which they did a couple years ago). He wanted to avoid getting into the same situation as Lamberth. Wouldn't be too surprising (to me) if Judge Sweeney or her successor is someday interested in a settlement too.

Thank god, it's no longer just a litigation play (or possibly thank the devil and The Donald).

I will say that I hope that Tim Pagliara and others are getting in to see the various candidates for appointed offices. The best time to try to influence these people is before they are appointed, not after. I'm sure ABA and other lobbyists are going full speed ahead along these lines.

Cherzica, I think you link is broken?

Here is the language in the rule. http://www.ecfr.gov/cgi-bin/text-idx?SID=3fb97d0c7dc256cc0713f1cf7de76a96&mc=true&node=pt12.10.1237&rgn=div5#se12.10.1237_112 I suppose it's the chicken and egg question, but, to me, you have to restore the preferred dividends before you can sell new common equity. You probably also need to start a small common dividend before you can sell any new common equity. I know that this may be optimistic. §1237.12 Capital distributions while in conservatorship. (a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship. (b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution: (1) Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity; (2) Will contribute to the long-term financial safety and soundness of the regulated entity; (3) Is otherwise in the interest of the regulated entity; or (4) Is otherwise in the public interest. © This section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.