Flynnstone5

Sold half of my remaining prfd position. I think there's an opportunity to buy back cheaper although there is possibility of announcement that sweep is being stopped. Seems like small probability of that this month IMO.

I find the price action concerning. This just feels like it's back to what's the next leg of bad news to drop.

What would be the alternative Mnuchin will propose and wipe out shareholders? He could start with a brand new capital structure - transfer assets to a new entity and IPO. For the record, I don't think that he does this, but not much has gone right for shareholders thus far. The unthinkable seems to have a way of coming true so I can't rule it out.

The only thing that matters is does the investment make money. Injustice, greed, etc, etc, etc. (not that I don't agree) isn't a consolation for losing all your money in the end.

I haven't been invested in this as long as many (1 year), but the narrative certainly always seems to revert to the positive despite the consistent history (last 4-5 years) of negative shareholder results. Definitely a glass half full, confirmation bias, etc. point of view myself included. I guess the question is if everyone's wrong about Mnuchin, what would be his course of action? Do you think that he would simply start with a new capital structure and just figure P's can work through the legal system knowing their success rate so far is terrible? I know Tim Howard has said in the past that basically he can't screw shareholders because he needs to instill trust for future investment/capital raise etc., but that's pretty weak IMO. People might be shocked by the action to wipe out shareholders, but make no mistake there would be plenty of investors lining up to participate in the new entity/structure. I'm 100% preferred now after selling all of my common, but you're spot on highlighting the thought patterns and changing narratives.

Excellent points - yes

Totally agree on the need for different media sources. I know it's referencing the same story, but it is additional coverage from a much more credible organization.

Second story today: http://www.americanthinker.com/blog/2017/03/the_obamacare_financing_flimflam.html

Yes, basically. Except it's the breach of implied covenant for the dividends and not the breach of K for liquidation preference. I hold preferred shares purely because of the political / rational solution which seems inevitable. But am I reading you correctly that you believe the appeals decision in aggregate was a net positive for pref holders? What kind of political/rational solution do you anticipate? It is almost a decade that they have been in conservatorship and nothing has taken place. Democrats want to kill Fannie and Freddie, reason for sweep and so do many of the Republicans. Are you hoping Mnuchin will do something on his own without congress? It appears that hedge funds own mostly pref shares and are most in news, so a political solution that benefits them would be highly unlikely. Do you agree? What would transpire a favorable political solution to pref shareholders after a decade? Mnuchin has indicated that FnF serve a vital purpose and that he is going to free them from gov ownership. The only question for shareholders is how will he raise necessary capital and will he preserve the existing capital structure. Prfds have contractual rights to receive par value (unless a court determines otherwise). Most HF do own prfd with the exception of Pershing. The gov will likely settle with P's at some point and prfds have a stronger position (although weaker than before) over common. All share classes may benefit, but unless Mnuchin wipes out the existing capital structure to start fresh (destroying all shareholders) , prfd are a much safer play at this point.

As discussed long ago, my concern is do they amend their claim and/or focus on ownership prior to the NWS allowing major prfd P's to settle while everyone else who purchased after the sweep gets screwed. I have less and less faith that any of the litigation is going to help us. As said in the audio, typically conservative judges respect property rights. The question is does the admin respect property rights enough to protect shareholders despite court cases. It seems to me the admin needs some cover in order to make a settlement that benefits shareholders and I can't understand why the Sessions DOJ continues to follow the Obama obstruction theme. Only silver lining in this is that I invested solely on the premise we would win the litigation. If HRC had won, I think common would be at a $1 or less and prfd close by.

Rumors floating that Mnuchin may not request next payment from sweep.

Common or prfd?

Money is fungible unless there's a communication that indicates enacting the NWS could be a solution to filling the ACA budget gap. This story seems so ridiculous and crazy, yet it could easily be true. Reminds me of the Enquirer originally breaking a story, everyone shrugs it off as nuts, but they actually get it right sometimes, i.e. John Edwards mistress, Jesse Jackson illegitimate child, Rush Limbaugh oxycontin addiction, etc. Obviously have to call BS unless this continues to grow and/or proof. I do have to say that Trump does like to set up the media/dems and then make them look like fools. He could destroy any existing FnF narrative, court results and at the same time reset the entire ACA narrative (never could have worked without pillaging FnF). Interesting mix of crazy yet totally fitting on many levels. This investment is certainly proving to be quite the experience.

I don't think there's any doubt that Mnuchin keeps FnF possibly close to the current model or as a utility based model despite anything Buffet has said. He specifically has said he didn't think they caused the crisis (he knows the truth) and that they ran safely for a very long time. The only question to me is the recap and the capital structure and it seems murkier than ever in trying to figure out what will happen. I'm really surprised with DOJ fighting the doc release under Sessions. Maybe Sessions is too new to establish a direction on this? I don't know how any of this would work in terms of a timeline in the DOJ as to when he would be "settled in" so to speak. If Cooper were to fill him in (hard to believe he hasn't already) - sure seems like a big negative that Sessions would take Obama admin. position. At this point, I'm mainly interested in how strong the prfd contractual rights are.

yes there is hope, though one may very well dismiss hope as a sound basis for an investment. i think you have to ask yourself whether the NWS will be viewed by the trump administration as a device that the obama administration used to prepare the GSEs for wind down, setting the stage for congress to act in a manner that would replace the GSEs. as we have seen, congress had 4 years after the NWS to act, and failed to do so. the question is whether the trump administration will pick up where the obama administration left off, or propose something different. the next question i think you have to ask yourself is whether you think the trump administration will respect shareholder rights in connection with their plans. mnuchin has stated that he wants the GSEs to continue without govt ownership and control, with sufficient capital to insulate the taxpayer from future bailouts. so it appears that a wind down is off the table and any trump admin plan will necessarily need to raise from the capital markets alot of new capital. there is no assurance that existing shareholders will be treated well in connection with this plan. but if mnuchin looks at the NWS not as a nationalization device, as per obama admin, but rather as a device to accelerate repayment to treasury, then there is some hope that the trump administration plan going forward will be build upon the existing capital structure with the junior pref, common and importantly the govt's warrants as a foundation for raising more capital. there are some legal avenues that remain, certainly more for pref than common, though the legal thesis is mostly shot at this point. i dont think current trading values reflect only a legal thesis at this point. so, perhaps we are down to hope, and perhaps hope is not enough. each of us has to decide. @cherzeca - in your opinion, how strong do you think the legal case is for prfds on a scale of 1-10?

I don't think you're wrong. The constant delays with this case are nothing short of incredible and does put the timeline way out there. Love to hear what the legal guys here make of Sessions - he would certainly be aware of this case and variables by now simply through his relationship with Cooper, no?

Valid concerns and as clear as the solution would seem to be somehow the goal post just keeps moving. With respect to large P settlement, I don't think it's possible for only Berkowitz prfd shares getting paid whatever while other prfd shareholders get screwed. I think the legal experts here have covered this, but renewed thoughts from some of those would certainly be welcomed. I've read additional material from Tim Howard and Adam Spittler, in addition to this board, and it seems very clear that the NWS can be amended and congress does not need to be involved. The language specifically says that, but some have said that the Corker bill was package into another bill that was passed. This is the only one I am aware of: https://www.congress.gov/bill/114th-congress/house-bill/2029/text SEC. 702. LIMITATIONS ON SALE OF PREFERRED STOCK. (a) Definitions.--In this section: (1) Secretary.--The term ``Secretary'' means the Secretary of the Treasury. (2) Senior preferred stock purchase agreement.--The term ``Senior Preferred Stock Purchase Agreement'' means-- (A) the Amended and Restated Senior Preferred Stock Purchase Agreement, dated September 26, 2008, as such Agreement has been amended on May 6, 2009, December 24, 2009, and August 17, 2012, respectively, and as such Agreement may be further amended and restated, entered into between the Department of the Treasury and each enterprise, as applicable; and [[Page 129 STAT. 3025]] (B) any provision of any certificate in connection with such Agreement creating or designating the terms, powers, preferences, privileges, limitations, or any other conditions of the Variable Liquidation Preference Senior Preferred Stock of an enterprise issued or sold pursuant to such Agreement. (b) Limitations on Sale of Preferred Stock.--Notwithstanding any other provision of law or any provision of the Senior Preferred Stock Purchase Agreement, until at least January 1, 2018, the Secretary may not sell, transfer, relinquish, liquidate, divest, or otherwise dispose of any outstanding shares of senior preferred stock acquired pursuant to the Senior Preferred Stock Purchase Agreement, unless Congress has passed and the President has signed into law legislation that includes a specific instruction to the Secretary regarding the sale, transfer, relinquishment, liquidation, divestiture, or other disposition of the senior preferred stock so acquired. © Sense of Congress.--It is the Sense of Congress that Congress should pass and the President should sign into law legislation determining the future of Fannie Mae and Freddie Mac, and that notwithstanding the expiration of subsection (b), the Secretary should not sell, transfer, relinquish, liquidate, divest, or otherwise dispose of any outstanding shares of senior preferred stock acquired pursuant to the Senior Preferred Stock Purchase Agreement until such legislation is enacted.

Thanks for the response. I thought the same, but shocked by his sudden change in sentiment.

I was reading comments from Jim Hodges (Value Investor Today). He believes Mnuchins comments this morning were negative, selling his positions in FnF. He is claiming that the NWS is a contractual obligation under SPSPA and that there is no clause to get out of this. Therefore, when tax reform triggers DTA adjustment, this will force a draw. I thought this could be stopped with a 4th amendment between Treasury and FHFA, which some else noted, but he says that is incorrect as Corker bill changed that? Some of the thread: https://twitter.com/ValuInvstrToday/status/834822316924272641

The two breach issues that I referenced both pertain to the preferred. The common does not have a case based on Perry. I haven't a clue why there is divergence between the security prices of the two. How strong a case are the breach issues in your opinion regarding prfd? I guess as a non-lawyer I simply wonder why Lamberth won't just go back to his initial logic of the gov can do anything under HERA. I also wonder if additional docs are revealed that continuously show he was lied to initially, does that change his demeanor at all.

No position but in agreement with this. It starts getting speculative when you have to read between the lines and analyze tones. If Trump had not won (a seemingly improbable event), I can't imagine these securities would be trading anywhere near current market prices. I think a lot of the parsing is based on the narrative post-Mnuchin comments in November of last year. That's just what people choose to focus on. And, surprisingly, people (including on this board) seem to be ignoring the fact that the breach of implied covenant (dividends) and the breach of contract & implied covenant (liquidation preference) case gets to move on in district court -- though that may be a function of ownership considerations (common vs. preferred). I really find it bizarre that the common has been moving incrementally up while the prfd is doing the opposite. The market seems to be perceiving that both breach cases are not very strong. What's your take?

also @cherzeca - any idea regarding time frame as to when one would expect an appeal, en banc or whatever the way forward may be legally speaking?

My concern is we're back to the litigation crawl and if a plan isn't going to happen until August at the earliest, the companies will have virtually zero capital by that time. Does anyone see any litigation effort moving fast enough to force a change sooner - doesn't seem very likely. Does he stop the NWS soon or does he just figure let Treasury keep taking the money until a plan is established? It feels like we're almost back to square one. What leverage do we have - even in the interview the narrative is that court cases were lost, nothing about what was remanded.

Just to clarify, he didn't say it won't happen before tax reform. He simply said tax reform is his #1 priority. Have to hear again. I thought that he did say it wouldn't happen until after tax reform. What a BS interview. Maybe Maria will be able learn a bit more.

Can any of the lawyers explain this? "Ginsburg & Millett neglected 12 USC 4623(b), which allows them 2 set aside NWS. But says 12 USC 4617 (no A&C wording) is anti-injunctive"