Flynnstone5

Lamberth will take some time or maybe we get an en banc. Either way, it would seem now is the prime time for Mnuchin and P's to hammer out a settlement before any additional rulings. I think he has enough cover to work out something that's favorable to prfds all Trump friendly. I can see commons having to fall on the sword here - not all hf benefited at "taxpayers expense", gov can make more $, all of those close to Trump make out plus cover of prfds having greater rights as business media would attest. Ackman wasn't exactly a pro Trump guy although the other key is does Icahn still own. I could also see Mnuchin/Trump protecting common as it is the right thing to do given all that has taken place. I'm just not willing to make the common bet anymore.

Seeing some big block purchases on FNMAS this morning

As another non-lawyer, I am just stunned that there's no order to produce a full admin record. How can they just say that the govs intent simply doesn't matter, i.e told the truth to lower ct or lied - doesn't matter, no one cares. What does Lamberth look at to make a determination? Any odds regarding the likelihood of an en banc? Re: HERA - can it even be challenged at this point? I wonder given the breach of implied covenant and the breach of contract cases still being alive, if that provides enough cover for Mnuchin to make a decent deal with prfds?

This is what I'm thinking and reason I sold my 50% common position with the thought of adding to my prfd position on any further decrease. The prfd's are all friendly players and Mnuchin could make a fortune while still providing par. I also still believe that a conversion is still a strong possibility.

I sold all my common for a decent gain although not as good as this morning. I'm keeping my prfd at this point. I am surprised the prfd's have sold off as much given contracts is only thing to have survived, still have breach with Sweeney and the major players around Trump/Mnuchin are prfd. Doesn't seem to add up to down nearly 30% in FNMAS?

This Bloomberg article notes: "Some Fannie Mae and Freddie Mac investors still have a shot at money damages, based on when they acquired their shares and whether they did so before or after the Federal Housing Finance Agency was created and then imposed its control over Fannie Mae and Freddie Mac." https://www.bloomberg.com/news/articles/2017-02-21/fannie-freddie-net-worth-sweep-case-affirmed-in-part-on-appeal Anyone have a clear understanding on this?

millett wrote the opinion i thought she would write, and so did borwn. i am shocked that ginsburg joined millett. now, we are on mnuchin watch. Anything regarding an administrative record or is that not even in there? Anything in this that leads you to believe Lambert changes his mind or is this basically a weak take a second look?

Tim Howard: The bigger change in Fannie’s press release is in the table titled “Treasury Draws and Dividend Payments: 2008-2016” on page 8. In previous years Fannie simply titled this table “Treasury Draws and Dividend Payments,” and included the payment it expected to make in the first quarter of the following year, both in the bar graph and a box within that graph (which, in the 2015 10K, showed “Total Dividend Payments Through 1Q 2016, with a footnote explaining that it expected to pay the first quarter amount based on its fourth quarter 2015 earnings). In the 2016 10K that came out this morning, this same table shows just the payments made through the end of 2016. The expected payment for the first quarter of 2017 is discussed verbally in the paragraph following the table, but, in contrast to the presentation in previous years, appears nowhere in the table itself. Like the change in the wording in Freddie’s press release yesterday, this presentational change by Fannie was deliberate.

there was advocacy in oral argument by i believe fhfa lawyer that govt thought the economic effect of NWS would be a wash. i am not sure this "better position" language directly contradicts this, because you can be in a better position but not be able to realize upon this if profits dont grow. just generally, i havent seen a smoking gun in any of this discovery, but it is certainly true that all this material was before the govt at time of making NWS decision and should have been included in administrative record. Yeah it seems that what has been brought public thus far is only enough to get the sense that this was much more premeditated and directed than the "death spiral" associated narrative outlines - but as you said, no smoking gun. The smoking gun is the fact that the government understood there was going to be *more* of something that was not going to be captured by the 10% established in the original agreement. And that capturing that excess would mean favoring only 1 actor to the detriment of all others. Had the government thought there was a death spiral or an irreversible melt down of the companies none of this language would have existed. It only exists because they were alerted of a melt up. I would infer same, but the legal experts here don't seem to think that's the case. Possibly. But we will not find an email that says DTAs will revive the companies and make vulture speculators rich. That conversation may have happened around some water cooler. So what is the best second smoking gun we could hope for? Right. I hope that the best is yet to come in the 40+ we haven't seen. Like to see merket, cherzeca, hardincap and steve_berk all saying, holy shit....have you see this!....lol

it never was an obligation in my view, as a matter of delaware corporate law. but i do think removing the div oblig reference, like adding scheduled in fmcc, is not the sort of changes in an earnings release that are just made willy nilly. that fhfa was cool with them is also interesting as tim howard points out. seems to me both fmcc and fnma acknowledge that whether or not the dividends will actually be made will be decided in future and has not been decided yet 2014 language is also same: The company reported a positive net worth of $3.7 billion as of December 31, 2014, resulting in a dividend obligation to Treasury of $1.9 billion, which the company expects to pay in March 2015.

there was advocacy in oral argument by i believe fhfa lawyer that govt thought the economic effect of NWS would be a wash. i am not sure this "better position" language directly contradicts this, because you can be in a better position but not be able to realize upon this if profits dont grow. just generally, i havent seen a smoking gun in any of this discovery, but it is certainly true that all this material was before the govt at time of making NWS decision and should have been included in administrative record. Yeah it seems that what has been brought public thus far is only enough to get the sense that this was much more premeditated and directed than the "death spiral" associated narrative outlines - but as you said, no smoking gun. The smoking gun is the fact that the government understood there was going to be *more* of something that was not going to be captured by the 10% established in the original agreement. And that capturing that excess would mean favoring only 1 actor to the detriment of all others. Had the government thought there was a death spiral or an irreversible melt down of the companies none of this language would have existed. It only exists because they were alerted of a melt up. I would infer same, but the legal experts here don't seem to think that's the case.

2015: WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported annual net income of $11.0 billion and annual comprehensive income of $10.6 billion in 2015. For the fourth quarter of 2015, Fannie Mae reported net income of $2.5 billion and comprehensive income of $2.3 billion. The company reported a positive net worth of $4.1 billion as of December 31, 2015, resulting in a dividend obligation to Treasury of $2.9 billion, which the company expects to pay in March 2016. 2016: WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported annual net income of $12.3 billion and annual comprehensive income of $11.7 billion in 2016. For the fourth quarter of 2016, Fannie Mae reported net income of $5.0 billion and comprehensive income of $4.9 billion. The company reported a positive net worth of $6.1 billion as of December 31, 2016. As a result, the company expects to pay Treasury a $5.5 billion dividend in March 2017. Does anyone think the removal of "dividend obligation" has any significance considering all indications are they are sweeping in March?

there was advocacy in oral argument by i believe fhfa lawyer that govt thought the economic effect of NWS would be a wash. i am not sure this "better position" language directly contradicts this, because you can be in a better position but not be able to realize upon this if profits dont grow. just generally, i havent seen a smoking gun in any of this discovery, but it is certainly true that all this material was before the govt at time of making NWS decision and should have been included in administrative record. Why wouldn't the fact that there was never any intention to act as a conservator, but instead wind down the companies not be a smoking gun? My background is not in law, but I don't understand how the gov can make blatantly false claims to the lower court and selectively omit key info. from the record to get a desired ruling, yet not have these new docs be enough for appeals ct to clearly see this. In any event, I absolutely trust the assessment from the legal experts here. Can you give an indication of what would be considered in your view a smoking gun? Lets hope the new batch has something significant and is added to the record.

This one makes it pretty clear the intention is to wind down the GSE's, they say as much. Not exactly what a conservator should be doing no? http://fanniefreddiesecrets.org/wp-content/uploads/2017/02/PSPA-Modification-Key-Points-to-Make-7-20-12.pdf What do the legal guys think about this? "It is consistent with our commitment that the GSEs will be wound down." What would it take in your opinions to virtually guarantee a reversal? Merket, cherzeca, hardnicap - what do you guys think? No one here knows better than you IMO.

Mulvaney's in

Regardless of what someone thinks of him that article I posted is still really good. I tend to focus on the message instead of the messenger. Guy's doing great. His cost basis was around $250K and he's now over $1M net worth from that. If he gets par he's at $3.5M.

fed doesnt regulate GSEs. not sure why she is even answering questions about GSEs I know. Think it's just the start of each side making their case. What do you think time frame is regarding court ruling on unsealing docs and admitting to record?

Yellen just said "the GSE's were not the critical part of what caused the housing crisis" - pretty close to verbatim Royce then brings up Basel3 and GSE's were leveraged 100:1. Asks what is the right capital 5%, 10% and references another study of 23%. Yellen: basically says leverage ratios shouldn't equate junk bonds to the treasury. Nothing said specifically as to capital. Certainly seems the rep's are going to keep up the BS of private gain at taxpayer expense, caused crisis, etc. Damaging docs and a positive court outcome would go a long way to muzzle them.

@hardincap @cherzeca @merkhet Any idea on how quickly court rules regarding unsealing and supplementing the record? Would this have a high probability of happening today or are we talking much longer? Thanks in advance.

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials on feb 9, counsel for usg agreed to remove "protected information" designations pretty inconsistent, no? sessions was confirmed feb 8 interesting, hardincap. let's see how this plays out. i would think DOJ becomes less adversarial, but that may be wishful I'm left wondering if Session's DOJ will soon lead the Perry panel toward a reversal. Sounds crazy, yes. But a ruling against the government would: 1. provide political cover against the "hedge fund giveaway narrative", 2. blunt congressional opposition, 3. speed along a settlement, 4. allow a jump ahead toward recapitalization negotiations. This whole issue is complicated by the looming cut in the corporate tax rate, which would reduce the GSE's DTA valuation and force a government draw. A quick resolution of the mortgage giants would avoid this scenario, and a Perry reversal would move things along. All true and not that crazy especially regarding #2, but who knows. One of my hopes is that there are seriously damaging docs in terms of gov case, as well as, seriously damning docs regarding the Obama admin. internal deliberations, i.e. hypocrisy, lies, deceit. I think there is such bad blood now between Trump and dems. that he will take advantage of any opportunity to expose/damage their credibility.

http://seekingalpha.com/article/4045788-fannie-mae-earnings-mnuchin-confirmed-get-surprise?app=1&auth_param=dkhti:1ca69rc:3cf4210c2d67bdd73acd4f00e3835aa9&uprof=51

Listening to Yellen testimony in background. Crapo just mentioned FnF and how bipartisan reform is needed - could she please comment on her views.

Favorable court ruling would be so sweet right now. For all the delay, the timing would be absolutely perfect. Lets hope that additional docs reinforce what should already be devastating to the govs claims/case. Wallison: One question: Do the dividend payments amortize principal, and if so how? For example, if the 10% dividend rate were in effect, a payment of more than 10% would amortize principal, but from the press release it sounds as though the profits that are swept into Treasury are replacing the 10% dividend. Parrott: No principal is written down no matter what the quartely payment is. Dividend is variable, set at whatever profit for quarter is, eliminating ability to pay down principal (so they can"t repay their debt and escape as it were). Wallison: That could be a problem. From the perspective of the budget, if Congress were to eliminate them it would be eliminating a revenue source. If principal were amortized that problem would eventually go away.

Do you think that govt can afford the return of full NWS to GSEs without a big budgetary issue? If you think the return of full NWS to GSEs is easy/affordable/won't crash into congress/debt ceiling/etc., then yeah, "par" scenarios are more likely. They're never going to return the NWS, but there is a high probability that the overage against original 10% div. gets applied to the outstanding senior prf'd effectively zeroing it out. I think the point you raise regarding a court loss is absolutely a valid concern, but that likely reduces leverage in a settlement as opposed to gov continuing the fight. Do you really think knowing the players involved that Trump is going to go out of his way to screw some of his closest and most loyal supporters - this does not fit at all with his character. As far as not re-instituting divs on prf'd for 5-10 years to recap solely through retained earnings, it's way too long IMO. They're going to want to recap in 3-4 years max. Recession risk and congress winding down are non-issues as far as I can see. A reformed utility model is ultra safe and Mnuchin has already clearly stated that the GSE's are necessary and serve a vital purpose. I do think you're viewing the investment as though the prior admin or HRC were in office. That said, my opinion on what is a probable outcome doesn't amount to anything right now so I appreciate your views and any others that present alternative views.

Anyone know the status regarding the docs ordered to be disclosed to P's? Can we assume from the sealed notice to Perry court that in fact has occurred or do we not know that? I'm asking as I'm curious if the gov (although now under Sessions) could file some sort of additional appeal regarding order to release. Also, why wouldn't Fairholme immediately file whatever possible to go after all of the other remaining 11K?