HalfMeasure
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Posts posted by HalfMeasure
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Which company is the first diagram from?
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We believe the taxpayers will be in a better position to benefit from any GSE
profits as they are wound down
Then:
Is the taxpayer in a worse off position?
o No - they are in a better position. Under the current arrangement Treasury's
upside was capped at the 10% dividend, now the taxpayer will be the
beneficiary of any future earnings produced by the GSEs.
Didn't they try to play it off at some point in the Perry case that they didn't expect taxpayers to be any better off under the NWS?
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.
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We believe the taxpayers will be in a better position to benefit from any GSE
profits as they are wound down
Then:
Is the taxpayer in a worse off position?
o No - they are in a better position. Under the current arrangement Treasury's
upside was capped at the 10% dividend, now the taxpayer will be the
beneficiary of any future earnings produced by the GSEs.
Didn't they try to play it off at some point in the Perry case that they didn't expect taxpayers to be any better off under the NWS?
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Other activist investors (including some on this board who have the human and financial capital to become activist) are also a margin of safety against greenmail, since the goal of a settlement would be to put the cases behind.
I also realize that Berkowitz is over the 35% I reach by full Kelly, ,and he may be over 50% by next weekend, so he's seeing less risk than I am perceiving.
Berkowitz is also in a different situation than you are. The position has grown as a percentage of his portfolio due to recent capital appreciation but also investors redeeming funds. When investors redeemed, he liquidated other positions while leaving Fannie/Freddie untouched. For the capital gains in the portfolio on Fannie/Freddie, there are tax implications that portfolio allocation decision different for Berkowitz than someone allocating today. As well, he's footing a legal bill it and has his reputation attached. In sum, his position has grown into being 35% (was not originally) and due to size and other factors is less liquid than others.
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reversal seems basically out as an option in perry. chuck cooper's letter to the court explicitly asks for remand.
I don't think outright reversal was much of a possibility to begin with due to the fact the court would want such a significant ruling against the US Gov't to be made in the most prudent manner possible. But with the writ ruling and impending document release, isn't remand almost 100%? Hard to say there was a complete administrative record when there is buried evidence that just got uncovered floating around the system.
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"FHFA and Treasury turned over approximately 48,000 documents, but refused to produce 58 documents. The government asserted the deliberative process privilege with respect to all or part of 52 of the documents, asserted the presidential communications privilege as to all or part of four documents, and asserted the bank examination privilege with respect to eleven documents"
I thought that the 58 documents were just a sample of a larger number of documents that the government refused to produce - the way this is written makes it sound as if they only refused to produce 58 documents.
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Not to beat a dead horse, but Berkowitz and Perry both hold prfd while Paulson, Ackman and Icahn (if he still holds) are all in common? Is this accurate?
Paulson holds prefs. Ackman at least publicly is 100% common. Icahn we know bought some common from Berkowitz. Important to remember that there aren't filing requirements on the prefs and common, so things can change without public knowledge unless the fund makes its own disclosures (e.g. Fairholme, Pershing). Icahn could have long since sold his common, and/or bought prefs, and we would never know.
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So he just said he didn't imply "recap and release" based on his previous comments. Also said didn't explicitly commit to bypass or not bypass Congress, but said he wants bipartisan support. Murky comments..
I believe he said he didn't "commit" to that - I wouldn't read too much into that comment, he has to be shrewd given the situation.
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I've been very impressed by Mnuchin thus far.
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if cooper withdraws from law firm no reason why firm cant continue to rep fairholme as long as cooper doesnt work on GSE cases at DOJ. however i imagine he could make his view known within DOJ that these cases deserve a hard relook by the trump admin DOJ (for the sake of the DOJ as an institution). must say i have never seen this situation before...
Would he have to have zero economic interest in Cooper & Kirk? Indeed a very interesting situation.
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wow, what would happen to all the court cases if cooper becomes solicitor general?
Certainly one way for cooper to read all of the privileged documents!
Edit: if cooper becomes SG he won't be able to "work" on GSE cases due to conflict concerns but I imagine he might become an influential voice within DOJ
Could Cooper & Kirk still represent Fairholme? I would imagine that would be a conflict of interests too.
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They are discussing the risk of a settlement between Fairholme, Paulson, and US Govt to end the related litigation. In practice I'm not sure how probable this is
Yeah that doesn't make any sense from the Gov't/Treasury perspective as whatever solution they move toward, they will want to remove the risk of all future litigation. And again, they will want to do something optically palatable (i.e. not favoring specific preferred shareholders over other preferred shareholders).
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Did you mean shareholders getting screwed depending on whether they supported a Bloomberg presidential run as Ackman did or they supported Trump right after winning the presidential nomination as John Paulson did?If the Gov't/Treasury want the legal problems to go away, they are not going to negotiate a settlement that unfairly benefits certain shareholders - they will want the solution to be as optically palatable as possible.
EDIT: At least, they won't be unfair between shareholders within the same part of the capital structure. The only way a class of shareholders gets screwed is if the restructuring is more friendly to either the prefs or the common.
Not that particularly. Just that the only way shareholders get unfair treatment is between different slices of the capital structure, not within the same - i.e. all FNMAS shareholders will be treated the same, but FNMA and FNMAS are fundamentally different claims and thus will be treated differently.
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If the Gov't/Treasury want the legal problems to go away, they are not going to negotiate a settlement that unfairly benefits certain shareholders - they will want the solution to be as optically palatable as possible.
EDIT: At least, they won't be unfair between shareholders within the same part of the capital structure. The only way a class of shareholders gets screwed is if the restructuring is more friendly to either the prefs or the common.
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Interesting article from Bloomberg on the Senate confirmation hearings:
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Just a small anecdote. A family member worked with Mnuchin at Goldman. He says that Mnuchin is a diehard capitalist. Hopefully that's a good thing for us...
much of his business experience at goldman and thereafter involves mortgage finance. plus he is a big risk-taker, as evidenced by his indymac coup. he doesn't look at his partner in the indymac deal, paulson, or berkowitz, ackman and perry as anything other than good guys doing the right thing, imo.
Plus, he's probably well prepared for a negative narrative in the press after IndyMac - likely thickened his skin while lining his pockets.
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I think people are overlooking the max win scenario for Trump.
(1) Settle the court cases because the underlying documents show bad faith from government
(2) Vaguely mention the documents as why but don't release them
(3) Let the media foam at the mouth about how this is just a giveaway to cronies
(4) "Succumb" to pressure to release the documents
(5) Slam the "anti-business" Democrats and use it as a cudgel for years
No need for a favorable court decision. Much better this way. They "tried" to keep it out of the public eye, but they had to "correct" the narrative.
i've been thinking along these lines but i'm not sure how far this dog will hunt.
mnuchin will need cover from the attacks that he is favoring his hedge fund buddies (and trump assuming he is an LP of paulson). the simple fix is for mnuchin to release (or at least threaten to release) all privileged docs and say this was a terrible mess and he is just trying to do right, fix the mistakes of the last administration (which will be a recurrent theme for the trump administration).
in this way, a denial of mandamus is not even necessary, though i expect it to come.
this is a powerful defense available to mnuchin, i just hope he is thinking along these lines
This is where I think the courts could be very helpful for the narrative - a favorable ruling in the Perry appeal or continued positive developments in the Court of Claims could help the narrative. The more obvious the Gov'ts wrongdoings, the more inevitable a shareholder win looks, and the less one-sided or favor-like any negotiation from Mnuchin will look. There doesn't have to be a win in the courts outright, but the stronger the cases look optically to the media/layman the better.
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This is where the legal and political angle intertwine - positive news from the courts and damning evidence from discovery would help manage the political angle. While we might think of these as two separate roads to victory, in reality you can't decouple them. As well, the strength of the legal cases dictates the negotiating power of the shareholders. E.g., the stronger the legal case looks, the more concessions the Treasury will have to take on any settlement/restructuring agreement. Right now I think many people are assuming the Treasury gets full payback on the liquidation preference + 10% dividends on the Sr Prefs as well as the warrants, but to me that sounds a lot like having their cake and eating it too (which only makes sense to me if there was no wrongdoing).
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
Posted
In short, the most natural reading of the Recovery Act is that it permits FHFA, but does not compel it in any judicially enforceable sense, to preserve and conserve Fannie’s and Freddie’s assets and to return the Companies to private operation.
Anyone else troubled by this language?