Midas79

What fate for FnF do you believe is good for Goldman Sachs?

I agree with the second sentence here but not necessarily with the others. My idea is that if SCOTUS grants cert then it increases the administration's urgency to act. Is it possible that the worst SCOTUS could do (from the administration's perspective) is order the NWS unwound? Or is there more? Craig Phillips said that the administration will not act in August even if Congress gets nothing done and that they will instead wait. Of course, this was before Draft 29 was leaked. Perhaps Treasury thought it would take a lot longer for Congressional action to go completely off the rails like this.

Yeah. Personal attacks are definitely not the way to go here. Always take the high road, however hard it is.

An IMF News piece says that Warner doesn't even support the Corker bill. That's much more significant news than Warren's opposition. If Warner doesn't even support this bill, will any Democrat at all vote for it?

They sold 22M shares of FMCKM. Those multiple 1M share blocks over the last few months must have been Fairholme.

I think you've identified the main risk being that what seems "fair" to us (par or close to it) may not be what's "fair" to others (CW, Mnuchin, etc.). In general, despite my sense that we are likely due for a favorable result in the near future (post-CW bill failure & Mnuchin taking action), I would be hesitant to push in all my chips here. We could easily have said the same thing a year ago and then got hit with that inexplicable Perry appeal opinion. Do you think there's still a chance of a partial or complete loss of principal, or is it a matter of having alternate non-correlated investment options and being diversified?

i doubt that what was released would get toomey's support. how bipartisan is this draft? it would appear to have been written by MBA for committee staff without a whole lot of adult supervision. this may prove embarrassing for CW, much in the way the govt shutdown was a dumbo move for schumer Giving Corker and Warner the benefit of the doubt, we can view this draft as their first offering in a negotiation and that they know they will have to give way on some things to get what they ultimately want. The problem is that what they ultimately want might be to finally kill Fannie and Freddie. I don't think an olive branch to shareholders will matter if the Ds object to that. The compromise seems to be a utility model that somehow caps Fannie and Freddie's market share. Existing shareholders get a piece of those new companies, they (and other market participants) keep affordable housing goals, and the big banks get a slice of the market. The very definition of compromise. What we need now is catchy names for the successor companies to Fannie and Freddie. I would have suggested names starting with G but I don't want to group them with Ginnie Mae. Let's try Helga: HLGA (Home Loan Guaranty Association) and Hubert: HUBR (Homeowners' Underwriting Board for Realty). The "ritual sacrifice" foaming-at-the-mouth Rs that just want Fannie and Freddie gone might be appeased by a name change and a charter repeal. Especially if they can be made to see that Helga and Hubert (Fannie and Freddie as they exist now plus some handicaps) are far different than the 2007 actual Fannie and Freddie that their hate is directed towards.

I don't think an administrative move to a utility format is even possible if the companies are eventually released. It might take some broad interpretation of FHFA's powers under HERA......oh wait they have already done that. This bill would render the senior prefs mostly worthless; right now there's only around $6B in liquidation preference to go around and that will go negative on March 31. So on one hand we have arguments that Mnuchin would never give up the seniors because that is like lighting $200B on fire, but if they aren't worth anything anyway then he could do something before the bill gets passed.

Yes, that is what it would take. The existence of the lawsuits is proving to be rather important, I think. There are many forms the bribe could take: Shares in the post-receivership FnF (if they even exist) Payouts to all shareholders, common and junior pref Payouts to only junior pref holders Payouts to only series of junior prefs owned by plaintiffs Payouts to only shares owned by plaintiffs I guess the second to last is the only scenario where it matters what series you own.

And its own mini-Jumpstart in section 802(b)(1). Section 802(b)(2) ties Watt's hands: So receivership plus seniors in place equals zero for all commons and junior prefs. This is what Corker calls fair?

Courtesy of whipstick on the iHub board: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=138127285 http://bankrupt.com/CRL_FMCC_013018_182330.pdf I just started reading but it appears to be a draft of the Corker/Warner bill.

A mutually owned private entity would be largely consistent with everything that's been publicly said and c an wipe out preferreds. Seems unlikely but the most material in probability. What does this mean, and who would the new owners be? Would there be grounds for any new lawsuits about liquidation preference if it takes receivership to move to this new model? It would be hard to reconcile a move to an entity that wipes out even the junior prefs with Corker's specifically mentioning existing shareholders and immediately afterwards expressing a desire for a solution that is fair to all interests, which presumably would include the shareholders he just mentioned. I see why existing shareholders are a thorn in the side of a reform effort: the capital that the original buyers contributed has long been swept away and thus they (well, we) wouldn't actually contribute anything towards a recap. And I understand your point of view, Snarky. You consistently play devil's advocate and I appreciate that; it is always good to keep the downside in mind.

What exactly does that mean?

The Stevens comments I was thinking of have been since Trump was elected. He had this to say about the Moelis plan: http://www.scotsmanguide.com/News/2017/06/Shareholders--GSE-reform-can-happen-quickly/ As for Parrott's comments about FHFA moving to the right in 2019, I see those as scare tactics to get the Ds to support what the Rs want right now. He's saying "if you think this version of housing finance reform is too conservative, you don't want to know what the 2019 version will be like!". It's all bluster because the FHFA director doesn't have nearly that much power, and if the Ds gain control of Congress they will have much more say in what happens next. The fight over the direction and even constitutionality of FHFA would be just like the current one over the CFPB with the parties reversed.

I would take anything David Stevens has to say with a giant grain of salt. He has been on a crusade against hedge funds being able to profit on GSE shares. Yes, agreed. Everybody that has been following the situation should know to take what he says with a huge grain of salt. I didn't mean to imply that you didn't know that. I should have elaborated more: Stevens's anti-hedge fund rhetoric in the past means that he could say that while Fannie and Freddie wouldn't be harmed, the same may not be true for shareholders. On second thought I don't see how that is possible, unless we see massive dilution to commons and dividends stay turned off for a long time.

I would take anything David Stevens has to say with a giant grain of salt. He has been on a crusade against hedge funds being able to profit on GSE shares.

the rumored senate bill and FHFA/moelis aren't completely different, imo. in the end, almost certainly attached to any potential reform is the end of the duopoly (i.e. more competition) and the removal of the implied guarantee model. it's also likely, but not certain, that an explicit guarantee will come on the securities. whether the guarantors are utilities or the # of competitors or transition details, etc. are likely overcome-able differences. I now believe the corker bill has a greater chance of passing than most. the bankers are acting desperate. hopefully they'll retire the sr pref. if that happens, the jr pref and common should get some proceeds, in that order, either in the form of shares in the new companies or over time in a legacy portfolio rundown receivership scenario. in the mean time, i'm guessing the pref are dealing with the unwind of hf positions who were hoping for admin reform and/or perhaps using the warrants for infrastructure. You bring up a good point: the parts on which all the different proposals agree will almost certainly be part of the new system going forward. The implicit guarantee is gone, explicit catastrophic backstop is likely, and at least 1-2 more competitors is a strong possibility. The part I bolded seems contradictory. Aren't Corker and the TBTF banks on the same side here? I believe that the names Fannie Mae and Freddie Mac are not long for this world. I love the way that renaming the companies is called a "ritual sacrifice" to appease Rs. Very fitting. Those same Rs probably would not be the wiser if two basically identical companies take their place, operating the way Fannie and Freddie do right now (as opposed to in the past, which is the phantom that these Rs fight so hard against). I can't say the recent price movement hasn't been disappointing, but I don't see any reason to sell at this point.

Thanks. The tough part is having to revive fannie and freddie. I just listened to the segment. What does the bolded part mean?

I agree here. Add to the list that Phillips said that the conservatorships will end during this presidential term. Even if Phillips wouldn't say that the administration will act if Congress doesn't by August, he didn't say that they never would.

High liquidity prefs going down hard at the moment. FNMAT trading at near parity with FNMAJ, a good time to switch from the latter to the former! The unusual volume is in FNMAM. Two blocks of 765,352 shares were sold at prices (12.09, 12.13) well below the bid (12.87 at the time). Is there some news I missed or is it just another day at the office?

If a Jumpstart (or Jumpstart-like) bill was gaining steam (either as a stand-alone bill or attached to something bigger), couldn't Mnuchin/Watt simply make a deal before any Jumpstart gets signed into law? I'm sure they are watching any and all legislative bills to see if something like that is trying to be sneaked in. I wouldn't be surprised if Mnuchin/Watt already have an agreement written that merely needs to be signed in case this scenario arises. Yes, Mnuchin and Watt should be able to front-run any Jumpstart-like legislation. I don't see Congress being able to pass something like that without any sort of leaks.

I wonder if there are actually two competing Senate bills? Corker-Warner 2.0 as mentioned in this article, and something by Crapo and Brown that aligns more closely with FHFA's proposal?

The market seems to agree with you. I would love to have more context behind those quotes though.

wtf? :o Watt said that the SMEs should be shareholder-owned companies. Does Phillips (and Mnuchin) think that current shareholders have no rights at all and will just be washed away? Or just that current shareholders are that only in name because they have no voting rights or ability to participate in company earnings? Common shares took a small hit just now but not nearly to the extent I would have expected. This news seems to drastically increase the uncertainty behind both commons and juniors, though it is much harder to wipe out (or heavily dilute) the juniors. Joe Light also tweeted this: https://twitter.com/joelight/status/954066284362240000 So if Congress gets nothing done at all Mnuchin will eventually act, but it could take up to 3 more years.

I think the politics of who says what, when, and in what order is important. FHFA having this plan and Treasury saying "yeah sure, why not" is much better optically than vice versa.