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allnatural
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Posts posted by allnatural
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High likelihood, but I think more like a years worth of earnings ($10-15b buffer), which buys them enough time to finalize reform as they retain capital.
whats the likelihood that Calabria implements a capital plan exactly like what Watt did for the 3 bn buffer except a much larger number?
So say, the next 150 bn earnings will be retained while senior preferred balance increase by that same amount?
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Safe to say that got tabled as it wasn't supposed to leak and drew some scrutiny. Current focus is on getting Calabria confirmed and then taking it from there.
What happened to Ottings 'Within Weeks' comment back in Jan??
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I wouldn't worry too much about the recent Collins filing. It potentially hurts plaintiffs constitutional argument but has no effect on the APA claim which is what the judges during oral arguments focused on / our best shot at a win there.
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Very quiet lately. While I am still optimistic they amend the NWS this month if Calabria is voted in.. is it safe to say if this step isnt taken by June dividend latest, that admin reform is dead for time being heading into election year? Thesis would shift back to courts where judges havent helped (other than the recent Lamberth ruling which won't decide damages until 2H 2020). I'm still cautious on Collins given past rulings give some judges an easy way out.
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Don't take it to heart. It seems he's pretty strict about what comments stay up and don't (for good reason, a lot of nonsense gets posted there).
edit: he responded to your post
@midas
I would encourage you raising these questions with Tim since I want to know the answers and I wouldn't trust anyone else. it would be interesting to know what the minimum required capital addition is to authorize a release from conservatorship. how much above that which is determined to be prudentially appropriate is another matter which is discussed at length on Tim's blog, but I can't remember Tim ever saying this is the amount that would be the statutory minimum
I made a post there, but it got removed. Perhaps I am persona non grata over there; my last two or three posts have been removed as well, including one asking why Treasury would not insist on a fast recap and/or a full recap before release (in response to Tim opining that the companies might be released before they are recapped).
All I did was ask why my calculation of Fannie's statutory minimum core capital ($85.5B) differs from that in their filing ($22.2B).
If you really want to know, you will likely have to ask him yourself. You have much more latitude on that site than I, it appears.
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As optimistic as one can get about Collins case... if we are back to relying on courts for any progress from here... Not a good sign IMO.
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If they settle the lawsuits, declare the senior prefs (the vehicle that allows the NWS) fully paid off and redeemed, and recapitalize / monetize the warrants / declare the conservatorship over, i cant imagine any scenario where a future admin can reinstate the senior pfds once theyre gone. it would be past the point of no return.
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Source on Feb 25 vote? Thats very quick
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Calabria himself also said that "The powers of the conservator have to conserve the assets and preserve the assets of the companies' during the hearing. Seems like he still agrees w/ his paper.
you might notice that in crapo's opening he did say that the conservator had a "mandate" to conserve and preserve
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This is taken out of context. He says since he was selected as FHFA nominee in Fall, he has recused himself from any discussion to stay independent. This doesnt imply that there isnt a plan out there. Great political answer to dodge that question.
Fannie confirmed in its 10-k today that an admin plan is coming in early 2019.
Van Hollen (regarding Otting's comments): "You don't know of any plan, correct?"
Calabria: "Correct."
That's concerning.
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At least we know a plan is coming.. from 10-k
"Administration Developments
Officials in the Trump Administration have indicated that resolving the conservatorships of Fannie Mae and Freddie Mac is a priority and that the Administration intends to release a framework for housing finance reform in early 2019."
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That is my suspicion. Might be wiser to wait for admin plan thats being released "shortly" and Calabria hearing out of the way (it also makes sense to release the plan AFTER Calabria's hearing as well).
I think the idea is they dont have to announce anything tomorrow, but they can stop the sweep before div is due at the end of March (after Calabria hearing and after admin releases its reform plan).
Or they could announce it tomorrow. who knows
if a capital restoration plan is to be released by admin "soon", I don't know why they would sweep a dividend now...just makes the amount of capital to be restored incrementally higher...but you never know with the govt
Announcing tomorrow would draw too much fire against Calabria hearing, right?
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I think the idea is they dont have to announce anything tomorrow, but they can stop the sweep before div is due at the end of March (after Calabria hearing and after admin releases its reform plan).
Or they could announce it tomorrow. who knows
if a capital restoration plan is to be released by admin "soon", I don't know why they would sweep a dividend now...just makes the amount of capital to be restored incrementally higher...but you never know with the govt
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I share similar sentiments. Otting clearly wants to retain capital with his recent commentary on capital being the "most important thing" in order to operate the GSEs in a safe and sound manner. But I am not convinced it happens tomorrow. Matter of when not IF.
I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept. that and the sound of Emily's digital head hitting the floor
I'm expecting the language stays the same until after the plan had been announced. Co's can always release an 8k on the day.
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You realize for all intents and purposes, FHFA (Otting) and UST (Mnuchin) are now essentially the same person. Neither will act without the other.
PSPAs and Conservatorship are separate issues. FHFA placed them in conservatorship, not Treasury. So Treasury has no say in getting them out. However, Hank Paulson came up with a clever way to obtain leverage through the financing. Termination or any change to the PSPAs requires Treasury's consent. Thus, if Tsy doesn't agree to allow the companies to retain full capital it won't matter that FHFA has the sole authority to terminate the conservatorship. Unless it switches to receivership. Tsy is needed, in the end. Whoever concocted this, including the sweep, was a genius.@cherzeca
This board might be a better place to continue the discussion from Tim Howard's blog. I feel that my response might just be clutter there. In fact, my post there is at least somewhat off topic, and was only a hypothetical I thought up, inspired by Tim's sentence that I quoted there.
My understanding of the SPSPA is that Treasury has to approve release from conservatorship unless it's receivership. In that case, they can just refuse to let the companies out even if they are fully capitalized, right? If that's true it dodges all the duty problems because FHFA and Treasury could agree to change the seniors to something else before the companies are released. Then Treasury could push to convert their senior shares to some other form of equity worth at least the $122B they had to give up.
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FHFA Director Otting commentary from today I thought was very interesting..
"He declined to comment on any specifics other than to say that ensuring the mortgage giants have enough capital and liquidity to operate in a safe and sound manner is "the most important thing."
Otting is agreeing with shareholders in the Collins case. Capital is required for safety and soundness, and operating with out capital (thanks to the NWS) is not operating the GSEs in a "safe and sound manner".
Amazing FHFA can repeatedly defend these actions in court but agree with shareholders outside of court (both Watt and Otting)
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It makes things more complicated than necessary (why are we transferring assets down the road in a 2-5 year transition process according to them) and at the same time forfeiting the governments 80% equity... Good luck with that
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Pay attention to ~15:00 in the Mnuchin clip. He mentions how there are many ways to pay for infrastructure and there are ways to leverage other money.
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If the choice is between marking down ur snr pfds as fully paid w/o paying shareholders a penny or writing a ~$150b check to fannie and freddie... i think choice is obvious if youre the government.
https://investorsunite.org/top-ten-takeaways-from-5th-circuit-hearing-in-collins-v-mnuchin/
Thoughts on point 8 if the nws is ended administratively before ruling?
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To be more specific, there were 16 en banc cases in total in this circuits history, 13 were reversed (see below):
Tim Pagliara @timpagliara
"EnBanc hearings in 5th Circuit 13/16 cases reversed decisions- 2/15 same ruling for different legal reasons. 1/15 confirmed lower court ruling. This points to the significance of the 5th Circuit hearing - David Thompson- Investors Unite call 1/31/19"
I'm assuming any reversal on remand would fall into the 13 bucket.
Did Thompson say that all 13 of those cases were actually reversed, or does that number include remands?
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If i may play devil's advocate- is it possible the primary reason this case was picked up en banc was related to the constitutional claim (which the defense later withdrew), and not constitutional remedy or APA, which may have been secondary to the en banc judges? I guess if that were the case you would have to believe that majority of the judges don't agree that FHFA is unconst. structured (which would be a leap of faith given the majority conservative panel).
Just thinking out loud but I think i answered my own question.
Can't wait to be #4 of 17
wow 13/16 enbanc hearings in 5th circuit resulted in reversed decisions, according to thompson on the call
you mean 14/17, right?
it takes at least 9/16 to agree to rehear en banc, so this is not surprising. only 20% upon actual rehearing proved to be an unnecessary rehearing from a result point of view. couple this stat with what one heard on the oral argument and one may be inclined to draw an inference
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
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I agree with your view. They will increase the SPSA liquidation preference by the buffer they allow them to retain. This gives them cover while litigation plays out and they finalize a reform which involves the government declaring the senior prefs fully paid off (settlement w/ shareholders).