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  1. If the government wants to win in the takings case all they have to say is that dividends will be resumed when the GSEs are fully capitalized. Current trajectory is about 15 more years. Preferred shareholders aren’t entitled to dividends until fully capitalized.
  2. 5th Amendment Takings claim is 1-2 years away. On the eve of that case does anyone think the preferred shares will not be trading much higher than 8-9 cents on the dollar? This seems like the point of maximum pessimism.
  3. While I would never encourage anyone to make this a 90% position, I wouldn’t call it insane if someone has a high risk tolerance. If SCOTUS agrees with 9 of the 16 5th circuit judges that the NWS is an ultra vires action then the stock goes up bigly this month. If SCOTUS rules that the NWS is within FHFA’s statutory authority, then the plantiffs will be asking for liquidation preferences + interest @ around 9% per annum in the other court cases. Only Receivership can take away the preferred shareholders’ liquidation preferences. Receivership is extremely unlikely because Receivership will cause nearly $6T to be added to the national debt.
  4. This message board has been unusually quiet lately. Am I the only one trembling with greed with the prospect of SCOTUS agreeing with the 9 of the 16 5th Circuit judges that the NWS was an ultra vires action? I noticed that the 5th Circuit has 10 judges appointed by Reagan, Bush, or Trump and 6 judges appointed by Clinton or Obama. 9 of the 10 consecutive judges agreed that the NWS was an ultra vires action. All 6 six of the liberal judges disagreed. Doesn’t this mean that we can expect SCOTUS to rule 6-3 or 5-4 along party lines that the NWS was ultra vires?
  5. cherzeca - you believe that there will be a settlement before 9-Dec-2020. I believe that all negotiation occurs at the 11th hour. If true, then when do you think is the latest that settlement happens? Seems to me that the court’s time is still wasted if settlement happens 8-Dec-2020.
  6. Seems to me that it might take ~10 years to reach the 4% minimum leverage ratio. Even if g-fees are raised it will take time for earnings to increase across the entire book of business. Many comments suggest that private capital investors will be unwilling to invest the substantial equity capital needed if the re-proposed capital rule is not changed significantly. Like Tim Howard, I’ll also be very interested to see how Fannie and Freddie, and their financial advisors, react to where Calabria appears determined to take them.
  7. I tend to agree with this. Calabria has repeatedly stated that releasing the GSEs from conservatorship will be process dependent, not timeline dependent. Reading through the comments for the reproposed Capital Rule there is much discussion about CRTs being strongly disincentivized. According to the US Treasury’s September 2019 Housing Reform Plan, CRTs are to be encouraged. I expect this part of the rule to be rewritten. I also expect many other parts of the rule to be rewritten too. This will all take time. Government doesn’t do anything quickly.
  8. Why does a 4th amendment need a capital rule finalization? Hopefully I'm missing something. IIRC either Calabria or Mnuchin said that the PCF needs to come after a Final Capital Rule because they don’t want to set the PCF twice. Since the 4th amendment needs the PCF, and the PCF needs the Final Capital Rule, then the 4th amendment needs capital rule finalization.
  9. Is this fake? Is David Stevens of the MBA actually encouraging the JPS to be converted to common during a recap? https://www.fhfa.gov//SupervisionRegulation/Rules/Pages/Comment-Detail.aspx?CommentId=15591
  10. The November 2018 Moelis Blueprint assumed that the g-fees needed to be increased to 70 bps to earn an adequate ROE on $167B core capital. If the GSEs need to hold $250B then using the same logic it seems the g-fees need to be increased to ~105 bps (Maybe more because the twins will want an administrative buffer too). JPM and MS will undoubtedly voice opinions about where the g-fees need to be.
  11. Per the attached slide from Berkshire Hathaway Energy, utility regulators seem to aim for about a 10% ROE. So if the twins have to hold ~$250B then net earnings available to common shareholders would need to be ~$25B. The November 2018 Moelis Blueprint seems to assume a somewhat higher ROE. Either way the g-fees will have to be increased. Is there political will to increase the g-fess even if there is a new administration next year?
  12. $250B of capital needs ~$25B of earnings to attract investment (utility-like rate of return) If there is a new FHFA Director next year he or she can just refuse to increase g-fees (or decrease g-fees) in the name of affordable housing and no capital other than retained earnings can be raised. A new administration may have an automatic backlash against sweeping changes done during the lame duck period.
  13. I believe Luke is referring to this: http://www.fairholmefundsinc.com/Documents/PublicConferenceCall20161118.pdf Fairholme Capital Management Public Conference Call November 18, 2016 David Thompson: Yes, there are three standard remedies for a breach of contract. One is expectancy damages, which puts us in the position that we would have been in if there had been no breach of contract. Two is reliance, which is to give us our out-of-pocket costs. The third is restitution. We’re entitled to present evidence of all three and pick the highest. But, I want to focus on restitution, because I think that is really the concept that is the most relevant here, and it’s pretty simple. You look at the benefits that the breaching party received – and here the breaching party would be Fannie Mae and Freddie Mac – and the benefit they received was par value, $25 a share. From that, you would potentially subtract any benefits as they would probably argue for an offset of any dividends that the preferred shareholders received. Now as we know, two thirds of this float was issued in 2007 and 2008. So, for those series the offset from par value would be somewhere between zero and five dollars a share. Thus, we could be looking at damages of $20 a share if we are successful on our breach of contract claim and the court agrees with us about restitution.
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