sholland

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.

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.

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

Ditto.

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.

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?

$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.

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.