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valuecfa

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    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Even though Sweeney's case is currently in some sort of discovery...can she file a similar ruling or must that wait until discovery is over?

     

    Last time the government tried to argue something similar Judge Sweeney said -

     

    With respect to defendant’s claim that the court lacks the authority to affect the exercise of the FHFA’s powers or functions, the court agrees with the case law of the United States Court of Appeals for the Ninth Circuit, which states that the “FHFA cannot evade judicial review

    . . . simply by invoking its authority as conservator.” County of Sonoma v. Fed. Hous. Fin. Agency, 710 F.3d 987, 994 (9th Cir. 2013); Leon County v. Fed. Hous. Fin. Agency, 700 F.3d 1273, 1278 (11th Cir. 2012) (“The FHFA cannot evade judicial scrutiny by merely labeling its actions with a conservator stamp.”). Thus, rather than turning a blind eye to a case and immediately dismissing it from its docket merely because the case concerns the FHFA, the proper approach is for a court to examine the factual underpinnings and legal contentions presented by the complaint, in order to determine whether the exercise of its jurisdiction is proper. County of Sonoma, 710 F.3d at 994 (“Analysis of any challenged action is necessary to determine whether the action falls within the broad, but not infinite, conservator authority.”). Indeed, “Congress did not intend that the nature of the FHFA’s actions would be determined based upon the FHFA’s self-declarations . . . .” Leon County, 700 F.3d at 1278. For purposes of the instant motion, there is no request by plaintiffs that would potentially restrain or affect the exercise of powers or functions of the FHFA as conservator. Consequently, blanket assertions concerning the court’s ability to conduct these proceedings, especially as they pertain to a discovery matter related to the question of jurisdiction, hold no merit.

     

     

    In other words, I believe Judge Sweeney will take this all the way to trial, and see what discovery brings up.

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    The Government is probably going to use Lamberth's brief to throw a wrench in the Federal Claims Court case I feel like. He basically said that HERA allows the FHFA and Treasury to do whatever the hell they want to do.

     

    "It was Congress, after all, that parted the legal

    seas so that FHFA and Treasury could effectively do whatever they thought was needed to

    stabilize and, if necessary, liquidate, the GSEs. Recognizing its role in the constitutional system,

    this Court does not seek to evaluate the merits of whether the Third Amendment is sound

    financial--or even moral-policy. The Court does, however, find that HERA's unambiguous

    statutory provisions, coupled with the unequivocal language of the plaintiffs' original GSE stock

    certificates, compels the dismissal of all of the plaintiffs' claims. "

     

    There are different arguments in the Federal claims case, and of course there will be an appeal of the district court case. But, yes i'm sure the gov will reference certain particulars in the district court decision to Judge Sweeney.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Well, looks like Lamberth ruled in favor of the Government...

     

    http://timhoward717.com/2014/09/30/memorandum-opinion-and-orders-perry-injunction/

     

    What sort of precedent does this set for the other Fairholme case?

     

    Yup. The district court case (the injunction) was dismissed. We still have the federal claims court case that is well into discovery. A blow nonetheless. Would have been nice to wrap this one up more quickly if injunction was in our favor.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    VIC has a new FNMA write-up today. Any VIC members willing to give a brief summary of the write-up? I'm guessing there's not much there that you can't find on timhoward17 blog, but, of course, I'm curious.

     

     

    Thesis summary

     

     

    Buy FNMA common at $4.00 because:

     

     

    1.  Regan-appointed Judge Lamberth will invalidate the 3rd amendment (3A) via summary judgement in the Perry case soon after his current Blackwater murder trial goes to jury.

    2.  He will rule based on facts that are not in dispute (which will expedite the time frame and offer investors a quick catalyst).

    3. The 3A will be vacated based on either (a) a finding that Treasury violated HERA by invoking the 3A and creating a new security beyond the 2009 time limit.  (Note:  Even Treasury's own enforcement of tax law deems the 3A a new security), or (b) a finding that the 3A was arbitrary and capricious due to the fact, admitted to by FHFA, that FHFA failed to comply with the APA requirement that they compile an administrative record at the time of the 3A.  (Note:  FHFA did compile an administrative record at the time of the 1A and 2A.)

    4.  Vacation of the 3A will put $80bln of excess dividends (above and beyond the 10% as required pre-3A) into question.

    5.  Perry will pursue the obvious remedy and successfully have the $80bln used to reduced the $117bln Treasury senior preferred currently outstanding.

    6.  The incremental gain of $80bln will be reduced by $12bln (goes to private preferred to bring them to par) and then diluted by 4:1 (80% of common shares goes to Treasury via warrants) leaving $68/ (1.15*5) about $12/share value for the non-US Govt common shareholders, or a 200% gain.

     

     

    My only dispute with the thesis is that one could buy the private preferred's today and get a return of over 150% and avoid the risk of steps 4 & 5 entirely.

     

    In my opinion, the common thesis of 7x - 10x return rests in the fact that the government is doing the taxpayer an incredible disservice by not exercising its warrants and unlocking that value to the American taxpayer. Any future reform can include the existing common as it stands as opposed to wiping it out and starting over, effectively costing the taxpayer over $150 billion. I think logical heads in the Treasury/FHFA/government will eventually prevail and realize the value the taxpayer would sacrifice.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I recently moved to Washington, DC, so I was able to sit in the joint status conference in Judge Sweeney's courtroom today. A few things struck me as interesting:

    • Judge Sweeney seems to be trying her best to be fair to all parties.
    • Charles Cooper is a far better attorney than (I think it was) Gregg Schwind.
    • Judge Sweeney mentioned the possibility of sanctions on the government for non-production.
    • The government has refused to produce documents relating to whether the FHFA was directed to enter into the 2012 Amendment at the behest of Treasury or other governmental branches.
    • At the end of the conference, Judge Sweeney directly addressed the government by saying that, while she knows all the government attorneys have the upmost integrity and would never do this, they would do well to inform their clients that they had better not refuse to disclose documents that were detrimental to the government's case.

    It does not look like the government attorneys are winning themselves any friends by dragging on production.

     

    Appreciate the heads up.

    Mannkind

    in General Discussion

    Posted

     

    For those still following the MNKD saga...some upping important dates-

    Mar 28: FDA briefing docs released

    Apr 1: AdCom

    Apr 15: PDUFA

     

    Expect significant volatility within the next 2 months

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

     

    I'm interested to see what Ackman's proposal will be, whereby he expects the common to do so well even more so than the prefs. He is obviously expecting more than a 3x from the common given that is where most of the prefs are relative to par

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

     

    What's the alternative? If they wind them down and dissolve them, instead of sell them, then who has the capability to step in and take their place...let alone take their place with minimal disruption to the mortgage market. The only possible viable alternative is an FDIC like entity, but that keeps the government on the hook. The Fairholme proposal really is the most logical one yet.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I think the real estate industry would be against this plan.

     

    Lack of government guarantee will increase mortgage costs.

     

    What's to say this entity doesn't MBIA itself and overextend while reducing underwriting standards at some point in its existence? If that's the case, we are back at square one.  Obviously this plan works well now that all new mortgages are pristine.

     

    It's a bold step to do without a guarantee, and has been perceived as a far fetched goal of the politicians. A lack of guarantee will have large ramifications, but will please those (especially the politicians)  that prefer the government to not be on the hook when things go bad. The interested parties have not even gone so far as to definitively conclude whether or not they need/want a guarantee, or what form it will need to take if one remains. We are still in early innings on proposals, but this is one that goes the extra step.

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