merkhet

Curiously, Shelby stated in January that he "would like to get Fannie and Freddie up and running on their own without government help," but that it would require bipartisan support. See 5:24 in the following clip http://www.bloomberg.com/news/videos/2015-01-29/iran-nuclear-talks-is-survival-question-shelby-says And now he's advancing a bill that makes it so that Treasury (and by implication FHFA) can't do anything on its own to release and/or reform Fannie and Freddie...

So, looks like Democrats have moved quickly to oppose the bill. (http://thehill.com/policy/finance/241486-democrats-threaten-to-oppose-shelbys-financial-services-bill) Additionally, the DOJ has responded to Grassley. (http://www.grassley.senate.gov/news/news-releases/lack-transparency-over-administration-decisions-fannie-freddie-earnings) What's interesting in the actual reply is the following: If I remember correctly, at the last status conference, the government seemed to be pretty adamant in stating that the document production would be done by the end of April except for the documents that require privilege -- so I'm surprised that Cooper et. al. did not raise a stink this week by asking for a status conference when they had a chance. It feels like something is up, but it could just be that we had a rash of Fannie & Freddie news today when it's been rather quiet for a few weeks. 2015-05-06_DOJ_response_to_Grassley.pdf

It seems like things are coming to a boil. http://www.housingwire.com/articles/33838-senate-bank-chair-weighing-sweeping-gse-lending-overhaul?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire As far as I can tell: (1) Treasury says that it's up to Congress to deal with GSEs (2) Congress says great, and we'll make sure we foreclose on any possible administrative reform in case you don't like what we do We'll see soon whether Congress has essentially called Treasury's bluff or if Treasury and the Obama administration really want to punt this off to a Republican Congress.

Timeline for the Perry appeal attached. Given the timeline, I think it's possible that the appeal gets argued and decided by the end of the year. 2015-05-06_Per_Curiam_Order_for_Brief_Deadlines.pdf

Combining Jurgis & TwoCitiesCapital together, I think the relevant question is whether a broader stock market drop from elevated levels will have a correlation of 1 across all equity sectors and/or asset classes or whether there will be certain pockets that will maintain or even increase their value.

No status conference this week.

They release the info on whether there will be a status conference on Mondays. Also, someone alerted me to the following over the weekend

Look for publicly traded companies that have cleverly hidden their amount of leverage using captive reinsurance. And when you find a few, report back to us on which ones. :)

It was at Bookworms yesterday

http://www.valuewalk.com/2015/04/fannie-mae-freddie-mac-dick-bove-calls-it-a-bombshell/ Dick Bove's comments on the leaked memo.

I think it's helpful.

Discussing potential policy is part of the Treasury department's job. They weren't interfering with the conservator's role or communicating these ideas to the GSEs. Jon Prior from Politico mentioned this as well -- that it could be an intellectual exercise, but that doesn't seem to be the case if you read the actual document. The memo is written as a policy memo to Geithner as to what to do. http://www.insidesources.com/wp-content/uploads/2015/04/DOT-1.4.2011.pdf For instance, on page 2, the exact wording on the memo is as follows: Who is the "we" that the Treasury is referencing there? If this is just discussing potential policy, then why are they using the term "we"? Recall that this is a memo sent to Secretary Geithner. The memo is directed at Geithner to ask him to consider how to manage various assets of FNM & FRE. It doesn't say FHFA should consider managing things... it's just "consider." If they weren't interfering with the conservator's role or communicating these ideas to the GSEs, then why does the memo say the following: That certainly sounds like someone is interfering and/or communicating things to FHFA and/or the GSEs, which they are not allowed to do based on HERA. You'll also notice that, on page 3, the 4th item says to "Affirm our current obligations" with respect to the PSPAs. If the rest of the items aren't actually directives that the Treasury is supposed to act out, wouldn't the 4th item be distinguished in some way? Like "Treasury should affirm our obligations" to be distinguished from the other three items on which Treasury is merely pontificating? In any case, IMHO, there is more than enough here for Cooper to show Sweeney that there's direction from Treasury to FHFA -- so that they can either lift the privilege on the documents that may show more of the same and/or prove jurisdiction in Sweeney's court.

One other thing to consider -- the timing of this leak seems interesting. If things are going according to the schedule laid out from the last status conference, discovery should have ended by now -- meaning the government should have turned over all relevant documents save for the clearly labeled privileged documents. I wonder if they left this memo out of the discovery in the Court of Federal Claims. The next status conference is going to be mighty interesting.

Attached. 2014-11-05_Possible_Restructuring_Method.pdf

That memo is the motherlode. Here's my quick analysis of this: (1) I haven't checked the story as to whether this is a document that was left out of the Lamberth court, but if it was, then is a big no-no -- and that judgment will at the very least be vacated and remanded for a second look. (2) Why is the Treasury department discussing what the "Transition Plan" will look like for the GSEs when FHFA is supposed to be the conservator? Treasury's only role should be to deal w/ their PSPA duties. - You can see this in things like "End activities the GSEs should never have been doing in the first place," or "Setting the required capital for the GSEs to 300 to 400 bps," or "Potentially accelerate recognition of losses prior to 2012." (3) Option 1 indicates that adequately capitalizing the GSEs and then having them exit conservatorship was the initial path laid out under HERA and the Paulson Treasury -- and confirms that this could be done without any legislation by Congress. (4) Option 2 is completely untenable because of the "Key criticisms of this system" - Moving from 30 year mortgages to 3 year and 5 year hybrids - More pro-cyclical markets - Increased mortgage rates beyond anticipated rates implied by higher capital standards (5) Option 3 indicates that they'd convert Fannie & Freddie into First-Loss Providers once the FDIC-like portion was created -- very similar to the model that Jim Millstein suggested a while back -- I believe I posted it a few months ago. I repeat. Motherlode.

http://www.federalreserve.gov/aboutthefed/section13.htm 13(3) is a provision dealing with the powers of the Federal Reserve. The plaintiff is arguing that the government is not authorized to accept equity as anything other than collateral. The benefit here wouldn't have anything to do with the Fannie warrants as the Treasury was free to accept warrants for their deal versus the Federal Reserve accepting warrants. The applicability of the AIG case to the Fannie & Freddie case is that there will be relevant precedent on what might constitute an illegal exaction in this type of case, whether what happened to AIG is a physical or regulatory taking and how economic loss will be viewed.

The transcript says he will issue a opinion in the relatively near future, but that's a pretty vague concept. I'm hoping within a month.

It sounds like Starr will win this case...

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/aig-american-international-group/msg219843/#msg219843 Transcript from the closing arguments in the AIG case. I'm anxiously awaiting this decision.

Had a friend who argued to his wife that it was cheaper to go to the bar to watch the games, plus there was a sense of community there. Around here bar's have deals for Steeler games. Usually you can get a Miller or Coors for $2, figure five beers and the NFL "costs" $160 or so. I'd say he had a point considering that seems to be the average monthly Comcast bill around here. I've thought about that too, but my math is a bit different. When we watch a Texans game we can't catch at home, we go to the bar, and that will usually set us back about $50 because of food + drinks + tip. Figure maybe half the games aren't broadcast here, so that's $80 + $400, and we can eat/drink at home for about $10 a game, and that's an $80 difference, so my delta is $320. And then there's 13 games for my Longhorns, and the math is fairly similar. My bill in DC is about $120 a month, and that includes HBO. So take off $10 a month I'm paying for HBO and figure that cable is about half that bill, and I'm paying about $660 a year for cable. And the bonus is that I can catch random games, like when Colt McCoy starts for the Redskins.

I've thought about it a number of times, but I haven't taken the plunge. I need my college and professional football.

That seems reasonable. $225B in 25 years implies a CAGR of around 11.5%.

I do the same ting about spending vs investing. It's a good problem to have.

There's no logic there.

Looks like there's a fight brewin' -- filed on April 23rd, 2015