Mephistopheles

It says currently trade at the equivalent of $32. I think they mean that FNMAS is currently at 32% of par value, which it is. Perhaps... that would be quite the typo! I don't think it is a typo. I believe that $100 is a standard par value for prefs or bonds, but I may be wrong. When they state "equivalent of", they mean assuming it was a $100 par value. I agree they could have worded it better.

It says currently trade at the equivalent of $32. I think they mean that FNMAS is currently at 32% of par value, which it is.

Side note they did invest in Apple recently. :)

Just a small anecdote. A family member worked with Mnuchin at Goldman. He says that Mnuchin is a diehard capitalist. Hopefully that's a good thing for us...

I didnt like Buffett's comments at the general meeting that noncum pref shares are a weak form of currency as fannie mae investors are finding out - I wish someone would ask him if he actually thought the net worth sweep was legal on any level as his comments seemed to suggest this was just the way it goes if you buy a non cum pref share ... Wait, he commented on the FNMA/FMCC preferreds? I don't recall any question about the NWS or the GSE's... Incidentally I emailed both Becky Quick and Sorkin questions about the NWS, as I'm sure others did as well. IMHO, Buffett is a fan of the NWS as I remember him commenting a while ago that Berkshire would go into the mortgage guaranty business if FNMA/FMCC pull back or disappear. (I think it was before the NWS).

Missed that part, you're right

They're converting to common stock, cashless (and taxless) transaction

There is very little political will to destroy the post office.

Except that one side wants to get rid of the entities all together by starving them of their capital. The other side wants them recapitalized to ensure affordable housing, and would rather see them in private hands than in constant jeopardy as they are in their current state. Furthermore, it's all up to the Executive Branch anyway, and if not, the Judicial Branch. Congress is the least important of the three. They are not under "constant jeopardy" as they are under government conservatorship currently. The case can be argued that without the government's backing, these entities would cease to exist and the common and subordinated preferred stock would be worth 0 so why should they receive anything? The GSEs are currently in a weird limbo state, but interestingly enough the mortgage market is functioning well. Only financially-interested hedge funds are complaining. They will have zero capital in the near future, at which point their survival depends on the whims of whoever is in power and the political environment. Any small loss would make them insolvent. Seems like jeopardy to me.

She's not going to apologize. She already heard from Whitney who informed her of his support for Clinton, and all Warren did was remove the word billionaire from her post as it was factually incorrect. Can't stand her. If she hated Wall St so much she would have endorsed Sanders while attacking Clinton for her Wall St ties. She's just as fake as the rest of them.

At first glance this makes sense. Would you rather have 100% of cash flows or 79.9% ownership minus junior preferred? Obviously the former. But Treasury changes every 4-8 years. So, contrary to what a private investor might seek, Treasury would much rather take all of that cash up front and use it for budgeting rather than a limited amount every year, for a limited time. In this case, everything Trump has said indicates massive deficits going forward, with massive infrastructure spending. It's in his best interest (and Treasury's) to maximize the value of the warrants upfront and IPO the shares. For this reason, I predict we will see very gradual capital requirement buildup over time, rather than all at once - along the lines of what Ackman has said, similar to the Basel III requirements for banks. Couple this with Mnuchin's public comments and John Paulson's financial and personal connections to the administration, it's very obvious exactly what Treasury wants to happen. At the risk of sounding like a fool a year from now, I think at least the preferred investment thesis is a slam dunk.

Except that one side wants to get rid of the entities all together by starving them of their capital. The other side wants them recapitalized to ensure affordable housing, and would rather see them in private hands than in constant jeopardy as they are in their current state. Furthermore, it's all up to the Executive Branch anyway, and if not, the Judicial Branch. Congress is the least important of the three.

Is there a way to read this without having a Barron's subscription? Google the title and click on the link from Google. Or I can save it for you. Still surprised not everyone knows about this already. This stopped working, at least for me with wsj, a while ago

Here's a contrarion thought: Trump's been needing Obama's help with much of the transition and possibly a fair amount of the actual Presidency. And it seems he actually likes the guy. Maybe it's in his best interest to keep the documents hidden!

Highly unlikely that Congress debates and creates reform eliminating F&F before Mnuchin comes up with a plan. Even if that does happen, Trump can veto, which would be hard to override given Republicans don't have enough of a majority and Democrats are unlikely to support elimination.

Looking at the specifics of 3 of the Fannie preferred classes, Series F and G (FNMAP and FNMAO) are redeemable only on one date, every 2 years. And series S (FNMAS) only every 5 years. Of these, FNMAS is most interesting not only because its redemption period is the least frequent, but because its dividend is set to be 7.75% minimum (or LIBOR + 4.23% if its greater). The next redemption date is 12/31/20. Assuming this gets resolved within a year, FNMAS holders could be looking at 7.75% interest minimum for like 3-4 years, which would cause it to trade above par. However, that's assuming the settlement, or court, honors that term. For instance, if the court determines its a liquidation, then all the shares may just be redeemed regardless of the date. Or they could settle by converting to common from day 1, since obviously the company has no capital. There are 280 million shares of FNMAS with par value of $25, so I'd say fair chance these terms are not honored given the capital shortfall. Thoughts anyone?

Agreed, hence I'm trying hard to kill the companies. :)

What are the risks to the jr. preferred thesis at this point? I'm trying to kill the companies. Here's what I've come up with so far. 1. An adverse ruling in both the Court of Claims and D.C. Court of Appeals before Trump gets a chance to settle. The Takings case hasn't reached that point yet, but the Appeals case may decide any moment to affirm Lamberth, which would work against us. But even in that unlikely scenario, we can still get a Trump settlement out of Sweeney's Court; so overall I don't see the Courts as a substantial risk right now. 2. An adverse law passed by Congress, similar to Corker's provision last year which disallows the Treasury to sell its stake until 2018. What if they pass a law that makes the NWS permanent, disallowing Treasury from ever changing the terms? Again I think this is highly unlikely as there simply isn't time. Any such law would then be vetoed by Trump and would have to win by 2/3 in Congress, I think, which doesn't have that strong of a Republican stronghold. Again, not a substantial risk. 3. Trump gets impeached, or doesn't even make it to inauguration day. This one I am concerned about more than anything else. There's an op-ed in the NYT today from a Republican elector pushing for the electorate to choose an establishment Republican such as Kasich, when they decide in the next few weeks. Trump is a petulent child who just can't help but control himself, and I'm afraid that the Republican Congress may lose patience sooner rather than later. Of course, it's a tricky call for them. They can give Pence the job and be happy temporarily, but face a major populist backlash in 2018 from Trump and his supporters, so I feel they'd rather not mess with that. But still, the guy is insane and imo is the single biggest wild card for our investment. Aside from #3, I simply can't think of a way this doesn't turn out well. Looking at it from a 10,000 ft. level: We have a major party from the Plaintiff class, Paulson, who's been a supporter of the President-elect and worked closely with the head of the Treasury, the Defendant, who just so happens to have openly said he favors exactly what the Plaintiffs have been asking for. How often does that happen? It can't get any more clearer imo, at least for the jr. preferred. Can anyone think of something that I may be missing?

Fyi that article wasn't written by Carney lol

Looking back at Bruce Berkowitz' interview on CNBC from September where he announced support for Trump, he mentioned that he's making his decision based on those who will be working in his administration including running Treasury. I wonder if Mnuchin was in consideration back then, and if Berkowitz was referring to him, and in regards to FNMA. Clearly Bruce's prediction came true, haha. I'm really looking forward to this being resolved quickly.

What would help though is if they count the excess dividends as repayment of capital, and adjust the 10% accordingly. So if in 2013 they swept $100 billion, and owed only $18.7 as per 10%, then that $81.3 billion extra not only counts as repayment, but then in the next year the 10% counts only for about $100 billion. So the 2014 excess would be anything over $10bn in dividends, and so on. I agree that having to pay $19 billion a year in dividends for all these years leaves nothing for the common, but there is certainly a range of possibilities in retroactive maneuvering.

Not very material for Trump. Ericopoly also used non recourse leverage (warrants/LEAPS) while shorting downside exposure in related competition- neither of which are applicable here. I was being facetious about the 100%. But having said that, I think Trump likes every single penny coming his way, material or not, and he's a total sellout. That's why he does things like appear in wrestling matches and run a scam university.

This hasn't been mentioned enough, but Trump has between $1-5 million invested in each of 3 Paulson funds, lol. Pg 35/92: http://2016election.procon.org/sourcefiles/trump-financial-disclosure-form.pdf I think this may be an Ericopoly, put 100% of your net worth in, type of situation... Edit: I will bet anyone $100 that Paulson has been buying aggressively since the election, probably both prefs and common. I wouldn't be surprised if he's got like 10-20% of his funds in there.

Which scenario? If they deduct the dividends already paid in a settlement, as Fairholme's lawyer suggested

That would be an awful scenario; I still don't get why that makes sense as a settlement.