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

[Luke 532]

This thing about funding Obamacare is a terribly weak argument.

 

Money is fungible. If they put the NWS in place to increase government revenues following the sequester, it would be impossible to prove that it was solely for that purpose. And the previous administration got away with way worst than that.

 

Cardboard

 

Unless the docs show an e-mail saying "we'll use the GSE money to fund Obamacare."

[investorG]

This thing about funding Obamacare is a terribly weak argument.

 

Money is fungible. If they put the NWS in place to increase government revenues following the sequester, it would be impossible to prove that it was solely for that purpose. And the previous administration got away with way worst than that.

 

Cardboard

 

are you sure about that?  I am not sure, but from what I read, certain aspects of Obamacare needed to be funded specifically and only by congress, rather than some general fund.

 

the Obamacare adjustment is proving to be very hard to get through ---- the administration, if there's truth in this, could say the ACA is in worse shape than thought, the prior administration plugged holes with housing profits, even more reason why we have to fix it.

[onyx1]

This thing about funding Obamacare is a terribly weak argument.

 

Money is fungible. If they put the NWS in place to increase government revenues following the sequester, it would be impossible to prove that it was solely for that purpose. And the previous administration got away with way worst than that.

 

Cardboard

 

I agree the money is all fungible.  But as a political argument, it resonates with GOP opponents and the public much more than "Obama stole money from institutional investors".

 

The Master Persuader is practicing his craft.

[Flynnstone5]

Money is fungible unless there's a communication that indicates enacting the NWS could be a solution to filling the ACA budget gap.

 

This story seems so ridiculous and crazy, yet it could easily be true. Reminds me of the Enquirer originally breaking a story, everyone shrugs it off as nuts, but they actually get it right sometimes, i.e. John Edwards mistress, Jesse Jackson illegitimate child, Rush Limbaugh oxycontin addiction, etc.

 

Obviously have to call BS unless this continues to grow and/or proof. I do have to say that Trump does like to set up the media/dems and then make them look like fools. He could destroy any existing FnF narrative, court results and at the same time reset the entire ACA narrative (never could have worked without pillaging FnF). Interesting mix of crazy yet totally fitting on many levels.

 

This investment is certainly proving to be quite the experience.

[SnarkyPuppy]

 

That point is very clear to me - hence my comment that if it's true it's material.  My point is that your source that the "White House is leaking info" is a ridiculous website which lacks any integrity and blatantly makes up absurd  information on a whim (and any rational observer would concoude this is more than likely the case here).  Capiche?

 

 

Yes, again I agree it's a ridiculous website.  And I wouldn't even think about responding to the person that originally posted it if Jerome Corsi didn't have White House press credentials.  But he does (as of 3 weeks ago).  So he is going to risk losing those credentials by immediately reporting falsely that he received info from the White House?  Couple that with the 11,000 docs hitting Trump's desk recently.  Add to it that the leaked info is something that has been discussed previously by those following the situation closely.

 

Fair point.  Definitely respect your views and I personally think you've added a lot to this thread.  I just think when tensions are high we can all tend to exaggerate reality.  It would be wonderful if this had happened - I just am skeptical for what I think is good reason.  Will watch closely.

[Luke 532]

 

That point is very clear to me - hence my comment that if it's true it's material.  My point is that your source that the "White House is leaking info" is a ridiculous website which lacks any integrity and blatantly makes up absurd  information on a whim (and any rational observer would concoude this is more than likely the case here).  Capiche?

 

 

Yes, again I agree it's a ridiculous website.  And I wouldn't even think about responding to the person that originally posted it if Jerome Corsi didn't have White House press credentials.  But he does (as of 3 weeks ago).  So he is going to risk losing those credentials by immediately reporting falsely that he received info from the White House?  Couple that with the 11,000 docs hitting Trump's desk recently.  Add to it that the leaked info is something that has been discussed previously by those following the situation closely.

 

Fair point.  Definitely respect your views and I personally think you've added a lot to this thread.  I just think when tensions are high we can all tend to exaggerate reality.  It would be wonderful if this had happened - I just am skeptical for what I think is good reason.  Will watch closely.

 

I agree we should be skeptical, as I am per the first thing I said in my first post regarding this "Doubt this is true..."

 

It will be interesting to see if any other press brings it up.  If not, then it's nothing.

[no_free_lunch]

I agree we should be skeptical, as I am per the first thing I said in my first post regarding this "Doubt this is true..."

 

It will be interesting to see if any other press brings it up.  If not, then it's nothing.

 

This is the thing.  At the end of the day if it was really being leaked by the WH then it would be leaked to multiple sources.  If you don't see it more wide spread soon then it's made up.

[Guest Schwab711]

Imagine the headlines:

"OBAMA PLAYED ROBIN HOOD STEALING FROM THE HEDGE FUNDS TO GIVE HEALTHCARE TO THE SICK/POOR!"

 

"TRUMP AND MNUCHIN HALT CHEMO FOR SICK CHILDREN TO GIVE FRIENDS BILLIONS!"

 

"TRUMP AND MNUCHIN MAKE FRIENDS RICH WITH FRANNIE HANDOUTS!"

 

Obama allegedly broke the law to pay for healthcare for the poor/sick... Who gets mad at that? That's the general risk I see with fnf, the future headlines. Whether the above are the total truth or not, they are the easy stories to write and true in the absolute sense.

 

With the ACA/NWS story, it was broken by MSM folks. They had wider distribution at their disposal and published via blog. I imagine they did it because it is entirely circumstantial evidence that plays off pre-conceived notions. It's a nice theory though.

 

Good luck all

[investorG]

Imagine the headlines:

"OBAMA PLAYED ROBIN HOOD STEALING FROM THE HEDGE FUNDS TO GIVE HEALTHCARE TO THE SICK/POOR!"

 

"TRUMP AND MNUCHIN HALT CHEMO FOR SICK CHILDREN TO GIVE FRIENDS BILLIONS!"

 

"TRUMP AND MNUCHIN MAKE FRIENDS RICH WITH FRANNIE HANDOUTS!"

 

Obama allegedly broke the law to pay for healthcare for the poor/sick... Who gets mad at that? That's the general risk I see with fnf, the future headlines. Whether the above are the total truth or not, they are the easy stories to write and true in the absolute sense.

 

With the ACA/NWS story, it was broken by MSM folks. They had wider distribution at their disposal and published via blog. I imagine they did it because it is entirely circumstantial evidence that plays off pre-conceived notions. It's a nice theory though.

 

Good luck all

 

if trump delivers justice, he will have a handful of community bankers + policemen + nurses in his office ---- they sold tens of billions of preferred securities to pension funds and community banks a mere months before the conservatorship. 

 

keep in mind i'm not talking bad about hera, some times investments fail.  but the nws has stunk since the day I first read about it.

[Cardboard]

All of this sounds a bit like noise. What are the true options?

 

1) Keep Fannie/Freddie under conservatorship with NWS aka nationalization.

2) Keep current capital structure, exercise warrant and recap via a secondary offering.

3) Wipe-out current capital structure, recap via an IPO.

4) Buffett idea or only 2% done by private but, that kind of seems like #1 modified.

 

Is there anything else? It should not be so hard for the government/Mnuchin to figure out what has the highest NPV.

 

Cardboard

[orthopa]

New Politico article picking up on the DTA issue. Looks like a sense of urgency is building FWIW.

 

http://www.politico.com/story/2017/02/fannie-freddie-bailout-looms-over-white-house-235460

 

Pressure is mounting on the Trump administration to fix Fannie Mae and Freddie Mac as the two mortgage giants grow increasingly vulnerable to another taxpayer bailout despite robust profits.

 

The companies are watching their capital dwindle as the Treasury takes most of their earnings, weakening their ability to weather market volatility and raising the odds of short-term losses. Corporate tax reform — a top priority of President Donald Trump and congressional Republicans — could force them to take huge writedowns.

 

 

Treasury Secretary Steven Mnuchin says a fix for the companies isn’t at the top of the administration’s agenda. But without action from the White House or Congress, it’s all but certain that Fannie and Freddie, which back two-thirds of U.S. home loans, will need another taxpayer rescue on the Republicans’ watch.

 

“This would be a new bailout,” said Rob Zimmer, a lobbyist for the Community Mortgage Lenders of America. “Republicans own this town, and they will own this problem. It will be a big political black eye.”

 

Complicating the political calculus is the federal spending that Fannie and Freddie help finance. Allowing them to keep their profits would deny Congress revenue that could be used to cut taxes, pay for infrastructure projects and fund a repeal of the Affordable Care Act.

 

Given the slim chance for a legislative fix, some banks, investors and housing groups are counting on Trump to break the gridlock that has left Fannie and Freddie trapped under government control since the 2008 housing meltdown.

 

On Feb. 17, the Independent Community Bankers of America warned of “another massive bailout” if the companies continue to be starved of capital, an opinion shared by hedge funds and some lawmakers.

 

“There’s no reason whatsoever they shouldn’t be able to recapitalize,” said Michael Capuano (D-Mass.), a member of the House Financial Services Committee. “They’re being used as a piggy bank.”

 

It might seem farfetched to think of the mortgage giants on the brink of another rescue. Earlier this month, they reported robust profits and said they would send $10 billion to taxpayers. That brings their total remittances to the government to nearly $266 billion, a sum in excess of the $187.5 billion in aid they received to operate during the foreclosure crisis.

 

In return for forfeiting revenue, the companies are promised a government lifeline to make ends meet if they suffer a loss. Tapping that credit line would highlight eight years of congressional inaction that has left the companies in limbo. But allowing them to bulk back up brings its own political risk if it’s seen as a step toward re-establishing the mortgage giants as private companies that profit from taxpayer risk.

 

That’s the choice confronting Trump, who has stacked his administration with mortgage experts who call the status quo unacceptable. Chief among them is Mnuchin, who has the power to recapitalize Fannie and Freddie, but hasn’t signaled that he’ll use it.

 

 

“It’s something we’re going to very carefully consider before we come out with a plan,” Mnuchin told Fox Business News on Feb. 23. “We don’t want to do anything that would put the taxpayers at risk going forward, so this is something that’s going to take us a little bit more time.”

 

Industry might get a clue to the administration’s plans for the mortgage companies next month, when Trump releases his first budget plan. Like Mnuchin, Trump’s budget director, Mick Mulvaney wants action on Fannie and Freddie. Last year, as a member of Congress, Mulvaney introduced legislation to allow the companies to retain capital, a bill that won support from small-government groups.

 

Allowing the companies to rebuild capital, even without a promise to set them free from the government’s grip, could also trigger a legislative backlash from Congress that could make broad reform even more complicated.

 

House Financial Services Chairman Jeb Hensarling (R-Texas) is among the lawmakers who oppose recapitalization and want to minimize or eliminate the government’s role in the mortgage market.

 

“There’s a common view among most Republicans, in Congress anyway, that the worst-case scenario here is re-privatizing them,” said Jim Parrott, a senior fellow at the Urban Institute and former adviser to President Barack Obama. “What you do not want politically is to be subject to the narrative that you’ve taken the first step toward re-privatizing since 2008.”

 

A Treasury spokeswoman had no comment on the administration’s position on recapitalization. A Hensarling spokesman did not respond to a request for comment.

 

Some lawmakers may be reluctant to agree to a legislative fix because Fannie and Freddie have proved useful as a source of cash. In 2012, Congress funded a payroll tax cut by raising the guarantee fee, or g-fee, that the companies charge mortgage borrowers.

 

Rep. Mark Sanford (R-S.C.) has sponsored legislation with Rep. Brad Sherman (D-Calif.) to stop the practice.

 

Tax reform, too, looms large for the companies. If Congress lowers the corporate tax rate, Fannie and Freddie would have to write down the value of deferred tax assets by as much as $30 billion, according to an analysis from Fitch Ratings. That could trigger a loss that forces the companies to seek taxpayer help.

 

Finally, any change to the current arrangement, known as Treasury’s net worth sweep of the companies, would land in a thicket of litigation and might give an edge to the hedge funds who bought Fannie and Freddie stock at bargain-basement prices.

 

Investors were dealt a legal setback last week when a federal appeals court said they couldn’t sue over the net worth sweep. Still, some of the biggest of those speculators, including John Paulson and Bruce Berkowitz, raised money for Trump’s campaign and are betting the White House will act in their favor.

 

“We are optimistic that the indispensability of Fannie Mae and Freddie Mac to affordable homeownership eventually overpowers the taboo imposed upon them by the previous Washington establishment,” Berkowitz told investors last month.

 

When Fannie and Freddie's losses do come, they’re are likely to be short-lived. In the long run, the companies should continue to report profits as home prices rise and default rates stay low. That’s another reason lawmakers aren’t eager to take on heavy lift of reform, said Christopher Whalen, senior managing director at Kroll Bond Rating Agency.

 

“The status quo is ugly and conflicted,” Whalen said. “There’s a huge downside for the politician who wants to wade into the crocodile-infested waters, but not much upside.”

 

Victoria Guida contributed to this report.

[SnarkyPuppy]

Is anyone not concerned about the fact that Hensalring openly supported mnuchin + mnuchin pointed out specifically that he has met w Henslaring re: FNMA?

 

"House Financial Services Chairman Jeb Hensarling (R-Texas) is among the lawmakers who oppose recapitalization and want to minimize or eliminate the government’s role in the mortgage market."

[Cardboard]

If they met and being on the same side (Republicans), I think that is a positive. They should try to find a compromise.

 

Cardboard

[Guest cherzeca]

All of this sounds a bit like noise. What are the true options?

 

1) Keep Fannie/Freddie under conservatorship with NWS aka nationalization.

2) Keep current capital structure, exercise warrant and recap via a secondary offering.

3) Wipe-out current capital structure, recap via an IPO.

4) Buffett idea or only 2% done by private but, that kind of seems like #1 modified.

 

Is there anything else? It should not be so hard for the government/Mnuchin to figure out what has the highest NPV.

 

Cardboard

 

I like the idea of voiding senior pref since it will have been repaid as per original deal and treasury exchanging its warrants for new conventional preferred stock all of which could be immediately resold. Immediate value recognition for treasury and eliminate overhang represented by warrants so GSEs can issue more common stock to build capital.

 

Nifty, huh?  Only question to be answered is how much new pref stock

[orthopa]

Is anyone not concerned about the fact that Hensalring openly supported mnuchin + mnuchin pointed out specifically that he has met w Henslaring re: FNMA?

 

"House Financial Services Chairman Jeb Hensarling (R-Texas) is among the lawmakers who oppose recapitalization and want to minimize or eliminate the government’s role in the mortgage market."

 

I would be more concerned it he was given a position within an administration. Remember he was being floated for Treasury Secretary but backed out or whatever. Mnunchin, Ross, and Mulvaney are in. That's what I'm concerned about. Hensarling will go on the record for what he wants because he needs to get re elected. The appointee's don't.

 

 

[DocSnowball]

Imagine the headlines:

"OBAMA PLAYED ROBIN HOOD STEALING FROM THE HEDGE FUNDS TO GIVE HEALTHCARE TO THE SICK/POOR!"

 

"TRUMP AND MNUCHIN HALT CHEMO FOR SICK CHILDREN TO GIVE FRIENDS BILLIONS!"

 

"TRUMP AND MNUCHIN MAKE FRIENDS RICH WITH FRANNIE HANDOUTS!"

 

Obama allegedly broke the law to pay for healthcare for the poor/sick... Who gets mad at that? That's the general risk I see with fnf, the future headlines. Whether the above are the total truth or not, they are the easy stories to write and true in the absolute sense.

 

With the ACA/NWS story, it was broken by MSM folks. They had wider distribution at their disposal and published via blog. I imagine they did it because it is entirely circumstantial evidence that plays off pre-conceived notions. It's a nice theory though.

 

Good luck all

 

if trump delivers justice, he will have a handful of community bankers + policemen + nurses in his office ---- they sold tens of billions of preferred securities to pension funds and community banks a mere months before the conservatorship. 

 

keep in mind i'm not talking bad about hera, some times investments fail.  but the nws has stunk since the day I first read about it.

 

I think the story can be told the way it is - instead of making the companies safe and sound, the previous Government "looted" them to fund failing Obamacare, or at least to balance the budget. This will lead to their needing another draw in the coming year at Taxpayer expense. Now "we" will make them safe and sound and bring in money to the taxpayer.

[Mephistopheles]

Imagine the headlines:

"OBAMA PLAYED ROBIN HOOD STEALING FROM THE HEDGE FUNDS TO GIVE HEALTHCARE TO THE SICK/POOR!"

 

"TRUMP AND MNUCHIN HALT CHEMO FOR SICK CHILDREN TO GIVE FRIENDS BILLIONS!"

 

"TRUMP AND MNUCHIN MAKE FRIENDS RICH WITH FRANNIE HANDOUTS!"

 

Obama allegedly broke the law to pay for healthcare for the poor/sick... Who gets mad at that? That's the general risk I see with fnf, the future headlines. Whether the above are the total truth or not, they are the easy stories to write and true in the absolute sense.

 

With the ACA/NWS story, it was broken by MSM folks. They had wider distribution at their disposal and published via blog. I imagine they did it because it is entirely circumstantial evidence that plays off pre-conceived notions. It's a nice theory though.

 

Good luck all

 

if trump delivers justice, he will have a handful of community bankers + policemen + nurses in his office ---- they sold tens of billions of preferred securities to pension funds and community banks a mere months before the conservatorship. 

 

keep in mind i'm not talking bad about hera, some times investments fail.  but the nws has stunk since the day I first read about it.

 

I think the story can be told the way it is - instead of making the companies safe and sound, the previous Government "looted" them to fund failing Obamacare, or at least to balance the budget. This will lead to their needing another draw in the coming year at Taxpayer expense. Now "we" will make them safe and sound and bring in money to the taxpayer.

 

We're going on the deep end of speculatory behavior, but just to add to the fun:

 

"Communist Obama STOLE from mortgage companies to fund Obamacare which is a total disaster, making it harder for the blacks to get home loans! Homeownership levels are the lowest they've been in 47 years. SAD! Nobody knows real estate better than me, only I can fix!"

[no_free_lunch]

Sold half my position.  I bought in in December and sold at effectively the same price which is unfortunate.  However, with the court case going the way it did I feel getting even money out is a good deal.

[abitofvalue]

The article is confusing in trying to link May 2016 to the net worth sweep which occurred in 2012.  Did anyone else pick up on this?

:) ++

[Flynnstone5]

Sold half my position.  I bought in in December and sold at effectively the same price which is unfortunate.  However, with the court case going the way it did I feel getting even money out is a good deal.

 

Common or prfd?

[SnarkyPuppy]

Sold half my position.  I bought in in December and sold at effectively the same price which is unfortunate.  However, with the court case going the way it did I feel getting even money out is a good deal.

 

I've have orders ready to sell half my position every day of this week.  Might pull the trigger today but it's a tough choice

[Flynnstone5]

Rumors floating that Mnuchin may not request next payment from sweep.

 

[no_free_lunch]

Sold half my position.  I bought in in December and sold at effectively the same price which is unfortunate.  However, with the court case going the way it did I feel getting even money out is a good deal.

 

Common or prfd?

 

Preferred.  Mostly T series.

 

I just don't like all the ways that we can "win" and still do poorly on the preferred's.  If they stop the NWS but not retroactively and we have to rebuild capital, we might lose.  If they convert the preferred's and then exercise the warrants we lose.  If they convert the preferred's under difficult terms we might lose.  Whatever, I am not bearish overall as I still have a 3% position but I couldn't keep it at 6% of portfolio.

[LC]

The article is confusing in trying to link May 2016 to the net worth sweep which occurred in 2012.  Did anyone else pick up on this?

:) ++

Yep, noticed that too haha

 

Aren't there government budget reports which detail accounting flows? It seems it would be pretty simple to prove.

[orthopa]

Im surprised that some guys are throwing in the towel with the court case on an appeal that was already dismissed. It was ok to hold through an administration that wanted the GSEs dead with all hope hanging on to a couple court cases, and not when the current treasury secretary wants to release them from govt control?

 

I totally appreciate the idea of breaking even and not losing money but dont follow the logic. How is mnuchins whims and biases any worse off then judges and justice system that is crawling at a snails pace?