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

[TwoCitiesCapital]

19 minutes ago, Sunrider said:

Indeed - what a slow burn. Just wondered whether there's anything new in terms of admin action or courts which I missed? I seem to recall that there was a plan to release once they build enough capital - was that ever formalised? How far away would the companies be from that?

C.

 

They're still not able to really build capital. Every $ of retained earnings is offset by a liability of $ owed to the Treasury via liquidation preference. They get the benefit of having access to that liquidity, but any return it generates is still owned by the Treasury and not shareholders.

 

The only real benefit of "reforms" made by the Trump admin is it put an extra layer of trouble for the Treasury in accessing those funds that they technically own - basically made a current asset a deferred asset. 

 

Shareholders do not benefit from this arrangement though - it seems more designed to punish the next administration then improve anything for the stockholders. People have argued it was set up to incentivize additional negotiations between the two parties to come to an agreement in the middle, but here we are 4-years later with 0 progress made there. It was a hard argument to make as a positive twist then and significantly harder argument to make today with the benefits of hindsight. 

 

 

 

Edited May 22 by TwoCitiesCapital

[sholland]

7 hours ago, Sunrider said:

Indeed - what a slow burn. Just wondered whether there's anything new in terms of admin action or courts which I missed? I seem to recall that there was a plan to release once they build enough capital - was that ever formalised? How far away would the companies be from that?

C.

It’s a Trump trade.  Share prices going up lately because Trump’s poll numbers have gone up.  Trump floated the idea of John Paulson being the treasury secretary. Paulson was a backer of the Moelis Plan to recap and release. 

[TwoCitiesCapital]

23 minutes ago, sholland said:

It’s a Trump trade.  Share prices going up lately because Trump’s poll numbers have gone up.  Trump floated the idea of John Paulson being the treasury secretary. Paulson was a backer of the Moelis Plan to recap and release. 

 

If Trump really wanted to help them, couldn't he have forfeited the Treasuries' defense in court and admitted that the institutions were stolen from shareholders, and pillaged, at the direction of the Treasury and the prior administration? 

 

He didn't. 

[Sunrider]

Thank you. If there is one thing I’m sure about is that Trump as President or ex will only do what benefits him.

[Sweet]

I don't believe that Trump could not have gotten these companies released had it truly been a priority.

[gfp]

I don't follow any of this FNMA/Freddie stuff closely, but I will just point out that Trump was completely checked out once COVID messed up the pretty picture he was trying to paint.  Mnuchin was basically running Treasury without much input from Trump and Mnuchin was busy micromanaging the COVID response with Jay Powell.  

[Mephistopheles]

Mnuchin went on cnbc before Trump was even sworn in, and said he wanted to release the companies. He should have had it done long before Covid. As two cities mentioned, why the fuck did he keep fighting Fairholme et al in court?? How hard is it to drop a case, to settle if you’re the Sec of Treasury. Is the bureaucracy really that bad?

[Gregmal]

Just flip em into the election. Easy trade.