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


twacowfca

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Again I refer you to the case of the rbs pref. The face value means squat. If it meant something everybody holding a bond would always get paid back at par.

 

/quote]

 

Wellmont, I was reacting to this.

 

I re read your post and don't disagree in general.

 

Cheers & Happy Thanksgiving!

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Guest wellmont

Again I refer you to the case of the rbs pref. The face value means squat. If it meant something everybody holding a bond would always get paid back at par.

 

 

 

Wellmont, I was reacting to this.

 

I re read your post and don't disagree in general.

 

Cheers & Happy Thanksgiving!

 

No, you brought up a valid, and very good point. The markets did anticipate rbs changing their dividend policy. And rbs got out of their jam relatively quickly. the other factor is that the capital markets have been generally very favorable since early 2009, and those non paying pref never really faced adversity. Monetary conditions could not have been more favorable.

 

The difference here is that it looks like fannie and freddie will need a LOT of time to rebuild capital before they can think about paying pref dividends. If I am wrong and they start paying right away, I will be a happy camper indeed since I own common And preferred.

 

regards

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Guest cherzeca

Interesting to see Wilbur Ross's expected appointment considering his connection with Jim Lockhart.

 

what's connection?  provide link?

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Interesting to see Wilbur Ross's expected appointment considering his connection with Jim Lockhart.

 

I asked Wilbur Ross in 2014 in Toronto (at one of the dinners associated with the Fairfax annual meeting) to respond to a recent statement by Jim Lockhart while a Vice-Chairman of WL Ross & Co., where Lockhart said in April 2014 about the GSE's:

 

"It's a stretch, the stock and the preferred (stock) is worthless and should be worthless."

 

Ross responded, in effect, that it was a stupid statement for Lockhart to make and does not represent the view of WL Ross & Co.  I haven't heard a peep from Lockhart since then.  Ross didn't offer any additional words of support for the shareholders or the government though. 

 

Many board members from COBF where in attendance, so maybe they can offer their interpretation as well.

 

 

http://finance.yahoo.com/news/former-u-regulator-says-fannie-222316531.html

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Guest cherzeca

new financial times article:  https://www.ft.com/content/a661d6fe-b205-11e6-a37c-f4a01f1b0fa1

 

Trump has motivation to rewrite the future of Fannie and Freddie

US president-elect has the motivation to engineer IPOs of the mortgage companies

 

It is the curse of Fannie Mae and Freddie Mac. Since the mortgage insurers were bailed out in 2008, some of the most renowned US investors — from John Paulson to Bill Ackman to Richard Perry — have piled into their shares and suffered mysterious losses in their once rock-solid portfolios.

 

Bruce Berkowitz is another. The founder of Fairholme Capital Management bet on the preferred shares in 2012 and then came a cropper on unrelated investments. A Morningstar “Manager of the Decade” in 2010, Mr Berkowitz’s mutual funds have since trailed the market.

 

Like the other men, he has gone as far as suing the US government to try to extract value from his Fannie and Freddie stakes. “We’re not asking for a cheque,” he says. But he does want the government to end a four-year-old practice of taking all the institutions’ profits, which has starved other shareholders. “You’ve done very well. You’ve been paid tens of billions. Stop.”

 

Since the US presidential election, the common shares have surged about 50 per cent on the belief that Donald Trump will relax the government’s stranglehold. Mr Berkowitz, who says “we crossed break-even last week”, is also investing hope in the new team — “maybe you don’t want them to marry your sister or your daughter but they’ve had some success in their lives”.

 

There are three reasons why Mr Trump might want to break the hex: causing embarrassment, giving payback and building a war chest. First, embarrassment. The Bush administration took warrants for 80 per cent of the equity and preferred stock and a 10 per cent dividend on the bailout funds. In 2012, the Obama administration changed the terms. Instead of taking a dividend, it simply “swept” all the profits. The excuse was that the lossmaking companies might enter a “death spiral” if they had to keep drawing on the bailout money to pay an increasing dividend. The reality was that the companies were about to become very profitable as the housing market recovered; the switcheroo has diverted billions of dollars to the Treasury, which has received more than $250bn in dividend payments since 2008.

 

In court, disgruntled private shareholders have attempted to extract emails and memos between Mr Obama’s closest advisers and the president himself. They believe those documents will show that the government was concocting a fiction with its “death spiral” argument to prevent the companies’ renaissance.

 

The Justice Department has fought tooth and nail to keep those documents secret, citing a panoply of presidential privileges. When a judge rejected them and ordered the documents handed over to the plaintiffs, government lawyers filed an emergency appeal, which is still pending.

 

Mr Trump’s lawyers might keep up the fight. After all, they might want to rely on the same arguments to protect their own secrets in the future. It is also possible that in spite of the dubious reasoning and the ferocious attempt to keep them secret, that the emails are not that embarrassing after all. But it is still a good bet that the stance on protecting the prior administration’s secrets will change. That is only one part of one lawsuit, but it is likely to weaken the government’s overall case that the profit sweep was legal.

 

Second, payback. When most of Wall Street backed Hillary Clinton, John Paulson was a rare supporter of Mr Trump. The hedge fund manager is also the second biggest non-government shareholder in Freddie Mac, according to data from S&P Capital IQ. If Mr Trump wanted to reward his ally in a privatisation, Mr Paulson’s stake would leap in value.

 

Third, the war chest. In a dream privatisation, the Treasury would exchange its warrants for 80 per cent of the shares and then sell them to the public, much as it did in AIG, for a price tag that could reach $200bn. That could help fund a Trump infrastructure plan or build a big wall on the Mexican border.

 

One obstacle is that Fannie and Freddie are being starved of capital under the current regime. They would need an adequate capital buffer before they were privatised — they could get there by retaining earnings but that would take years. A quicker remedy would be to sell new equity to institutional investors. The dilution would be severe for all shareholders but still might offer some upside and sizeable spending money to the government.

 

Does embarrassing adversaries, rewarding friends and assembling a war chest sound like something Mr Trump might like? The biggest problem is Republican lawmakers.

 

Many of them — including putative Trump Treasury secretary Jeb Hensarling — have been fiercely opposed to the companies re-emerging in the same public-private form. Then again, at the start of his administration, Mr Trump will have the clout. If he can grasp all the benefits, it would be foolish to bet against him lifting the curse.

 

tom.braithwaite@ft.com

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question, please, is there a firm deadline on when mandamus needs to be ruled on? given there are other deadlines in december coming up related to sweeney's ruling.

 

also, please, if there is a settlement soon, do the 12000 documents go away forever, or could they be re-accessed in a new suit? 

 

basically i think its in too many powerful people's interest, including trump's, that these emails are not released.

 

 

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awesome that the great ft has finally picked up on this story and reported it in an unbiased, objective manner

 

meanwhile...

 

John Carney ‏@carney  Nov 23 For the record, I revise all my bearishness on $fnma. It could happen. Still think legal case is weak but politics is undetermined.

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Steve Mnuchin and Bruce Berkowitz both sit on the BOD of SHLD.  Mnuchin will have to relinquish his role if he is appointed, however Bruce and his team should have no problem getting a sit down with him, once appointed.

 

I'd be shocked if BB hasn't already made his case.  Mnuchin is a sharp guy.  I dealt with him directly in the mid 1990's while exploring a mortgage transaction.  He understands MBS's and the role of the GSE's.  It wouldn't take BB more than 30 minutes to explain the lawlessness of the NWS, and his idea of moving the GSE's to a utility structure.

 

I've no idea what Mnuchin's view is on the GSE's in general (of of the NWS in particular), but I'd bet heavily that he understands the legal & balance sheet issues, and the potential for a UST warrant windfall.

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