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

twacowfca

By twacowfca
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no_free_lunch Rising Star

no_free_lunch

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I am learning to be cautious with fnma but it sounds huge to me.  I mean he is basically repealing the nws albeit without explicitly saying so.  So the entire fairholme case would be won via legislation. Once capital builds momentum shifts towards cleaning and fixing the existing entities. Ok im a bit ahead of events but yes very good to see.

 

 

 

 

 

 

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Guest cherzeca

Guest cherzeca

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watt has finally revealed his trump card (no pun intended). im still unclear how things will work out with housing reform, but the path of least resistance seems to be based on letting f&f rebuild capital first and foremost

 

i suspect that watt has precleared everything with mnuchin. and indeed watt is carrying mnuchin's water at this stage, laying foundation for an administrative solution if congress doesnt act in a suitable fashion

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hardincap Newbie

hardincap

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Tax reform has been pushed back to eoy/early 18, so slim chance for housing reform to pass before the gses run out of capital. Watt will want to start rebuilding before it actually reaches zero. Shareholders are not out of the woods yet though, we still need to see what reform looks like

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Midas79 Newbie

Midas79

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watt has finally revealed his trump card (no pun intended). im still unclear how things will work out with housing reform, but the path of least resistance seems to be based on letting f&f rebuild capital first and foremost

 

i suspect that watt has precleared everything with mnuchin. and indeed watt is carrying mnuchin's water at this stage, laying foundation for an administrative solution if congress doesnt act in a suitable fashion

 

The bolded part has to be correct. Watt has shown no willingness to act on his own (i.e. without direction or support from Treasury) in the past.

 

I'm just surprised this is happening so soon. What happened to all the "Mnuchin won't tip his hand yet" talk?

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rros Newbie

rros

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Tax reform has been pushed back to eoy/early 18, so slim chance for housing reform to pass before the gses run out of capital. Watt will want to start rebuilding before it actually reaches zero. Shareholders are not out of the woods yet though, we still need to see what reform looks like

Yes. Lookout for possible nasty curveballs. We don't want smartypants tomorrow to propose retaining money in an escrow or other esoteric solutions aimed at blocking retained earnings from reaching equity.
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Desert_Rat Newbie

Desert_Rat

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watt has finally revealed his trump card (no pun intended). im still unclear how things will work out with housing reform, but the path of least resistance seems to be based on letting f&f rebuild capital first and foremost

 

i suspect that watt has precleared everything with mnuchin. and indeed watt is carrying mnuchin's water at this stage, laying foundation for an administrative solution if congress doesnt act in a suitable fashion

 

No doubt, but still..

I am looking forward to Bob Corker's reactions tomorrow, guys.

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orthopa Apprentice

orthopa

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Then there is this....https://rockytoppolitics.com/2017/05/10/bonaparte-bob/ 

 

Again take with a grain of salt but wasnt Jerome Corsi's last article about trump/watt stoping the NWS.  This guy hasnt been that far off with his articles.

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SnarkyPuppy Newbie

SnarkyPuppy

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The Trump administration and a bipartisan group of U.S. senators are working to address an issue that has gone unresolved for nearly a decade: how to overhaul Fannie Mae and Freddie Mac, the mortgage-finance giants the government took over in 2008.

 

The Senate Banking Committee has begun behind-the-scenes work on the issue of how, exactly, to revamp the companies. The senators want to develop a framework to decrease the government’s outsize role backstopping the nation’s $10 trillion mortgage market. On Thursday, the panel will hear testimony from Mel Watt, the director of the Federal Housing Finance Agency, which controls Fannie and Freddie, in the first step of a process that could play out in the coming months.

 

It remains unclear if policy makers can overcome philosophical differences and hammer out a final deal. Conservative Republicans have called for a private market with no new federal guarantees. Some centrist Republicans and many Democrats have said a federal role is needed to preserve liquid markets for the popular 30-year fixed-rate mortgage that drives home buying.

 

The Trump administration’s publicly stated desire to jump-start an overhaul is giving a boost to Senate lawmakers, who aim to advance a bipartisan plan to revamp the companies later this year, according to Senate aides and advocates who want to see the companies weaned off government control. Senate Democrats have told their Republican colleagues that a Fannie and Freddie overhaul would garner much more bipartisan support than other GOP priorities, such as rollbacks to Dodd-Frank law financial regulations, these aides said.

 

“Unlike some other issues that are on Congress’s plate right now, this topic has a relatively robust recent history of bipartisan work,” said Jim Parrott, a former Obama administration housing adviser.

 

The rekindled legislative effort involves work by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.), whose staff have acknowledged that earlier, failed efforts to overhaul the companies during the Obama administration were unduly complicated, people familiar with the matter said. Their earlier plan, drafted in 2013, would have replaced Fannie and Freddie within five years with a new “public guarantor.”

 

Trump administration officials and Senate Banking Committee Chairman Mike Crapo (R., Idaho) have made an overhaul a priority. “I’m committed to housing reform and we are committed to not leave them as is for the next four years,” Treasury Secretary Steven Mnuchin said on Fox Business Network last week. Mr. Crapo said in April he is “pretty optimistic” he can advance a bipartisan plan.

 

The White House hasn’t advanced any proposal of its own. Craig Phillips, a deputy of Mr. Mnuchin’s, may shed some light on the administration’s preferred approach as early as next week, when he is scheduled to address the issue publicly for the first time in New York.

 

Fannie and Freddie play critical roles maintaining the plumbing of the U.S. mortgage market. They purchase loans from lenders and repackage them as securities that are insured if the loans default. The firms’ regulator seized the companies through a process known as conservatorship during the George W. Bush administration, and the Treasury Department agreed to inject vast sums to support some $5 trillion in debt securities issued by the companies.

 

The companies have thin capital reserves under the terms of their 2008 government-backstop agreements. And they are required to send most of their profits to Treasury in exchange for some $258 billion in potential ongoing government support.

 

At Thursday’s hearing, Mr. Watt is expected to say his agency may need to change the terms of those agreements to allow the companies to retain earnings rather than to continue sending them to Treasury. Such a move would aim to avoid the possibility of another taxpayer-funded infusion triggered by possible future losses at the firms, he plans to say.

 

“We cannot risk the loss of investor confidence,” he is expected to say, according to an advance copy of his remarks reviewed by The Wall Street Journal. “FHFA’s actions would be taken solely to avoid a draw during conservatorship.”

 

Still, he is expected to stress Congress should decide the future of the housing finance system, not the FHFA. Any steps by the FHFA to allow the companies to retain earnings shouldn’t be construed as supporting a “recap and release,” or a simple recapitalization of the companies followed by releasing them from government control, Mr. Watt is expected to say.

 

While bipartisan legislation potentially could advance through the Senate Banking Committee later this year, the outlook becomes muddy after that. It is unclear if Senate Republican leadership will devote time to the issue on the floor this year, amid competing priorities such as a tax overhaul and health care.

 

Another uncertainty is what would happen in the House. House Financial Services Committee Chairman Jeb Hensarling (R., Texas), who has repeatedly called for liquidating Fannie and Freddie, may not be willing to compromise on that goal. That could put the House at odds with any Senate-approved legislation, which is likely to maintain some role for the government in the mortgage market.

 

“It’s deplorable that the GSE’s are still in conservatorship for nearly 10 years without legislative action, but it’s still highly unlikely this Congress is going to act given the already overloaded agenda and a lack of urgency regarding the issue,” said Isaac Boltansky, an analyst with Compass Point Research & Trading.

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stevevri Newbie

stevevri

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Posted

The exchanges between Corker and Watt are classic. Corker is trying to tell him it's not a big deal to draw and even suggests he draws $10 billion just because he can.

 

Watt tells him this is on him and if a problem happens it's on him not Corker and he can't take the risk.

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Luke 532 Newbie

Luke 532

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Wow!  Heated debate between Corker and Watt.  Typed as I was listening live so please excuse errors...

 

Corker: Lefty think tank and righty think tank coming together.

 

Watt: we've made reforms to enterprises and those shouldn't be ignored.

Watt in charge of GSE reform, congress housing and finance reform.

 

Corker: Building capital.  Notion of running out of resources is baseless issue, why is it even being discussed.  Unilateral step by you when they have 258B in capital right now and drawing on that credit creates a different direction and sends signal to world that something is happening that is not.

 

Watt: I hope you heard the analogy I used, keep them safe and sound and efficient.  If risk of draw or reduction in commitment that backs enterprises then the market being impacted if it happens then what we say is foreseeable it happens it won't be you they come to talk about if it happens, it will be the conservator that will have to answer to it.

 

Corker: why don't you draw 10b now to see what happens?

 

Watt: don't need it now.

 

Corker: Do it anyway.

 

Watt: Why take that risk if we're estimating the risk is harmful?  It's my responsibility and I will live up to that responsibility as conservator.  I can't afford to assume that risk.  You can afford to say it's theoretical, I can't.

 

Corker: most baseless argument I've ever heard.  Something has happened recently.  I don't know what it is.

 

Watt: I'm not saying it's a large risk or not, I am saying I can't take that risk regardless of size.

 

 

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muscleman Collaborator

muscleman

Posted
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Crapo and Corker are losing control.

 

Crapo kept saying "I agree with Corker". I think at least I heard three times.

And he asked something like "If you believe the current setup will shock the market, why would changes to the current setup not shock the market".

 

So he is still trying to keep the status quo by first say, the current setup is not going to be bad for the market, and then saying Watt's changes will be bad for the market.

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