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


twacowfca

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Guest cherzeca

Investors Unite seems to think we will get an answer from Jacobs/Hindes in the next two weeks.

 

i saw this in an email from investors unite:

 

"In the next two weeks, the judge in the case will either dismiss the suit, which could prompt an appeal by plaintiffs. Alternatively, the judge could let the case proceed to the Delaware State Supreme Court or simply issue a ruling."

 

@merkhet

frankly, i just dismissed it as idle or unfounded speculation.

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Investors Unite seems to think we will get an answer from Jacobs/Hindes in the next two weeks.

 

Do they say why?

 

Nope. They just think we will hear on the MTD/Certification in two weeks -- it's a little odd to me because of the fact that the certification reply from Justice Steele isn't even due until February 26, a week from now.

 

http://investorsunite.org/government-offers-nixonian-rationale-for-dismissing-shareholder-rights-in-delaware-case/

 

In the next two weeks, the judge in the case will either dismiss the suit, which could prompt an appeal by plaintiffs. Alternatively, the judge could let the case proceed to the Delaware State Supreme Court or simply issue a ruling.
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It's amazing to me that there's even the whiff of independence when Watt indicates that FHFA wants to end the conservatorship and yet is unable to do so.

 

http://harvardjol.com/wp-content/uploads/2016/02/HLL110_crop.pdf

More to this point, from Peter Chapman on the Harvard piece above:

 

"The fact that Treasury and FHFA amended the PSPA three times to account for changing circumstances shows the two agencies were working together to manage and regulate the GSEs."

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From Peter Chapman...

"The Clerk of the Court for the Federal Circuit made a notation (Doc. 45) on the docket sheet in Piszel v. U.S. yesterday that the case is scheduled for oral argument at 10:00 a.m. on Thurs., Apr. 7, 2016."

 

So, another case with oral arguments scheduled in early/mid April.

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Watt's comments make me want to get a little more exposure to this idea. He seems to be the first of "other side" to publicly agree that the current situation is unsustainable. There isn't a scenario where FnF are released from conservator ship but shareholders are not rewarded correct? I guess that would be the ultimate screw over, but the release of FnF and realization of value for shareholders goes hand in hand correct?

 

If FnF are released does the 10% dividend to the gov go back into place?

 

 

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Guest cherzeca

Watt & Mayopolous' comments seem co-ordinated. Maybe that's just my optimism.

i was thinking that too.  let's face it, they talk to each other alot, and i imagine they are both frustrated

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Does anyone have the text to the FT fannie article? I dont have a subscription.

 

Thanks.

 

Here are the important quotes:

 

Fannie Mae’s chief executive and its regulator are sounding the alarm on a decline in the institution’s capital cushion, which is on course to vanish in 2018, when it would have to ask the US Treasury for emergency funds.

 

So far investors who own Fannie Mae’s mortgage-backed securities have not been spooked, Mr Mayopoulos said, but he added: “We are a major source of liquidity to the mortgage markets and it would be better to avoid testing the market as to what the breaking point is well in advance of us getting to that point.”

 

Mr Mayopoulos said a range of options for solving the capital problem were available, such as allowing Fannie Mae to retain earnings, changing the terms on what gets Treasury support via preferred stock purchases, and taking it out of conservatorship so it could be recapitalised in another way.

 

Terry Haines, managing director at Evercore ISI, an investment research house, said Mr Watt’s speech “may hint at a frustration with administration inaction on housing finance reform”.

 

Looks like CNBC has basically posted the FT article.

 

http://www.cnbc.com/2016/02/20/fannie-mae-at-risk-of-needing-a-bailout.html

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Watt's comments make me want to get a little more exposure to this idea. He seems to be the first of "other side" to publicly agree that the current situation is unsustainable. There isn't a scenario where FnF are released from conservator ship but shareholders are not rewarded correct? I guess that would be the ultimate screw over, but the release of FnF and realization of value for shareholders goes hand in hand correct?

 

If FnF are released does the 10% dividend to the gov go back into place?

 

It depends on which shareholders you're talking about. I can see a world in which preferred shareholders are paid off at par, but the common shareholders are diluted very significantly because of the lack of capital. (Remember, you can either use the capital to pay off the Government preferred or you can use the capital to build capital. You can't use the same dollar for both.)

 

Why all of a sudden go against the Administration then? Why reverse course now?

 

Is this an election year tactic for the dems?

 

Unclear about the motivation.

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Watt & Mayopolous' comments seem co-ordinated. Maybe that's just my optimism.

i was thinking that too.  let's face it, they talk to each other alot, and i imagine they are both frustrated

 

And yet... Watt still has options available right now that he's not exercising. So the main thing that makes me curious is that Watt is so publicly voicing his displeasure with the situation despite being able to move unilaterally w/o Treasury's sign off.

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Merkhet-You've expressed your concern over the procedural bars the government claims the plaintiffs can't overcome. What are your thoughts on the "conflict of interest" exception in the context of HERA? Would love to read DeMarco's depo with this exception in mind. Would be more fun than whistling in the dark.

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Fairholme call today (Feb 23rd)...

 

Dear Investor,

   

This is a reminder that Bruce Berkowitz will host a one-hour conference call TOMORROW, February 23, 2016, at 11:00 AM EST. Please click here to view the full press release.

 

Mr. Berkowitz will be providing commentary on investments while responding to questions submitted in advance by the public.

 

Participants are encouraged to review recent commentary and topical postings, as well as the online streaming details, by visiting www.FairholmeFunds.com.

 

To listen to the call online, click here.

 

U.S. and Canada Toll-Free Dial-In: (888) 267-5949 

UK Toll Free Dial-In: 0800 028 8438   

UK Local Toll Dial-In: 0203 107 0289 

International Toll Dial-In: +1 (864) 568-3268 

Conference ID: 50083490

 

The conference line will open 10 minutes prior to start time.  A transcript of the call will be edited for clarity and made available on the website after the call.

 

Kind regards,

Investor Relations

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I highly doubt there will be anything substantial...we shal see.

 

Neither do I.  I love listening to these things because you can often pick up on non-verbal clues such as tone, body language (in videos), etc.  For example, those that saw the Mel Watt broadcast last week may have very well walked away with a different impression than those that simply read the transcript.

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Merkhet-You've expressed your concern over the procedural bars the government claims the plaintiffs can't overcome. What are your thoughts on the "conflict of interest" exception in the context of HERA? Would love to read DeMarco's depo with this exception in mind. Would be more fun than whistling in the dark.

 

There are two procedural bars:

 

(A) 4617(f) saying that courts are not allowed to review the exercise of conservator power, and

(B) the conservator succeeded to the rights of shareholders

 

The "conflict of interest" exception only deals w/ (B). Plaintiffs have to win (A) & (B). I think that FHFA has a conflict of interest because it's unlikely that they can stand up to Treasury, but you'd have to be able to prove it -- which is what the discovery in Fairholme v. United States is about.

 

I am more worried about how the courts decide to deal w/ (A).

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