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

[Luke 532]

Again, I know I sound like a broken tape at this point, but with the scathing Sweeney order to unseal the seven documents, the pending motion to compel in front of Sweeney, the pending Perry decision & the fact that they, stupidly, tried to consolidate cases through the MDL in DC without waiting to see who the judges were in DC... I can't imagine that the government isn't looking at a settlement.

 

+1.  Add to it that the gov't asked for terms awhile back, Sherrod Brown's comments, Berkowitz's comments, Political Alpha's piece as reported by Politico, etc...

 

Sherrod Brown/Bruce Berkowitz comments:

Brown 12/18/2015...

https://www.congress.gov/congressional-record/2015/12/18/senate-section

Mr. BROWN. I will say to my colleague from New York that it does not.

That is not the effect of the language. Any number of decisions could

be made after that date, when a new Congress and a new President will be in place. Nor does this provision have any effect on the court cases and settlements currently underway challenging the validity of the third amendment. As the Senator from Tennessee said yesterday, "this legislation does not prejudice'' any of those cases.

Berkowitz 2/23/2016

At 33-minute mark of the call: https://engage.vevent.com/index.jsp?eid=4711&seid=18

 

"In late 2015 there were settlement communications between plaintiffs and the government.  But frankly, given how deep treasury has dug in its heels and has tried to hide the truth by withholding evidence, it remains unclear to me whether treasury is capable of having an earnest conversation."

 

Gov't asking for terms:

Jon Prior (Politico) tweet on 2/24/2016:

"Treasury, DOJ made no offer last fall, asked for terms."

 

Political Alpha as reported by Politico 4/2/2016:

http://www.politico.com/tipsheets/morning-money

IS WALL STREET SLEEPING ON GSE REFORM? — Via Political Alpha: “While the 10/19/15 coordinated policy response by the White House and Treasury to our 10/5/15 note, ‘White House Looking into Ending GSE Conservatorship,’ had supposedly put the issue over rebuilding capital at the GSEs to bed, contacts tell us that the debate is still very much alive and ongoing inside the Obama Administration.

 

“Moreover, the discussions have moved to Federal Housing Finance Authority (FHFA), which has the authority to act unilaterally and is now actively reviewing its options and likely to act much sooner than Wall Street is expecting to begin the next major housing reform initiative: rebuilding capital at the GSEs.”

[hardincap]

i simply believe that you cannot vacate and have a full trial if 4617f is a judicial bar, not only just jurisdictionally, but also at a substantive level.  the appeals court in vacating would be telling the district court to find out based on the facts whether the NWS is a valid conservator action, given the proper understanding of the scope of the conservator's powers....and to do this, i would assume that the appeals court would have to set forth some standard by which the district court would determine what a valid conservator action was.

 

i took away that Millett was getting at this with her hypotheticals. specifically her probing olson on "what test should we apply" to know if conservator went beyond its powers. this is where Olson retorts "you can never get to a sound and solvent condition if you every nickel of profits is given to someone else", to which g says "that is clearly true"

[Eye4Valu]

If Sweeney grants the Motion to Compel, I think settlement negotiations could resurface, but not until then. There are of course a number of factors that could play out here that we're not aware of within the Administration and FHFA.

 

Assuming bear case scenario is in fact remand/produce administrative record, do you think Lamberth would be more willing to find for Plaintiffs? Does it depend on the instructions provided by the DC Circuit?

 

If Plaintiffs lose upon remand, isn't the next appellate level the U.S. Supreme Court? Would they grant certiorari? I know that if the government loses, the Supreme Court would likely grant certiorari. I think the Solicitor General just has to whisper a few sweet somethings in their ear.

 

What about the thesis that FNMA/FMCC are too big to replace, i.e. there are no substitutes. We spend a lot of time debating legality of NWS, but perhaps not enough analysis on whether FNMA/FMCC could truly be replaced. As I understand it, there is not enough private capital to fill the void. If Treasury cronies slide through the revolving door to private sector big banks and try to finish what they started, which is what I understand they're doing, could they even accomplish it?

[merkhet]

So the big question now is -- does the Perry appeals decision come before or after May 26th?

 

Consolidation or no consolidation, a favorable decision by perry appeals re: 4617f should be huge for those cases, no?

 

It would be persuasive elsewhere, but if cases were consolidated in DC, then it would be binding.

[merkhet]

Assuming bear case scenario is in fact remand/produce administrative record, do you think Lamberth would be more willing to find for Plaintiffs? Does it depend on the instructions provided by the DC Circuit?

 

Yes, it'll depend on how the opinion is structured.

 

If Plaintiffs lose upon remand, isn't the next appellate level the U.S. Supreme Court? Would they grant certiorari? I know that if the government loses, the Supreme Court would likely grant certiorari. I think the Solicitor General just has to whisper a few sweet somethings in their ear.

 

If appellants lose, then they can appeal to the Supreme Court, but it's not guaranteed that they will take the case. And, no, the Supreme Court would not be more or less likely to grant certiorari just because the government loses. That's... not how that works.

[doughishere]

Update on Taibbi's article from yesterday

 

*Update: Ironically, one of the very first memoranda Barack Obama wrote as president was about the Freedom of Information Act, and contained language very similar to Judge Sweeney's. "The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears." (Hat-tip to analyst Josh Rosner for pointing this out.)

 

[BTShine]

What are the chances Judge Sweeney was inspired by (or came as close to his language as possible without quoting) his memoranda? 

[SnarkyPuppy]

http://dealbreaker.com/2016/04/fannie-freddie-shareholder-lawsuit-looks-less-good-when-you-read-the-law/

 

What are everyone's thoughts on the issues raised in this article?

[Luke 532]

Government secretly plans Wall Street takeover of Fannie, Freddie

http://www.housingwire.com/blogs/1-rewired/post/36831-matt-taibbi-government-secretly-plans-wall-street-takeover-of-fannie-freddie?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire

[rros]

http://dealbreaker.com/2016/04/fannie-freddie-shareholder-lawsuit-looks-less-good-when-you-read-the-law/

 

What are everyone's thoughts on the issues raised in this article?

 

4623 lead to an action taken by the regulator. The nws was a conservateur's action. Possibly, very different things. What is being challenged is the action of the latter. I may be wrong on this.

[hardincap]

Again, I know I sound like a broken tape at this point, but with the scathing Sweeney order to unseal the seven documents, the pending motion to compel in front of Sweeney, the pending Perry decision & the fact that they, stupidly, tried to consolidate cases through the MDL in DC without waiting to see who the judges were in DC... I can't imagine that the government isn't looking at a settlement.

 

a rational businessman would. govtal officials?

 

agreed. there would be real personal cost to the rational businessman in not settling, but theres almost zero personal cost to the gov official. a settlement sounds nice, but i dont see it

 

[Luke 532]

Again, I know I sound like a broken tape at this point, but with the scathing Sweeney order to unseal the seven documents, the pending motion to compel in front of Sweeney, the pending Perry decision & the fact that they, stupidly, tried to consolidate cases through the MDL in DC without waiting to see who the judges were in DC... I can't imagine that the government isn't looking at a settlement.

 

a rational businessman would. govtal officials?

 

agreed. there would be real personal cost to the rational businessman in not settling, but theres almost zero personal cost to the gov official. a settlement sounds nice, but i dont see it

 

Unless part of the settlement is that the 11,000 docs in question will remain under wraps.  That would allow those personally involved to remain secret.

[hardincap]

Again, I know I sound like a broken tape at this point, but with the scathing Sweeney order to unseal the seven documents, the pending motion to compel in front of Sweeney, the pending Perry decision & the fact that they, stupidly, tried to consolidate cases through the MDL in DC without waiting to see who the judges were in DC... I can't imagine that the government isn't looking at a settlement.

 

a rational businessman would. govtal officials?

 

agreed. there would be real personal cost to the rational businessman in not settling, but theres almost zero personal cost to the gov official. a settlement sounds nice, but i dont see it

 

Unless part of the settlement is that the 11,000 docs in question will remain under wraps.  That would allow those personally involved to remain secret.

 

all those guys have left already. theyre no longer in the position to influence the settlement decision

[Luke 532]

all those guys have left already. theyre no longer in the position to influence the settlement decision

 

At least one doesn't leave office until January.

[Luke 532]

all those guys have left already. theyre no longer in the position to influence the settlement decision

 

At least one doesn't leave office until January.

 

Besides, you're assuming we know the names in those documents.  I wouldn't be surprised to see some big names of bank officials, top dogs in the mortgage industry, politicians still serving, etc.  There's likely a very good reason the government is fighting with everything they've got to keep those docs under wraps... and why I think it is probable that they will settle before the docs see the light of day.

[BTShine]

It also looks bad for the govt and POTUS to keep, or request to keep, documents sealed only to have them released, which may generate more interest and press coverage than it otherwise would.  President Obama's incentives are likely to keep the documents sealed so that people can always think "well, it must've been best the documents were kept private."  Once the docs are released and people see what was in them it turns into "I can't believe he wanted to keep that from us!!!  He said he'd have an open Presidency, but clearly did the opposite!"

 

 

[Luke 532]

Oh how I wish the author of these articles would contribute to the COB&F message boards!  ;)

 

Handicapping The Perry Appeal Oral Argument

http://seekingalpha.com/article/3966347-analyzing-perry-appeal-oral-argument?app=1&auth_param=c78o:1bhd295:c11cccbe4ea943f87df2859b42219fa7&uprof=44#alt2

[colinwalt]

http://dealbreaker.com/2016/04/fannie-freddie-shareholder-lawsuit-looks-less-good-when-you-read-the-law/

 

What are everyone's thoughts on the issues raised in this article?

 

4623 lead to an action taken by the regulator. The nws was a conservateur's action. Possibly, very different things. What is being challenged is the action of the latter. I may be wrong on this.

 

There's also this:

 

“It’s hard for me to envision that we would be able to make enough every single quarter to cover the dividend payment,” said Ms. McFarland.

 

I supppose the response to this is that there's the PIK provision...

[omahafloat]

Fannie wouldn't have to make enough each quarter to cover the dividend payment.  Each quarter they earned more than the 10% coupon on the outstanding senior preferred could pay back some of the senior prefereed (with Treasury's permission) thus the interest owed would decline like a melting snowball.  The huge earnings that ensued shortly after the net worth sweep could have diminished the outstanding senior preferred significantly and by now the senior preferred could be entirely redeemed.

[merkhet]

Fannie wouldn't have to make enough each quarter to cover the dividend payment.  Each quarter they earned more than the 10% coupon on the outstanding senior preferred could pay back some of the senior prefereed (with Treasury's permission) thus the interest owed would decline like a melting snowball.  The huge earnings that ensued shortly after the net worth sweep could have diminished the outstanding senior preferred significantly and by now the senior preferred could be entirely redeemed.

 

+1

[doughishere]

Fannie wouldn't have to make enough each quarter to cover the dividend payment.  Each quarter they earned more than the 10% coupon on the outstanding senior preferred could pay back some of the senior prefereed (with Treasury's permission) thus the interest owed would decline like a melting snowball.  The huge earnings that ensued shortly after the net worth sweep could have diminished the outstanding senior preferred significantly and by now the senior preferred could be entirely redeemed.

 

Invert. Always Invert.

[Steve_Berk]

Hi Guys, just wanted to introduce myself to the board. I've been following this discussion and am a friend of Luke who introduced me to this group.

 

I've been an attorney for 16 years, was federal law clerk at the appellate level and have practiced as a litigator at a big corporate firm in NY and have worked in house at a corporation for the last decade. Been brushing up my litigation/law clerk skills by listening to the oral argument. But one thing that's missing for me is the govt's briefing before the oral arguments. Does anyone have access to a full set of briefs? To me, this is the only real way to evaluate all the arguments, even though the oral arguments were quite comprehensive.

 

Without going into detail, I agree that trying to predict what judges are going to do based on their questions is highly speculative. But there are times in which judges will make definitive statements that do reflect their positions. BTW, i'm pretty heavily invested in this. That's probably the gambler in me though. Look forward to making substantive contributions and digging into the meat of the arguments.

[merkhet]

Hi Guys, just wanted to introduce myself to the board. I've been following this discussion and am a friend of Luke who introduced me to this group.

 

I've been an attorney for 16 years, was federal law clerk at the appellate level and have practiced as a litigator at a big corporate firm in NY and have worked in house at a corporation for the last decade. Been brushing up my litigation/law clerk skills by listening to the oral argument. But one thing that's missing for me is the govt's briefing before the oral arguments. Does anyone have access to a full set of briefs? To me, this is the only real way to evaluate all the arguments, even though the oral arguments were quite comprehensive.

 

Without going into detail, I agree that trying to predict what judges are going to do based on their questions is highly speculative. But there are times in which judges will make definitive statements that do reflect their positions. BTW, i'm pretty heavily invested in this. That's probably the gambler in me though. Look forward to making substantive contributions and digging into the meat of the arguments.

 

Welcome to the rabbit hole. :)

 

You can find the briefs on http://GSELinks.com

[Steve_Berk]

I may be missing something, but I only see the briefs for the plaintiff:

03/08/2016 - Final Reply Brief for Class Plaintiffs

03/08/2016 - Final Opening Brief for Class Plaintiffs

03/08/2016 - Final Reply Brief for Institutional Plaintiffs

03/08/2016 - Final Opening Brief for Institutional Plaintiffs

 

Does anyone have the briefs for the govt?

 

 

 

You can find the briefs on http://GSELinks.com

[hardincap]

I may be missing something, but I only see the briefs for the plaintiff:

03/08/2016 - Final Reply Brief for Class Plaintiffs

03/08/2016 - Final Opening Brief for Class Plaintiffs

03/08/2016 - Final Reply Brief for Institutional Plaintiffs

03/08/2016 - Final Opening Brief for Institutional Plaintiffs

 

Does anyone have the briefs for the govt?

 

 

 

You can find the briefs on http://GSELinks.com

 

http://gselinks.com/Archive/Court_Filings.html