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

[Steve_Berk]

The point that I was trying to make is that we only have Ginsburg supporting remand for a record, and not outright reversal on violation of the statute. That even though he says things that are supportive of a finding that the statute was violated that he thinks we have to go back to the record and that some lawful motivation might make it so that we understand the actions of the FHFA to be compliant. So I'm in agreement that we stand a good chance of getting a remand for an administrative record, but nothing beyond that.

 

I agree that the 'respectively' argument is a good one. But I still think that if "may" means "can" that a conservator isn't obligated to bring the entity to a sound a solvent state--that it can preserve and conserve. And that you can at least make an argument that that's what they were trying to do, in light of the opinions in the 10Q, Grant Thornton, etc.

 

The one thing that even has me concerned about Ginsburg is that even though he was skeptical of the FHFA's actions, to me one of the most revealing things that he said in oral arguments came  during the initial questioning Olson. Most of the time when judges are questioning someone there's a good chance that they are simply probing and not revealing their views. However, Ginsburg goes a little farther than that when he says something to the effect of I don't see how it's consistent to say we need a record and to ask for reversal, since the record could show some lawful purpose ("I don't see how that's consistent with saying that the record's inadequate"). That's taking more ownership of the question and expressing it in a way that one can interpret to be his view. Unfortunately at that point Olson all but concedes even though he had a chance to explain why the positions of asking for reversal and a record are consistent.

 

But then, Olson takes advantage of the exchange and says something  like 'that is what happens when the record is incomplete, we are here speculating' and the judge says 'that is exactly right, I don't think we need to go further than that'.

 

As for Cayne, that only liquidation is the additional power of the receiver, I am having a hard time seeing how J. Ginsburg would interpret this as a conservator being able to wind down and a receiver being able to rehabilitate since -according to Cayne and liquidation aside- all the powers granted by statute are shared. This is why I think J. Ginsuburg used the *implied* word "respectively". Meaning powers are distinct and separate.

[rros]

But I still think that if "may" means "can" that a conservator isn't obligated to bring the entity to a sound a solvent state--that it can preserve and conserve. And that you can at least make an argument that that's what they were trying to do, in light of the opinions in the 10Q, Grant Thornton, etc.

 

I do not know how the word "may" will be interpreted. But sometimes rehabilitating is not possible, whereas liquidation is a certainty. Therefore, legislators could have used the word may (or can) anticipating that -after a best effort- the conservator can't. I do not think legislators were offering the conservator a choice of may or may not, but instead "may" as in "only if possible" (may) or "if everything else fails" (may not).

 

Extrapolating the word "may" as "may or may not  (not obligated)" to the rest of the statute and the general powers will lead to an unreasonable interpretation. An excuse not to comply with a provision.

 

"May" could be interpreted as "is allowed".

[merkhet]

Again, re biases, I'm only in the junior preferred, and I've been pretty vocal about the idea that junior preferred stands in a different (better) situation than common stock, so keep that in mind when I'm arguing re breach of K versus APA claims.

 

But I don't know that it's true that the court spent all of its time on APA versus breach of K. From the transcript, we have 40 pages of APA versus 25 pages of breach of K -- eyeballing the transcript, it looks like the judges were similarly engaged on both. (Olson talks a bit faster than Hume.) Moreover, the audio transcript seems to indicate about 40 minutes on APA versus 30 minutes on breach of K.

 

What's interesting to me is that Stern, during his arguments, doesn't even attempt to engage in any meaningful way on breach of K claims. See transcript pages 110 to 115.

[merkhet]

@cherzeca, not sure if I've posted my response to you yet, but I've given it continual thought, and my sense is that any non-affirmance of the lower court would, by necessity, reject the government's view of 4617(f) -- because there'd be no point to asking for a full and complete record if 4617(f) is interpreted to be jurisdiction-stripping instead of remedy stripping & constrained by acts that are ultra vires.

 

Again, I'm hoping that it comes out prior to the MDL proceedings because then we will see whether the government drops that attempt and allows the Jacobs case to go forward in Delaware.

[Steve_Berk]

I was focusing more on the extent to which the court questioned either the FHFA or the Treasury aggressively on the contract issues, taking on Hume's argument. And I didn't think that happened so much. You're probably smart to just be in the preferred. I have a lot of common and some preferred. But only bc I think this is so speculative that I might as well go big.

 

Again, re biases, I'm only in the junior preferred, and I've been pretty vocal about the idea that junior preferred stands in a different (better) situation than common stock, so keep that in mind when I'm arguing re breach of K versus APA claims.

 

But I don't know that it's true that the court spent all of its time on APA versus breach of K. From the transcript, we have 40 pages of APA versus 25 pages of breach of K -- eyeballing the transcript, it looks like the judges were similarly engaged on both. (Olson talks a bit faster than Hume.) Moreover, the audio transcript seems to indicate about 40 minutes on APA versus 30 minutes on breach of K.

 

What's interesting to me is that Stern, during his arguments, doesn't even attempt to engage in any meaningful way on breach of K claims. See transcript pages 110 to 115.

[merkhet]

My other thought is that the D.C. Circuit probably also finds the APA claims more interesting because... well, they're the administrative court. But, again, possibly colored by bias.

 

I was focusing more on the extent to which the court questioned either the FHFA or the Treasury aggressively on the contract issues, taking on Hume's argument. And I didn't think that happened so much. You're probably smart to just be in the preferred. I have a lot of common and some preferred. But only bc I think this is so speculative that I might as well go big.

 

Again, re biases, I'm only in the junior preferred, and I've been pretty vocal about the idea that junior preferred stands in a different (better) situation than common stock, so keep that in mind when I'm arguing re breach of K versus APA claims.

 

But I don't know that it's true that the court spent all of its time on APA versus breach of K. From the transcript, we have 40 pages of APA versus 25 pages of breach of K -- eyeballing the transcript, it looks like the judges were similarly engaged on both. (Olson talks a bit faster than Hume.) Moreover, the audio transcript seems to indicate about 40 minutes on APA versus 30 minutes on breach of K.

 

What's interesting to me is that Stern, during his arguments, doesn't even attempt to engage in any meaningful way on breach of K claims. See transcript pages 110 to 115.

[Luke 532]

Audio recording of the recent IU call... http://investorsunite.org/federal-judges-listened-carefully-investors-pressed-case/

[Guest cherzeca]

great posts recently, and i do want to add to merkhet's post that steve_berk's arrival has added a great deal to our attempt at collective analysis.

 

i think lamberth's dismissal, based on the record as it was, was both a blessing and a curse.

 

blessing as it makes it "easier" to vacate and remand for more facts, as at least the merits panel wants more facts to conduct its analysis.  in fact, it seems to me that millett, who may be least disposed to P's claims as a matter of law, was perhaps most insistent in asking fact based questions, with hypos both very pro and con each side on the hypothetical facts.  which is why i agree vacate and remand is the most likely (and unanimous) outcome.

 

curse because lamberth thought the case could be decided as a matter of law against Ps, while olson thinks the case can be decided as a matter of law against Ds.  i have the sense that the merits panel is not inclined to take a "strong" position on the law in either direction, and in fact are less inclined to rule for Ps as a matter of law simply because the judges see the inadequacy of the result when lamberth decided as a matter of law.

 

as to favorability of outcome, while there will be a substantial time delay, vacate and remand, if coupled with some instruction on the law from the merits panel as to the need for the district court to examine the C's motivations etc, and especially if coupled with j. sweeney's granting at least in part of the MTC, "should" be very favorable.

 

and i agree with merkhet, that i think this remand on APA claims will be accompanied by reversal on the direct and derivative claims.

 

question for merkhet:  dont you think having one counsel for pref and common creates a conflict of interest, at least with respect to theories of damages asserted (though prob not with respect to theories of liability)?

[merkhet]

@cherzeca, yes, it probably creates a conflict of interest -- which, again, brings up the thought... these lawyers are likely being paid by Perry Capital, Fairholme Capital and Paulson & Co. As far as I know, those guys are predominantly in the preferreds -- so... from an incentives point of view re damages, don't get thrown under the bus.

[Guest cherzeca]

I was focusing more on the extent to which the court questioned either the FHFA or the Treasury aggressively on the contract issues, taking on Hume's argument. And I didn't think that happened so much. You're probably smart to just be in the preferred. I have a lot of common and some preferred. But only bc I think this is so speculative that I might as well go big.

 

Again, re biases, I'm only in the junior preferred, and I've been pretty vocal about the idea that junior preferred stands in a different (better) situation than common stock, so keep that in mind when I'm arguing re breach of K versus APA claims.

 

But I don't know that it's true that the court spent all of its time on APA versus breach of K. From the transcript, we have 40 pages of APA versus 25 pages of breach of K -- eyeballing the transcript, it looks like the judges were similarly engaged on both. (Olson talks a bit faster than Hume.) Moreover, the audio transcript seems to indicate about 40 minutes on APA versus 30 minutes on breach of K.

 

What's interesting to me is that Stern, during his arguments, doesn't even attempt to engage in any meaningful way on breach of K claims. See transcript pages 110 to 115.

 

the only thing i would add to the common v pref debate is: i) it is a highly personal analysis in terms of risk/reward assessment, and ii) there are two dimensions to think about, namely first legal outcome and second stock reaction to outcome.

 

i think the same legal outcome can have disproportionate effects based upon how the common and prefs are held, how they trade etc.  while i would admit affirmance on all issues other than the prefs breach claim would be good only for pref and not common, i see the more likely outcomes resulting in stock movements that are as much (if not more) based on how the stocks trade than on the specific legal issue and how it was resolved.

[merkhet]

Took a quick look at the last two months opinions. Looks like the median time from argument to decision seems to be two to three months. There are some that come in at one month and some that come in at six months, but those seem to be outliers.

[Eye4Valu]

The more I think about this situation, the more I agree with Bruce B. that the eventual outcome here will be similar to AIG. I think everyone finally comes around to the conclusion that Fannie and Freddie cannot be replaced. Perhaps the legal outcomes help get us there, but I don't think the eventual outcome rests solely on the legal issues. In this regard, I anticipate both the prefs and common going higher. I don't think this is as speculative as most people think. How can it be speculation when the entities in question have no substitute?

[merkhet]

The more I think about this situation, the more I agree with Bruce B. that the eventual outcome here will be similar to AIG. I think everyone finally comes around to the conclusion that Fannie and Freddie cannot be replaced. Perhaps the legal outcomes help get us there, but I don't think the eventual outcome rests solely on the legal issues. In this regard, I anticipate both the prefs and common going higher. I don't think this is as speculative as most people think. How can it be speculation when the entities in question have no substitute?

 

The main problem is that, so far, the government has been unwilling to take that approach. It's possible that a legal outcome hanging over their head still wouldn't change things, but who knows...

[Steve_Berk]

Even if the GSE's are necessary doesn't mean that they will be recapitalized. If the Treasury is allowed to get away with it, from their standpoint, why not allow them to reap the benefits of all profits and sweep away to their hearts' content?

 

The more I think about this situation, the more I agree with Bruce B. that the eventual outcome here will be similar to AIG. I think everyone finally comes around to the conclusion that Fannie and Freddie cannot be replaced. Perhaps the legal outcomes help get us there, but I don't think the eventual outcome rests solely on the legal issues. In this regard, I anticipate both the prefs and common going higher. I don't think this is as speculative as most people think. How can it be speculation when the entities in question have no substitute?

[deadspace]

Is anyone bothered by the fact that Ginsberg continues to refer back to the stock prices at the times of these events 

It makes me worry that if a "taking" is found to have occurred that the remedy will be based on the stock prices at the time of the taking.

[hardincap]

Even if the GSE's are necessary doesn't mean that they will be recapitalized. If the Treasury is allowed to get away with it, from their standpoint, why not allow them to reap the benefits of all profits and sweep away to their hearts' content?

 

The more I think about this situation, the more I agree with Bruce B. that the eventual outcome here will be similar to AIG. I think everyone finally comes around to the conclusion that Fannie and Freddie cannot be replaced. Perhaps the legal outcomes help get us there, but I don't think the eventual outcome rests solely on the legal issues. In this regard, I anticipate both the prefs and common going higher. I don't think this is as speculative as most people think. How can it be speculation when the entities in question have no substitute?

 

everyone knows this is unsustainable, and watt has gotten increasingly vocal about it. i think its safe to say fnma eventually exits conservatorship one way or another

[doughishere]

Is anyone bothered by the fact that Ginsberg continues to refer back to the stock prices at the times of these events 

It makes me worry that if a "taking" is found to have occurred that the remedy will be based on the stock prices at the time of the taking.

 

That kinda spooked me also....I didnt want to say anything....t

[doughishere]

Audio recording of the recent IU call... http://investorsunite.org/federal-judges-listened-carefully-investors-pressed-case/

 

Thanks luke this last few days posts are making much more sense now.

 

 

Edit: They talk about stock payouts on the conference call...wtf?......Is this that big of a slam dunk now?

[doughishere]

Bill Ackman and Senator Corker Right now

 

http://online.wsj.com/public/resources/documents/live-video-event.html?mod=e2tw

 

 

Talking Fannie and Freddie.

 

 

Corker Jabbs Ackman Blocks.

 

Corker is under the impression that the Taxpayers are underwater in their investment.

 

 

This Fannie and Freddie talk has to be annoying for Pearson and Schiller just sitting there listening to Corker....haahaha.. lol

 

 

 

Its over as of 4.30pm Central

[TonyG]

Watching that. He used his whole time to talk about fannie and freddie essentially lol.

[doughishere]

Watching that. He used his whole time to talk about fannie and freddie essentially lol.

 

That was amazing.....Like Ali and Frazier

[merkhet]

Watching that. He used his whole time to talk about fannie and freddie essentially lol.

 

Did he say anything interesting?

[TonyG]

Just that ackman has not lobbied ever for Fannie R&R. And that Corker and Ackman would like to discuss fannie and freddie and ackman said he would love to stop by and explain it to him

[TonyG]

Also he said Ackman on his CC said that Corker's Jumpstart bill was a head fake but Corker said he disagreed and explained why he thinks Congress should fix the issue and even extend the jumpstart bill regarding f and f even further

[doughishere]

Also he said Ackman on his CC said that Corker's Jumpstart bill was a head fake but Corker said he disagreed and explained why he thinks Congress should fix the issue and even extend the jumpstart bill regarding f and f even further

 

yup yup....i think he was just trying to probe Bill a bit and make it look as if hes a baddie hedge fund guy........trust me this will hit the press sooon.