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

[nkp007]

I guess nothing is going on... ;D

 

F+F both reported earnings today. Literally on the cusp of payback. One more quarter should do it, not that it matters now because that's obvious to everyone so functionally it is assumed.

 

Preferreds have been on quite the ride lately with all the legal victories... is there any news on the Bruce B/Perry Capital litigation?

 

No update on that yet.

[fareastwarriors]

 

 

Freddie Mac to Pay Treasury $30.4 Billion on Quarterly Profit

 

 

http://www.bloomberg.com/news/2013-11-07/freddie-mac-to-pay-treasury-30-4-billion-on-quarterly-profit.html

[valuecfa]

Been halted this morning

[muscleman]

Been halted this morning

 

Yeah. When is the US government response coming?

[Packer16]

Does anyone know why trading has been halted?

 

Packer

[onyx1]

IB says all pink sheet trading is down.

[fareastwarriors]

http://www.bloomberg.com/news/2013-11-07/over-the-counter-equities-trading-halted-in-u-s-on-data-issue.html

 

Over-the-Counter Equities Trading Halted in U.S. on Data Issue

[onyx1]

Been halted this morning

 

Yeah. When is the US government response coming?

 

Here is what I know about the current timing:

 

All junior preferred Federal Claims cases (5th amendment takings) have been consolidated and the US response is now due 12/9/2013.

 

All junior preferred District Court cases (suits alleging violation of administrative procedures) are awaiting a status hearing scheduled for November 12, 2013 to determine consolidation, timing and deadlines.

 

Washington Federal, which is suing on behalf of both the common and the junior preferred shareholders and thus is on a different path as the two above is moving forward.  US government respond will be submitted via a motion to dismiss by end of business today, 11/7/2013.  Expect 50 pages of very interesting reading!

[Grenville]

http://www.bloomberg.com/news/2013-11-07/over-the-counter-equities-trading-halted-in-u-s-on-data-issue.html

 

Over-the-Counter Equities Trading Halted in U.S. on Data Issue

 

OTC trading resumed

[nkp007]

Fannie Mae Fixed-to-Fltg Rate Non Cum. Pfd. Series S

OBB: FNMAS GO

Countdown to close

$8.29

Change

+8.29 +Infinity

Volume

450,000

Nov 7, 2013 9:20 a.m.

Quotes are delayed by 20 min

Previous close

Day low

Day high

$7.98

$8.50

[onyx1]

Washington Federal vs. USA

Government motion to dismiss, attached. 

01511657935.pdf

[Grenville]

Washington Federal vs. USA

Government motion to dismiss, attached.

 

Thanks for posting.

 

Here is the Joint Status Report filed by Perry Capital on 11/6/13. Still reading it, but it does outline a new coordinated schedule.

Joint_Status_Report_11-7-13.pdf

[muscleman]

Washington Federal vs. USA

Government motion to dismiss, attached.

 

I skimmed through it and didn't find many valid points. But I am no lawyer, so I hope someone more experienced could share some input. :)

[valuecfa]

Washington Federal vs. USA

Government motion to dismiss, attached.

 

I skimmed through it and didn't find many valid points. But I am no lawyer, so I hope someone more experienced could share some input. :)

 

Despite my large concentration in these prefs, i haven't had the time to review it yet. I'll look it over the weekend, and would be happy to post some thoughts then.

[fareastwarriors]

http://online.wsj.com/news/articles/SB10001424052702303309504579185691612432528?mod=WSJ_hp_LEFTWhatsNewsCollection

 

 

Fannie, Freddie Venture Has CEO Shortlist

[merkhet]

 

 

Washington Federal vs. USA

Government motion to dismiss, attached.

 

 

I skimmed through it and didn't find many valid points. But I am no lawyer, so I hope someone more experienced could share some input. :)

 

 

I found parts of the response to be fairly compelling.

 

For instance, a quick read through the underlying case law seems to show that there have been similar cases before with respect to whether plaintiffs have standing to bring this case. This may seem to be counterintuitive but many arcane parts of the law just happen to be like that...

 

I'll have to go through the response a few more times before I can give further analysis.

 

Btw, for those of you who were previously involved in the MBIA situation, it might behoove you to know that we are now on the flip side of the standard of review in that case. In MBIA, the standard of review under the APA was whether the administrative agency acted in an "arbitrary or capricious manner" when it split up MBIA. That's a difficult hurdle for a plaintiff to leap over. It is much the same here...

[Guest qanary]

Thanks for your initial comments Merkhet.  Here's where I pretend to be a lawyer and say foolish things that I hope I'll be corrected on.

 

It seemed to me that the motion to dismiss contained a bunch of technicalities that might or might not receive a favorable ruling.  However, it also seems to me that this shouldn't be concerning because the plaintiffs will simply refile through the correct party, with the correctly named defendant, in the correct jurisdiction, etc.  Because of the duties of the conservator and/or the companies, there is a fiduciary obligation to protect the assets of the company as the direct plaintiffs, especially if called upon by their stakeholders, I would presume.

 

When you strip this out, however, the argument concerning the heart of the matter, the sweep amendment, I felt, was extremely poor.  That the amendment was designed to strengthen the Enterprises seems extremely disingenuous since the amendment was effected at a time when the Enterprises were out of the woods.  The government saw profitability and used the general dissatisfaction of the public towards financial institutions as a cover to steal.  And I hate to use a word as strong as “steal” because it sounds a little impassioned (an emotion we don’t want creeping into the analytical process), but the weakness of their argument really supports this position.

 

How many pages were dedicated to technicalities, history and flowery language and how many were dedicated to a substantial explanation of why, in 2012, they decided to add this amendment?

 

My takeaway was that Team Berkowitz/Perry now have a starting point to tighten up their method of attack and that the main thesis is still very much intact. 

 

 

 

 

Washington Federal vs. USA

Government motion to dismiss, attached.

 

 

I skimmed through it and didn't find many valid points. But I am no lawyer, so I hope someone more experienced could share some input. :)

 

 

I found parts of the response to be fairly compelling.

 

For instance, a quick read through the underlying case law seems to show that there have been similar cases before with respect to whether plaintiffs have standing to bring this case. This may seem to be counterintuitive but many arcane parts of the law just happen to be like that...

 

I'll have to go through the response a few more times before I can give further analysis.

 

Btw, for those of you who were previously involved in the MBIA situation, it might behoove you to know that we are now on the flip side of the standard of review in that case. In MBIA, the standard of review under the APA was whether the administrative agency acted in an "arbitrary or capricious manner" when it split up MBIA. That's a difficult hurdle for a plaintiff to leap over. It is much the same here...

[Guest qanary]

And please let me add that unlike the MBIA case, which I followed very closely, the decisions of the NYSDF being capricious and arbitrary had to be taken in the context of protecting policyholders.  The NYSDF had numerical analyses supporting that the split should have been workable for all the policyholders.  Would any analysis in 2012 of the Enterprises’ financial positions and the vastly improved state of the mortgage market support such a permanent amendment in the context of conservatorship and protecting the stakeholders?

[colinwalt]

Thanks for your initial comments Merkhet.  Here's where I pretend to be a lawyer and say foolish things that I hope I'll be corrected on.

 

It seemed to me that the motion to dismiss contained a bunch of technicalities that might or might not receive a favorable ruling.  However, it also seems to me that this shouldn't be concerning because the plaintiffs will simply refile through the correct party, with the correctly named defendant, in the correct jurisdiction, etc.  Because of the duties of the conservator and/or the companies, there is a fiduciary obligation to protect the assets of the company as the direct plaintiffs, especially if called upon by their stakeholders, I would presume.

 

When you strip this out, however, the argument concerning the heart of the matter, the sweep amendment, I felt, was extremely poor.  That the amendment was designed to strengthen the Enterprises seems extremely disingenuous since the amendment was effected at a time when the Enterprises were out of the woods.  The government saw profitability and used the general dissatisfaction of the public towards financial institutions as a cover to steal.  And I hate to use a word as strong as “steal” because it sounds a little impassioned (an emotion we don’t want creeping into the analytical process), but the weakness of their argument really supports this position.

 

How many pages were dedicated to technicalities, history and flowery language and how many were dedicated to a substantial explanation of why, in 2012, they decided to add this amendment?

 

My takeaway was that Team Berkowitz/Perry now have a starting point to tighten up their method of attack and that the main thesis is still very much intact. 

 

 

I'm no lawyer either, but this was pretty much my take on the motion

[merkhet]

A big part of the law is about technicalities. These technicalities can kill a case.

 

I would not be so quick to dismiss the fact that there's a hard stop of 30 days in which to bring a case to challenge the FHFA's appointment as conservator.  That part of the plaintiff's case will likely fall since there's little to no ambiguity involved.

 

 

Because of the duties of the conservator and/or the companies, there is a fiduciary obligation to protect the assets of the company as the direct plaintiffs, especially if called upon by their stakeholders, I would presume.

 

 

I would also not be so quick to dismiss the standing issue. If the court holds that the FHFA stands in the position of all the stockholders, per 12 USC 4617(b)(2)(A)(i), then this case will have to be dismissed. The plaintiffs then cannot file the case... ever. Only the FHFA can bring the case... against itself. How likely is that to happen?

 

The only odd wrinkle I can see to the case is the existence of some residual value in the preferred shares and common stock of the companies. Does the FHFA hold any fiduciary duty towards those holders given that the HERA Act has transferred "all rights, titles, powers, and privileges of the regulated entity" to the FHFA? And if not, then does the FHFA owe a fiduciary duty to itself?

 

Again, I'll have to do a few more read-throughs, but in my opinion, this is not as quick a throw away as when Bank of America et. al. challenged the NYSID's actions in the MBIA case.

[Guest qanary]

I'm afraid I don't see how that stops the wheels turning here.  If the FHFA didn't bring the case in some fashion, you can bet the current plaintiffs would attack the FHFA for being derelict in its duties.  The "wrinkle" you point out is essential.

 

All rights, titles, etc. are in the context of being named a conservator.  The argument that the broad powers of a conservator allows them to benefit themselves or related parties at the expense of stakeholders would violate this.

 

Are you arguing that if I were named a conservator of a company with other stockholders and given broad powers to effect my duties that I could siphon off assets without concern because I wouldn't bring myself to court?  I'm pretty certain the stockholders would have recourse.

 

The 30 day hard stop doesn't concern me, it's that the conservator didn't execute in protecting value in the preferred shares that clearly had significant value at the time the amendment was effected. 

 

A big part of the law is about technicalities. These technicalities can kill a case.

 

I would not be so quick to dismiss the fact that there's a hard stop of 30 days in which to bring a case to challenge the FHFA's appointment as conservator.  That part of the plaintiff's case will likely fall since there's little to no ambiguity involved.

 

 

Because of the duties of the conservator and/or the companies, there is a fiduciary obligation to protect the assets of the company as the direct plaintiffs, especially if called upon by their stakeholders, I would presume.

 

 

I would also not be so quick to dismiss the standing issue. If the court holds that the FHFA stands in the position of all the stockholders, per 12 USC 4617(b)(2)(A)(i), then this case will have to be dismissed. The plaintiffs then cannot file the case... ever. Only the FHFA can bring the case... against itself. How likely is that to happen?

 

The only odd wrinkle I can see to the case is the existence of some residual value in the preferred shares and common stock of the companies. Does the FHFA hold any fiduciary duty towards those holders given that the HERA Act has transferred "all rights, titles, powers, and privileges of the regulated entity" to the FHFA? And if not, then does the FHFA owe a fiduciary duty to itself?

 

Again, I'll have to do a few more read-throughs, but in my opinion, this is not as quick a throw away as when Bank of America et. al. challenged the NYSID's actions in the MBIA case.

[merkhet]

The problem is that the case law is not terribly supportive on the standing issue.

 

Multiple cases cite that the conservator is, generally, the only entity that may bring suit on behalf of the corporation. (Read all three cases cited by the government and that will become clear.) There is an exception for situations where this would cause a conflict of interest, but that has been construed fairly narrowly. (Read First Hartford Corp. Pension Plan & Trust v. United States and Delta Savings Bank v. United States)

 

In regards to the Third Amendment:

 

Its not altogether clear that FHFA is the beneficiary and/or perpetrator of the improper conduct, so it's not clear that there is a direct conflict of interest via First Hartford. Additionally, it's not clear that the FHFA & the Treasury are "closely-related, sister agencies" in the manner described via Delta Savings Bank.

[Mephistopheles]

Is there a way to check Congressional stock holdings? I looked on Opensecrets.org but can't find anything. I am wondering if members of Congress are invested in either the common or the preferreds. That might be a good indicator of how things might play out.

[valuecfa]

Richard Epstein Op Ed:

 

http://www.restorefanniemae.us/bonanza

[Grenville]

Richard Epstein Op Ed:

 

http://www.restorefanniemae.us/bonanza

 

Good read. Thanks for posting!