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

[onyx1]

So I am long Fannie and generally on your side here.  However, wasn't the initial bailout of fannie under Bush?  The sweep is totally obama and shouldn't have happened but the initial deal was started under a republican admin.  The warrants and senior preferred are legit and will need to be included in any investing calculation.  Best case the sweep is reversed and fannie only owes $15-20B on the senior preferred,  IMO.

 

n September 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA. The action was "one of the most sweeping government interventions in private financial markets in decades".[43][44][45] Lockhart also dismissed the firms' chief executive officers and boards of directors, and caused the issuance to the Treasury new senior preferred stock and common stock warrants amounting to 79.9% of each GSE. The value of the common stock and preferred stock to pre-conservatorship holders was greatly diminished by the suspension of future dividends on previously outstanding stock, in the effort to maintain the value of company debt and of mortgage-backed securities. FHFA stated that there are no plans to liquidate the company.

 

https://en.wikipedia.org/wiki/Fannie_Mae#2008_.E2.80.93_crisis_and_conservatorship

 

The treatment of GSE shareholders under both Republican & Democratic regimes has been equally loathsome.

[rros]

ok last post because i'm just being redundant here but to your point onyx1, for far too long the gse's have been subject to the whims of both party's playing a dangerous game of musical chairs with the housing industry hoping to be the party that hands them over to tbtf first. ha, we beat you! ...........wow, what a game..........

 

enter ts designate and the word, utility. save the 30yr cheerleader, save the world. wasn't that the line? oh the cowards who speak of winding this and safeguarding that, if only they would respond to question of monopolistic banks and the 30yr. reminds me of fifty shades of grey, with the big bad billionaire bank getting his hands on the submissive residential mortgage market........then slapping the shit out of her............i guess, i never saw the movie but i'm pretty sure the girl doesn't "win" in the end...

 

imo, in terms of the commons, this can only go roughly one of two ways of course, but i see it only as being telegraphed as one.......

 

there's a fine line between hero and zero and in this case, imo it's all about the party line. i see party line as having gone from "death spiral" to "utility". hey senator franken, isn't that special? deep thoughts eh senator........

 

so the betting person is looking at two forward bets, does trump intervene and overturn that dick, with a bic? because the second bet as to if he keeps over payments and exercises warrants have to drop to close to nil. imvho, how does trump settle yet keep over's and exercise? that's the scenario i would bet most against. still just a bet from a guy. he will write his own narrative which is much closer to the truth, as he does. gse's were never in trouble, he'll quote tilson and other smartest guys on street,( and maybe dare anyone dream an actual judge with something positive to say) that previous admin shafted gse's for money due to public lie, and making gse's a utility saves 30 yr from ws banks, which by the way he despises remember since they won't lend him shit, not like he owes ws, rather deutche)

 

he'll negotiate a better deal on fee's up and down the line, like a boss working for american people, and set them free as healthy as can be because they're owned by the people, remember obama the ones that elected you? god, what an ahole.

 

ergo, his skinny is aligned with commons since it's the biggest pie to carve, how don't ackman paulson berk not show up hats in their hands, overflowing with flawless friking diamonds.....hedge fund partnerships, building loans, i mean, i'm not even trying here,

 

he may very well profit in ways i simply can't comprehend, so that's also a huge flaw in my flawed reasoning. banking on his take and being able to spot it are two different things. i'm only betting on his takes' alignment with health of commons. nothing i haven't said before of course, aww, god damnit, my psyche ward is restricting our internet access because people keep sending op ed's to brietbart for publication, so i might not be able to post for a while,

 

meantime, Good Luck and God Bless Us All

From all your diatribe this is my takeaway, with which I agree.

 

"obama..., what an ahole."

[investorG]

can a plaintiff legally press 'pause' on a case that is under consideration by a court? can they tell the judges to hold off?

 

or is there no middle ground and you have to either let it play out or fully withdraw?

 

thank you.

[investorG]

So I am long Fannie and generally on your side here.  However, wasn't the initial bailout of fannie under Bush?  The sweep is totally obama and shouldn't have happened but the initial deal was started under a republican admin.  The warrants and senior preferred are legit and will need to be included in any investing calculation.  Best case the sweep is reversed and fannie only owes $15-20B on the senior preferred,  IMO.

 

 

the warrants might be legally legit but imo it doesn't mean they are set in stone.  especially when looked under the lens of taxpayer returns on various bailouts + future ways for taxpayers to benefit financially on an ongoing basis rather than with 80pct of the companies for free.

[no_free_lunch]

So I am long Fannie and generally on your side here.  However, wasn't the initial bailout of fannie under Bush?  The sweep is totally obama and shouldn't have happened but the initial deal was started under a republican admin.  The warrants and senior preferred are legit and will need to be included in any investing calculation.  Best case the sweep is reversed and fannie only owes $15-20B on the senior preferred,  IMO.

 

 

the warrants might be legally legit but imo it doesn't mean they are set in stone.  especially when looked under the lens of taxpayer returns on various bailouts + future ways for taxpayers to benefit financially on an ongoing basis rather than with 80pct of the companies for free.

 

I just view that as a free option.  I think so long as the sweep is taken out and they are set free, even without government recap, I think preferred's are a good investment. 

[Luke 532]

 

I just view that as a free option.  I think so long as the sweep is taken out and they are set free, even without government recap, I think preferred's are a good freaking amazing investment.

 

I made an edit that reflects my opinion. :-)

[hardincap]

thomas sowell on janice brown: http://townhall.com/columnists/thomassowell/2003/10/21/a_lynch_mob_gathers

 

conservatives have traditionally opposed the GSEs bc they dont believe the government has any business essentially subsidizing mortgages

 

janice brown is conservative to her bones. in the perry case, she has to choose between the lesser of two evils: the NWS and the preservation of the GSEs. i would think a true conservative like her would find the NWS far more unpalatable, but those responsible for the NWS obviously thought the latter to be so

 

 

[Guest cherzeca]

"Senator Sherrod Brown, a Democrat from Ohio, asked Mnuchin to provide additional details on a housing-finance plan that could protect taxpayers as well as expand mortgage access.

 

In his response, Mnuchin wrote that “any solution will be dependent upon the GSEs being capitalized properly and other such controls that eliminate risk to taxpayers.”

 

The answer could cheer some advocates of preserving Fannie and Freddie, including investors, small lenders, and some affordable housing groups. Over the past few years, those groups tried to convince the Obama administration to allow the companies to rebuild capital to no avail."

 

https://www.bloomberg.com/politics/articles/2017-01-28/mnuchin-dims-banks-hopes-he-will-allow-a-prop-trading-revival

[TonyG]

isn't that huge? Seems like he is tipping his hand more in this letter than in front of senate committee.

[hardincap]

it confirms what we already knew: that mnuchin is not dumb or ideological enough to try to kill the gses

 

lets hope the trump admin doesnt blow itself up before mnuchin gets to do anything.. i know its hard to impeach a president but its hard to see how the trump presidency is sustainable if it continues to generate the level of outrage and anxiety its generating

 

 

[no_free_lunch]

isn't that huge? Seems like he is tipping his hand more in this letter than in front of senate committee.

 

I am very biased here but I tend to agree.  I still think the warrants get exercised but from the preferred perspective it looks great.  He still needs to be confirmed but not long to wait.

[investorG]

"Senator Sherrod Brown, a Democrat from Ohio, asked Mnuchin to provide additional details on a housing-finance plan that could protect taxpayers as well as expand mortgage access.

 

In his response, Mnuchin wrote that “any solution will be dependent upon the GSEs being capitalized properly and other such controls that eliminate risk to taxpayers.”

 

The answer could cheer some advocates of preserving Fannie and Freddie, including investors, small lenders, and some affordable housing groups. Over the past few years, those groups tried to convince the Obama administration to allow the companies to rebuild capital to no avail."

 

https://www.bloomberg.com/politics/articles/2017-01-28/mnuchin-dims-banks-hopes-he-will-allow-a-prop-trading-revival

 

risky strategy. would have preferred less disclosure in this instance.

[SnarkyPuppy]

Unless the recap comes purely from the companies retained earnings, seems explicitly very positive for preferred holders

[Luke 532]

Unless the recap comes purely from the companies retained earnings, seems explicitly very positive for preferred holders

 

Agreed, although I wish Mnuchin would have played it a bit closer to his chest. If he gets approved we are in excellent shape. 

[investorG]

Unless the recap comes purely from the companies retained earnings, seems explicitly very positive for preferred holders

 

yes sir, IF the q&a is benign (it still isn't out), IF he gets confirmed, and IF they execute the plan (ideally with the support of congress such that investors don't fear a future random reversal in div policy). 

 

unless preferred is potentially used for a recap (which i doubt), then outstanding preferred likely wouldn't have dividends turned back on until certain capital thresholds are met.  likely there would be a voluntary conversion option from preferred to common.

[waynepolsonAtoZ]

"Mnuchin wrote that “any solution will be dependent upon the GSEs being capitalized properly and other such controls that eliminate risk to taxpayers.”" [i pulled this from the top of the gselinks site.]

 

To me, that article seemed to link allowing banks to do proprietary trading with recapitalizing the GSEs.

 

That would be a helpful quid for pro. Neutralize the banks on the GSEs, by linking prop trading with recapitalizing the GSEs.

 

The banks might shut up a bit if it thought it would help them get out from under the Volcker rule.

 

 

 

[waynepolsonAtoZ]

"in the perry case, she has to choose between the lesser of two evils: the NWS and the preservation of the GSEs."

 

Judge Brown is a Federalist Society Constitution in Exile type. She'd love to role things back to 1936. Fortunately, nationalization and expropriation via the NWS is on the table for her. Killing the GSEs entirely is not really on her table. She's also interested in economics, very conservative economics (Austrians like Hayek and von Mises), not a criticism. So, I continue to assume she's on board.

 

Judge Ginsburg is a Univ of Chicago economist, a law and economics guy, probably will agree more or less with Brown. My caveat is that Peter Wallison probably was the guy that picked him as a nominee to SCOTUS in October 1986. Wallison was White House counsel from May '86 to March '87), so that's a concern. However, the delay in a decision may be beneficial in the sense that what we want the Circuit Court to do is also what Mnuchin (arguably) wants them to do. Or at least getting the NWS struck down would help accommodate recap and resumption of preferred and common dividends.

 

Going back to the question of whether someone at the DC court of appeals is trying to "en banc" the appeals case, which my lawyer thinks *could* be the case. [He was a clerk at the 3rd district court of appeals and his wife was a clerk at the 4th district court of appeals.] Whether he's right or not, it is almost surely a D that would be trying to do that, which implies that there is an effort to throttle down a Brown/Ginsburg decision that is good for us.

 

En bancing the case would be bad for us because it would restart the clock. There would be another round of oral arguments and another x number of months delay. Still, the decision would surely be 7 to 4 with 7 Ds voting for and 4 Rs voting against. That might spark an administrative action via a 4th Amendment.

 

 

[hardincap]

Brown seems to be against mnuchin as treasury sec:

 

Sherrod Brown ‏@SenSherrodBrown  9h9 hours ago

Mnuchin cannot be trusted to make decisions abt policies as personal to Ohioans as their taxes & retirement-SB

[doc75]

Brown seems to be against mnuchin as treasury sec:

 

Sherrod Brown ‏@SenSherrodBrown  9h9 hours ago

Mnuchin cannot be trusted to make decisions abt policies as personal to Ohioans as their taxes & retirement-SB

 

A little more colour on this:

 

http://www.dispatch.com/news/20170129/trump-treasury-pick-mnuchin-misled-senate-on-foreclosures-ohio-cases-show

[no_free_lunch]

WaynePolson,Thanks for the gselink link.

 

Found a good article there on the fannie situation in general.

 

The Washington Post editorial board is a big booster of both deceptions.  The board was incensed at the idea that the companies, “could exit the regulatory control known as ’conservatorship’ that has constrained them since 2008 — and resume bundling home loans and selling them, as if it had never been necessary to bail them out to the tune of $187 billion in the first place.” The Post invoked a half-lie written by columnist Robert Samuelson, who misled readers into thinking that $241 billion in GSE profits forwarded to Treasury were disconnected from the loans booked before 2008. Those same loans ostensibly triggered $200 billion in losses during 2008-2011 and then suddenly earned $130+ billion in 2013. (You would be surprised how many economists can neither analyze a financial statement, nor understand timing differences under GAAP. And you’d be surprised how many simply repeat what they’re told, instead of figuring things out for themselves.)

 

http://www.fidererongses.com/params/post/1030318/the-187-billion-fannie-freddie-bailout-is-a-big-half-lie

 

 

[orthopa]

Unless the recap comes purely from the companies retained earnings, seems explicitly very positive for preferred holders

 

Agreed, although I wish Mnuchin would have played it a bit closer to his chest. If he gets approved we are in excellent shape.

 

I guess it was easy in hindsight now to see that coming now knowing what Paulson and Berkowitz hold. Still a relief no matter what.  ;D

 

Anyone think those of us that hold some common should convert to only preferred?

[Flynnstone5]

Unless the recap comes purely from the companies retained earnings, seems explicitly very positive for preferred holders

 

Agreed, although I wish Mnuchin would have played it a bit closer to his chest. If he gets approved we are in excellent shape.

 

I guess it was easy in hindsight now to see that coming now knowing what Paulson and Berkowitz hold. Still a relief no matter what.  ;D

 

Anyone think those of us that hold some common too to only preferred?

 

Not to beat a dead horse, but Berkowitz and Perry both hold prfd while Paulson, Ackman and Icahn (if he still holds) are all in common? Is this accurate?

 

[HalfMeasure]

Not to beat a dead horse, but Berkowitz and Perry both hold prfd while Paulson, Ackman and Icahn (if he still holds) are all in common? Is this accurate?

 

Paulson holds prefs. Ackman at least publicly is 100% common. Icahn we know bought some common from Berkowitz. Important to remember that there aren't filing requirements on the prefs and common, so things can change without public knowledge unless the fund makes its own disclosures (e.g. Fairholme, Pershing). Icahn could have long since sold his common, and/or bought prefs, and we would never know.

[Mephistopheles]

Assuming our thesis regarding Paulson and Icahn's influence over Trump/Mnuchin (and the reason why the shares are up 140% since election day) is correct, then that nearly guarantees that they increased their position substantially since. Why would they not? Assuming this, there is only class of security that provides the liquidity for them to do this, and that is the common shares. I would bet heavily that Paulson now owns a good chunk of the common as well, unless of course our whole theory is wrong in which case the shares are overvalued.

[hardincap]

its official, government has won writ in part. what we presumed to be the most damaging docs (white house communications) were granted writ, so they wont be unsealed. im disappointed no one except carney saw this coming..