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

[Guest cherzeca]

It's going to be high theater watching Trump try to deal with a Democrat-controlled House. High comedy too.

 

Evidently, Maxine Waters proposed a bill in 2014 to wind down FnF. Mnuchin has shown no desire to do that, so does that (and the fact that the Dems have the House) shut the door on legislative reform? I'm trying to think of what common ground there could be between Trump and the House, and I'm just not seeing enough of it to make a difference.

Let's see what Watt does on November 16th or soon after that. Any action he takes, or none, may reveal what Democrats really want.

 

what's 11/16?

The last day for public comments on the proposed rule on Enterprise Capital requirements. Deadline was moved out 60 days.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Issues-Proposed-Rule-on-Enterprise-Capital.aspx

 

nothing is going to happen on 11/16.  the whole capital issue will not be addressed by a lame duck FHFA director.

 

I think the board is missing the boat on maxine.  she is not a friend of tbtf banks (though she might be desirous of their money contributions that went to hensarling when he had the gavel).  she may or may not be in favor of a plan that introduces competition from banks into FnF's business, but she won't bend over backwards in seeing that the terms are favorable to the banks.  her assuming chairmanship of HFS is an unambiguous good result for FnF

[allnatural]

I believe the midterms were a net positive for the GSEs. If (big if) legislative path is on the table (I think this remains very low probability, many hurdles to overcome), Maxine Waters and more importantly PAT TOOMEY are important allies. More probable, I believe midterms were positive because it puts congress in a gridlock and gives admin the green light and cover to go ahead and administratively execute a recap release more swiftly than if it was an all GOP congress.

 

The market seems to agree today.

[Midas79]

It's going to be high theater watching Trump try to deal with a Democrat-controlled House. High comedy too.

 

Evidently, Maxine Waters proposed a bill in 2014 to wind down FnF. Mnuchin has shown no desire to do that, so does that (and the fact that the Dems have the House) shut the door on legislative reform? I'm trying to think of what common ground there could be between Trump and the House, and I'm just not seeing enough of it to make a difference.

 

I do not remember maxine wanting to liquidate FnF.  that certainly was hensarling

 

It was both.

 

https://democrats-financialservices.house.gov/uploadedfiles/media/file/003%20maxine%20waters%20legislation/gse%20bill/waters_046_xml.pdf

 

TITLE V—WIND DOWN OF FANNIE MAE AND FREDDIE MAC

 

She might have changed her mind since then, though. This was in 2014.

[Guest cherzeca]

I believe the midterms were a net positive for the GSEs. If (big if) legislative path is on the table (I think this remains very low probability, many hurdles to overcome), Maxine Waters and more importantly PAT TOOMEY are important allies. More probable, I believe midterms were positive because it puts congress in a gridlock and gives admin the green light and cover to go ahead and administratively execute a recap release more swiftly than if it was an all GOP congress.

 

The market seems to agree today.

 

agreed.  and while nothing will happen on 11/16, something will happen on 1/6/19...watt's term will end.  trump likely will not want to see him continue in an acting capacity, and so will likely appoint someone who has already gotten senate confirmation...perhaps mulvaney or even Mnuchin, while someone below director will be appointed to do actual work and eventually secure senate confirmation. 

[Guest cherzeca]

It's going to be high theater watching Trump try to deal with a Democrat-controlled House. High comedy too.

 

Evidently, Maxine Waters proposed a bill in 2014 to wind down FnF. Mnuchin has shown no desire to do that, so does that (and the fact that the Dems have the House) shut the door on legislative reform? I'm trying to think of what common ground there could be between Trump and the House, and I'm just not seeing enough of it to make a difference.

 

I do not remember maxine wanting to liquidate FnF.  that certainly was hensarling

 

It was both.

 

https://democrats-financialservices.house.gov/uploadedfiles/media/file/003%20maxine%20waters%20legislation/gse%20bill/waters_046_xml.pdf

 

TITLE V—WIND DOWN OF FANNIE MAE AND FREDDIE MAC

 

She might have changed her mind since then, though. This was in 2014.

 

yes, I see that she has her name on the file but as I recall this was written by hensarling and the R staff at HFS.

 

the more I think about maxine as head of HFS, the more ludicrous it seems to me that anything she would support re GSEs would be acceptable to administration.  there is just so much animus. trump calling her a low IQ individual, maxine calling for his impeachment while other progressives like warren have been saying let's wait and see what Mueller says.  maxine has been a huge critic of the administration's "tear down" of the cfpb.  yes politicians can and often do get beyond the name calling and get stuff done, but I wouldn't bet on it in this case.

[rros]

Mnuchin?

Never thought of that...

[muscleman]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

[Guest cherzeca]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

 

brilliant if trump does

[Luke 532]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

 

brilliant if trump does

 

The Federalist thinks it's a good idea: https://thefederalist.com/2018/11/07/yes-president-trump-replace-jeff-sessions-janice-rogers-brown/

[Midas79]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

 

If so, would she have to recuse herself on matters involving the GSE cases? Seeing as she has already written an opinion on one of them.

[Guest cherzeca]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

 

If so, would she have to recuse herself on matters involving the GSE cases? Seeing as she has already written an opinion on one of them.

 

that is not so clear to me...that may be a question for DOJ internal policies.  certainly if the reverse was true, a former Atty Gen now become judge, she couldn't be deciding the case as judge that she was involved in as Atty Gen.  but in posited situation, not sure why not

[Luke 532]

Sessions resigned. Will Judge Brown be nominated to DOJ ?  ::)

 

brilliant if trump does

 

The Federalist thinks it's a good idea: https://thefederalist.com/2018/11/07/yes-president-trump-replace-jeff-sessions-janice-rogers-brown/

 

She has talked with The White House about it recently and also worked with Kavanaugh in the past...

 

"Janice Rogers Brown, who is African-American and well-liked in conservative circles, served alongside Supreme Court Justice Brett Kavanaugh and spoke to the White House about the job in recent weeks, the Sacramento Bee reported."

https://www.foxnews.com/politics/former-kavanaugh-colleague-among-group-being-considered-to-replace-sessions-as-ag-reports

 

 

[onyx1]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

[Guest cherzeca]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

 

thanks onyx!

 

someone from maxine Walter's district should send her a copy and give her office a call.  (my experience is that house staff respect district-based constituent inquiries only)

[investorG]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

 

very interesting --- professional analysis with some attractive share price targets.  hopefully it's weekend reading for mnuchin and phillips. 

[Guest cherzeca]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

 

very interesting --- professional analysis with some attractive share price targets.  hopefully it's weekend reading for mnuchin and phillips.

 

we are all indebted to Paulson and the other non-litigating junior preferred holders.  the blueprint was ripe for updating and now is a great time to reintroduce it into the public debate...indeed, its merits have only improved compared to one year earlier.  but this update wouldn't have happened without the junior pref holders writing the check.

[investorG]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

 

very interesting --- professional analysis with some attractive share price targets.  hopefully it's weekend reading for mnuchin and phillips.

 

we are all indebted to Paulson and the other non-litigating junior preferred holders.  the blueprint was ripe for updating and now is a great time to reintroduce it into the public debate...indeed, its merits have only improved compared to one year earlier.  but this update wouldn't have happened without the junior pref holders writing the check.

 

indeed - thank you Mr. Paulson.

 

I liked how it incorporated some preferences from mnuchin as options.

 

I guess what we're hoping for is a different tune from mnuchin and phillips regarding charter repeal, multiple guarantors, etc, with the cover that it's now hard to pull off with the Democratic House.

 

 

[Luke 532]

Partial conversion of prefs...  I wonder what percentage of prefs will convert vs. the amount that will not.  I wonder at what percentage of par the conversion will take place. It will also be interesting to see at what price (relative to par) the non-converted prefs trade in the market.

[Luke 532]

Partial conversion of prefs...  I wonder what percentage of prefs will convert vs. the amount that will not.  I wonder at what percentage of par the conversion will take place. It will also be interesting to see at what price (relative to par) the non-converted prefs trade in the market.

 

Specifically, I'm curious about FMCCL, FNMAH, and FNMAS.

 

I know it depends on dividend rate, when the dividend might be re-instated, etc. but (1) what are your thoughts on where these three securities would trade if NOT converted?  (2) Would yield even matter for conversion terms, settlement terms, etc.?

 

 

Thanks in advance for your input!

[Guest cherzeca]

Partial conversion of prefs...  I wonder what percentage of prefs will convert vs. the amount that will not.  I wonder at what percentage of par the conversion will take place. It will also be interesting to see at what price (relative to par) the non-converted prefs trade in the market.

 

Specifically, I'm curious about FMCCL, FNMAH, and FNMAS.

 

I know it depends on dividend rate, when the dividend might be re-instated, etc. but (1) what are your thoughts on where these three securities would trade if NOT converted?  (2) Would yield even matter for conversion terms, settlement terms, etc.?

 

 

Thanks in advance for your input!

 

one additional data point is when issuer can call these prefs.  if there is a near term call date and rates stay low to moderate, issuer can simply call and refinance at lower rate.  if no near term call date, then issuer might contemplate richer conversion offer

[Wiggins]

Partial conversion of prefs...  I wonder what percentage of prefs will convert vs. the amount that will not.  I wonder at what percentage of par the conversion will take place. It will also be interesting to see at what price (relative to par) the non-converted prefs trade in the market.

 

Specifically, I'm curious about FMCCL, FNMAH, and FNMAS.

 

I know it depends on dividend rate, when the dividend might be re-instated, etc. but (1) what are your thoughts on where these three securities would trade if NOT converted?  (2) Would yield even matter for conversion terms, settlement terms, etc.?

 

 

Thanks in advance for your input!

 

one additional data point is when issuer can call these prefs.  if there is a near term call date and rates stay low to moderate, issuer can simply call and refinance at lower rate.  if no near term call date, then issuer might contemplate richer conversion offer

 

The contracts of the JPS securities each specify different terms for callability. Last time I checked they are all callable either continuously or  quarterly except FNMAS (callable 12/31/2020) and FMCKJ (callable 12/31/2022).

 

Another reason Moelis may have raised the share price is the lowering of corporate tax rates from 35% to 21%, which makes the companies more profitable.

 

When would the sweep for Q4 occur? I ask because if Moelis is enacted they will have to make an announcement before that date.

[DocSnowball]

Updated Moelis Blueprint

 

 

http://gsesafetyandsoundness.com/2018/11/09/oneyearlater/

 

thanks onyx!

 

someone from maxine Walter's district should send her a copy and give her office a call.  (my experience is that house staff respect district-based constituent inquiries only)

 

great idea!

[investorG]

the Mba cohort is pushing for legislative reform to occur before recapitalization.   

 

does this view hold water?  or is it better to get going on the recap in December as a catalyst / spark for legislative reform (my view)?

 

in theory, the potential for action would open after the congress recesses for the year in December.

 

mnuchin appears conservative on the matter to date.  but the moelis / paulson / schwarzman group is quite close to trump.

 

[investorG]

Partial conversion of prefs...  I wonder what percentage of prefs will convert vs. the amount that will not.  I wonder at what percentage of par the conversion will take place. It will also be interesting to see at what price (relative to par) the non-converted prefs trade in the market.

 

Specifically, I'm curious about FMCCL, FNMAH, and FNMAS.

 

I know it depends on dividend rate, when the dividend might be re-instated, etc. but (1) what are your thoughts on where these three securities would trade if NOT converted?  (2) Would yield even matter for conversion terms, settlement terms, etc.?

 

 

Thanks in advance for your input!

 

 

these are good questions with no easy answers.  (obviously much of this is premature at this point). 

 

it likely depends on if there are guidelines set out in any plan as to if / when dividends would be restored.  if they want a healthy conversion rate of pref to common in the Moelis plan, then they might make dividend re-instatement murky to prevent people from holding out. the jr pref securities would likely trade below par, with some differential between them (as is now) based on yield.  there's also some chance they could target only select series for conversion.  in terms of yield mattering for conversion terms, i'd guess that it's a tradeoff between simplicity (treat them all equal) and precision (modestly better terms for higher yielders).

[Guest cherzeca]

all junior pref holders should have mindset they are holding out for par, whether by being called or in a conversion rate that they like.  I don't see treasury doing a re-IPO of common without being able to pay dividends on common, and this will only happen if dividends are turned on for prefs (which will cause them to trade to par...or even at a premium in cases of high div rate) or the prefs are "convinced" to convert, or they are called and paid out at par.

 

we are par-seeking missiles