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

[rros]

Thank you, Chris. If senior judges do not count that will be a lot less.

 

Patrick McHenry just mentioned GSE's reform on Bloomberg. Said something *must* be done now. When pressed by reporter he said Waters' proposal will not gather enough votes neither anything from the Senate. So his idea is to start afresh. He said he is not dogmatic on any solution but one that can move forward because housing has unmet pressing needs now. Start afresh? We are always on the "start" stage lol.

 

 

[DRValue]

Constitution trumped in the third circuit. Ridiculous.

[DRValue]

@cherzeca

 

Is there anything that can be done about the precedential 3rd circuit opinion denying plaintiffs?

 

It strikes me as a peculiarity that the court won't rule against the fhfa because it will inconvenience them.

 

We're a long way from private property rights when the government can make a law to take your property but it isn't unconstitutional because it will inconvenience the government.

[Midas79]

http://www2.ca3.uscourts.gov/opinarch/173794p.pdf

 

From today's Third Circuit affirmance (page 24)

 

Here, the challengers’ claims fall into none of th ese catego - ries. They are not constitutional. They have not gone through the Recovery Act’s administrative process. They do not flow from  ultra  vires  agency  action.  And  they  are  not  claims  for  breach of contract .

 

The claim Lamberth allowed to process was breach of contract, right? And the claims in front of Sweeney are Constitutional claims. It looks like this ruling shouldn't affect those cases in that regard.

 

Later on page 24

 

Even apart from the declaratory aspect, awarding monetary relief  would  restrain  or  affect  the  Agency’s  c onservatorship. The  request  for  damages,  disgorgement,  and  restitution,  against both the Agency and the Treasury, would (as the chal - lengers  concede)  unravel  the  Third  Amendment,  reverse  the  monetary payments made under it, and prevent or at least deter the Agency from implementing it further.

 

How does Treasury writing a check to shareholders unravel the NWS? It doesn't make any sense to me.

[Guest cherzeca]

the third circuit opinion is horrendous but it will be very difficult to get a rehearing.  the opinion cites no cases for the Delaware law analysis, because there are none on point, NWS is a case of first impression.  maybe Ps can argue that case should be stayed until Delaware S. Ct advisory opinion.  very unlikely

 

the big news of the last two days is collins rehearing.  that is the one to watch!

[DRValue]

the third circuit opinion is horrendous but it will be very difficult to get a rehearing.  the opinion cites no cases for the Delaware law analysis, because there are none on point, NWS is a case of first impression.  maybe Ps can argue that case should be stayed until Delaware S. Ct advisory opinion.  very unlikely

 

the big news of the last two days is collins rehearing.  that is the one to watch!

 

But we've had these ones to watch before though. Personally I'm no longer relying on lawsuits. I'm just mad cos it seems like courts are determined to rule for the government and ignore anything to the contrary. It wreaks of corruption.

Like you say the 3rd circuit is horrendous. I don't know how they can believe they won't get called out on it.

[blackcoffee]

You don’t understand, it is a value stock. We should keep holding it till 2028 and beyond. They are saying “let us hide behind ‘congressional action’ rhetoric so that we can finish the two to bankrupt companies, it’s coming with home prices down and we have been successful doing this over a decade and the media is in our side where none of them is reporting the loot”. Can’t fight the city hall, judges are political appointee and know what a wink means.

 

“White house to address housing finance in near future”,  don’t be mistaken, near means another 10 years. They said in 2016, the term ‘near’ many times and we are in 2019 soon. Truth is they love the sweep money : it is sweet and stolen.

 

https://subscriber.politicopro.com/financial-services/whiteboard/2018/11/adviser-white-house-to-address-housing-finance-in-the-near-future-2198950

 

Trump voice " you mean to tell me if I do nothing I keep getting all the money, but if I try to do the right thing I lose the money?"

 

lol what do you think someone like Trump is going to do in that situation?

[Guest cherzeca]

You don’t understand, it is a value stock. We should keep holding it till 2028 and beyond. They are saying “let us hide behind ‘congressional action’ rhetoric so that we can finish the two to bankrupt companies, it’s coming with home prices down and we have been successful doing this over a decade and the media is in our side where none of them is reporting the loot”. Can’t fight the city hall, judges are political appointee and know what a wink means.

 

“White house to address housing finance in near future”,  don’t be mistaken, near means another 10 years. They said in 2016, the term ‘near’ many times and we are in 2019 soon. Truth is they love the sweep money : it is sweet and stolen.

 

https://subscriber.politicopro.com/financial-services/whiteboard/2018/11/adviser-white-house-to-address-housing-finance-in-the-near-future-2198950

 

Trump voice " you mean to tell me if I do nothing I keep getting all the money, but if I try to do the right thing I lose the money?"

 

lol what do you think someone like Trump is going to do in that situation?

 

at which point Paulson and schwarzman tell Donald hey it's our money not your effing money

[Eye4Valu]

You don’t understand, it is a value stock. We should keep holding it till 2028 and beyond. They are saying “let us hide behind ‘congressional action’ rhetoric so that we can finish the two to bankrupt companies, it’s coming with home prices down and we have been successful doing this over a decade and the media is in our side where none of them is reporting the loot”. Can’t fight the city hall, judges are political appointee and know what a wink means.

 

“White house to address housing finance in near future”,  don’t be mistaken, near means another 10 years. They said in 2016, the term ‘near’ many times and we are in 2019 soon. Truth is they love the sweep money : it is sweet and stolen.

 

https://subscriber.politicopro.com/financial-services/whiteboard/2018/11/adviser-white-house-to-address-housing-finance-in-the-near-future-2198950

 

Trump voice " you mean to tell me if I do nothing I keep getting all the money, but if I try to do the right thing I lose the money?"

 

lol what do you think someone like Trump is going to do in that situation?

 

He'll actually make more money by doing the right thing, which is a powerful incentive for a guy like him. But don't get me wrong, I'm not trying to convince the peanut gallery.

[orthopa]

Anyone aware of the politico tweet regarding White house addressing housing finance in near future?

[Guest cherzeca]

Anyone aware of the politico tweet regarding White house addressing housing finance in near future?

 

tweet refers to a politico pro article which is behind paywall.  if anyone can provide color that would be great

[muscleman]

Anyone aware of the politico tweet regarding White house addressing housing finance in near future?

 

I can't find it. What's the link?

[rros]

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Also, did anybody hear Corker today at the hearing? He said something like 'the wh will take some actions and then leave other things to congress' or similar. Looks like he has accepted the fact there will be administrative reform. He then insisted on the GSEs being SIFIs. Probably, thinking the only way to contain them once out c-ship is by over-regulation/overseeing. He seems to be anticipating, perhaps correctly, this is going the way of Treasury/FHFA.

[Luke 532]

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Attached are the questions...

[Guest cherzeca]

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Attached are the questions...

 

The 5th circuit has sent this “letter of advisement” to collins P and govt in connection with the collins rehearing en banc:

 

“Dear Counsel,

Having granted both petitions for rehearing en banc in this case, the court directs the parties to file supplemental briefs addressing the constitutional, statutory, and remedy arguments that were presented to the panel. Counsel are specifically directed to address Supreme Court and federal appellate court opinions that support the respective positions taken by the parties on these issues. With respect to the remedy argument, expressly state whether, and under what circumstances, the proper remedy in a separation-of-powers case is to set aside the agency actions, see NLRB v. Noel Canning, 134 S. Ct. 2550, 2558 (2014), or to excise the unconstitutional portion of the statute, see Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 508–10 (2010); Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1485–87 (2018) (Thomas, J., concurring). Additionally, in practical terms, what would setting aside the Net Worth Sweep entail and how would it affect other functions of the FHFA.”

 

this is self-explanatory, but it does bear emphasizing that the en banc panel is focused on whether invalidating the NWS is required if they (as did the merits panel) find that the fhfa is unconstitutionally structured.

 

collins counsel found another case to support NWS invalidation: Bowsher see https://www.law.cornell.edu/supremecourt/text/478/714

 

collins counsel set forth Bowsher in their Bhatti 8th cir. appeal brief but did not cite to it in their original collins 5th cir panel appeal brief because, I believe, they came across the Bowsher precedent only after the collins merits panel issued its opinion (it happens). the money quote from Bowsher: “Accordingly, the judgment and order of the District Court [invalidating the Comptroller General’s action] are affirmed.” So added to Canning as support for NWS invalidation will be Bowsher and Lucia (an appointments clause case decided after collins was argued before the 5th circuit merits panel that should have precedential value even though collins is a separation of powers case).

 

As to the mechanics of invalidating the NWS and how that would affect fhfa functions, Collin counsel has addressed that in the bhatti appeals brief: no or little money need change hands as one can reduce the liquidation preference of the senior preferred, so treasury will not need to, for example, seek an appropriation of money from congress; and while invalidation of NWS might serve as a precedent for other plaintiffs to seek invalidation of fhfa action, there are many reasons why those hypothetical plaintiffs might not be able to bring those actions, such as the passage of the statute of limitations.

 

As to the APA claim, collins P will have to rely principally on the dissents of the 5th circuits own J Willett and former DC circuit Judge Brown.

 

having just read J. Thomas’s concurrence in Murphy, it should be pointed out that J. Thomas is asking the question whether it is a proper function of judicial review to sever a statutory provision that scotus finds unconstitutional to “save” the remaining provisions of the statute. reference to J. Thomas’s concurrence in Murphy by this “letter of advisement” really is a favorable reference for P, as it was the merits panel’s act of severing the fhfa director’s removal only for cause provision that served to justify the merits panel’s denial of relief (NWS invalidation) to P.

 

 

[rros]

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Attached are the questions...

 

The 5th circuit has sent this “letter of advisement” to collins P and govt in connection with the collins rehearing en banc:

 

“Dear Counsel,

Having granted both petitions for rehearing en banc in this case, the court directs the parties to file supplemental briefs addressing the constitutional, statutory, and remedy arguments that were presented to the panel. Counsel are specifically directed to address Supreme Court and federal appellate court opinions that support the respective positions taken by the parties on these issues. With respect to the remedy argument, expressly state whether, and under what circumstances, the proper remedy in a separation-of-powers case is to set aside the agency actions, see NLRB v. Noel Canning, 134 S. Ct. 2550, 2558 (2014), or to excise the unconstitutional portion of the statute, see Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 508–10 (2010); Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1485–87 (2018) (Thomas, J., concurring). Additionally, in practical terms, what would setting aside the Net Worth Sweep entail and how would it affect other functions of the FHFA.”

 

this is self-explanatory, but it does bear emphasizing that the en banc panel is focused on whether invalidating the NWS is required if they (as did the merits panel) find that the fhfa is unconstitutionally structured.

 

collins counsel found another case to support NWS invalidation: Bowsher see https://www.law.cornell.edu/supremecourt/text/478/714

 

collins counsel set forth Bowsher in their Bhatti 8th cir. appeal brief but did not cite to it in their original collins 5th cir panel appeal brief because, I believe, they came across the Bowsher precedent only after the collins merits panel issued its opinion (it happens). the money quote from Bowsher: “Accordingly, the judgment and order of the District Court [invalidating the Comptroller General’s action] are affirmed.” So added to Canning as support for NWS invalidation will be Bowsher and Lucia (an appointments clause case decided after collins was argued before the 5th circuit merits panel that should have precedential value even though collins is a separation of powers case).

 

As to the mechanics of invalidating the NWS and how that would affect fhfa functions, Collin counsel has addressed that in the bhatti appeals brief: no or little money need change hands as one can reduce the liquidation preference of the senior preferred, so treasury will not need to, for example, seek an appropriation of money from congress; and while invalidation of NWS might serve as a precedent for other plaintiffs to seek invalidation of fhfa action, there are many reasons why those hypothetical plaintiffs might not be able to bring those actions, such as the passage of the statute of limitations.

 

As to the APA claim, collins P will have to rely principally on the dissents of the 5th circuits own J Willett and former DC circuit Judge Brown.

 

having just read J. Thomas’s concurrence in Murphy, it should be pointed out that J. Thomas is asking the question whether it is a proper function of judicial review to sever a statutory provision that scotus finds unconstitutional to “save” the remaining provisions of the statute. reference to J. Thomas’s concurrence in Murphy by this “letter of advisement” really is a favorable reference for P, as it was the merits panel’s act of severing the fhfa director’s removal only for cause provision that served to justify the merits panel’s denial of relief (NWS invalidation) to P.

Thank you. Is invalidating the same as an injunction in legal jargon?

I ask because the PSPAs have that clause that says an injunction by any court will render the agreement null. In which case, the financial commitment is withdrawn.

[allnatural]

Plaintiffs are asking to vacate the 3rd amendment to the PSPAs, not to invalidate the PSPAs themselves. The PSPAs should continue to exist as if they did pre-NWS and the financing commitment would remain.

 

Thank you. Is invalidating the same as an injunction in the legal universe?

I ask because the PSPAs have that clause that says an injunction by any court will render the agreement null. In which case, the financial commitment is withdrawn.

[Guest cherzeca]

Plaintiffs are asking to vacate the 3rd amendment to the PSPAs, not to invalidate the PSPAs themselves. The PSPAs should continue to exist as if they did pre-NWS and the financing commitment would remain.

 

Thank you. Is invalidating the same as an injunction in the legal universe?

I ask because the PSPAs have that clause that says an injunction by any court will render the agreement null. In which case, the financial commitment is withdrawn.

 

if the 5th circuit finds fhfa to be unconstitutionally structured, and unlike the merits panel provides a remedy to Ps that enjoins enforcement of the 3rd amendment, then only the 3rd amendment is enjoined. it is my recollection that collins Ps asked only to vacate the 3rd amendment, not the PSPA.

 

now, rros, as to that provision you cite re withdrawing the commitment, I suppose treasury could take the next step and pull its commitment using that contractual provision...at which step that withdrawal of commitment would become the subject of another action...since fhfa agreed to that provision in the PSPA and fhfa is unconstitutionally structured.

 

now, as judge schilz fretted in his bhatti opinion, wouldn't a holding that fhfa is unconstitutionally structured void the entire PSPA itself?  and the answer is NO, BECAUSE THE PS HAVENT ASKED FOR THIS RELIEF.  A COURT CAN ONLY ACT WITHIN THE CONTEXT OF A CASE OR CONTROVERSY AND IN COLLINS CASE THE RELEIF SOUGHT IS TO INVALIDATE ONLY THE NWS.

 

EDIT:  the issues we are skirting around, and which are being raised directly by the 5th circuit in its reference to Justice Thomas's concurrence in Murphy, can be further explored in https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3158038. 

[rros]

Plaintiffs are asking to vacate the 3rd amendment to the PSPAs, not to invalidate the PSPAs themselves. The PSPAs should continue to exist as if they did pre-NWS and the financing commitment would remain.

 

Thank you. Is invalidating the same as an injunction in the legal universe?

I ask because the PSPAs have that clause that says an injunction by any court will render the agreement null. In which case, the financial commitment is withdrawn.

I think you may want to read the entire PSPAs agreement one more time, with all due respect. They have a built-in clause to self-destruct in case of an injunction by any court. So can invalidating one section of an amendment (the 3rd also included the reduction of the net worth to zero in 5 years) to the general agreement be the same as an "injunction"? This is the word included in the PSPAs.

 

I can't remember all the exact wording but if I am correct it was worded in a way that an injunction unwinds the agreement.

[rros]

Here it is:

 

6.7. Effect of Order; Injunction; Decree. If any order, injunction or decree is issued by any

court of competent jurisdiction that vacates, modifies, amends, conditions, enjoins, stays or otherwise

affects the appointment of Conservator as conservator of Seller or otherwise curtails Conservator’s

powers as such conservator (except in each case any order converting the conservatorship

to a receivership under Section 1367(a) of the FHE Act), Purchaser may by written notice to

Conservator and Seller declare this Agreement null and void, whereupon all transfers hereunder

(including the issuance of the Senior Preferred Stock and the Warrant and any funding of the

Commitment) shall be rescinded and unwound and all obligations of the parties (other than to

effectuate such rescission and unwind) shall immediately and automatically terminate.

 

Looks like money flows will reverse and the umbilical cord is cut.

[locutusoftexas]

 

Trump voice " you mean to tell me if I do nothing I keep getting all the money, but if I try to do the right thing I lose the money?"

 

lol what do you think someone like Trump is going to do in that situation?

 

Although I defer to the regulars on this thread, who have a comprehensive picture of the entire situation, I have been hypothesizing the same conversation occasionally over the last year. I would like very much to be wrong.

[Eye4Valu]

Purchaser "may"

[rros]

Purchaser "may"

Here we go again :)

[Guest cherzeca]

@rros

 

1. as a legal matter, that contractual provision is not self-enforcing, meaning that if treasury tries to cancel its commitment, a P can sue to enjoin that enforcement.  now why would that P do that.  because it would argue that the contract between an unconstitutionally structured fhfa and treasury is not enforceable against fhfa.  P would seek to enjoin that "blow-up" provision.

 

2. more importantly as a practical matter, does treasury want to blow up the entire housing finance market?  I think not, so treasury would not enforce that contractual provision

[rros]

@rros

 

1. as a legal matter, that contractual provision is not self-enforcing, meaning that if treasury tries to cancel its commitment, a P can sue to enjoin that enforcement.  now why would that P do that.  because it would argue that the contract between an unconstitutionally structured fhfa and treasury is not enforceable against fhfa.  P would seek to enjoin that "blow-up" provision.

 

2. more importantly as a practical matter, does treasury want to blow up the entire housing finance market?  I think not, so treasury would not enforce that contractual provision

Thank you. It makes sense.. Tsy would lose its warrants. Did not notice the infamous "may".