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

[Guest cherzeca]

that's not the way courts work.  if collins en banc voids NWS under APA claim, it sends case back to district court for that judge to implement remedy.  at that point judge asks parties what works for you both?  imo parties will both say terminate senior pref.  I am not sure what hoops treasury would have to jump through to write a 12 figure check, and Ps have no interest in making treasury jump through those hoops.

 

I defer to your expertise and judgment on how courts work. The Collins plaintiffs have a stated preference for the cancel-the-seniors route, without even asking for the extra $16.1B back if I remember right. And you're right, Treasury writing a 12-figure check would raise more than just eyebrows. I was just thinking out loud, thanks for showing me that that line of thinking isn't valid.

 

always willing to engage with you Midas. and Ps did say in supplemental briefing for collins en banc that they wanted the $16.2B overage and indeed not even that had to be paid, it could form a credit as against future taxes, and they supplied a precedent for such relief in their brief

[DRValue]

https://mobile.twitter.com/amacker/status/1093587069253943296

 

Senate confirmation next Thursday.

 

I'd imagine he's confirmed first then plan released after, to avoid tough questions.

[Guest cherzeca]

https://mobile.twitter.com/amacker/status/1093587069253943296

 

Senate confirmation next Thursday.

 

I'd imagine he's confirmed first then plan released after, to avoid tough questions.

 

that would be the optimal way to orchestrate it

[Wiggins]

Is this guy will be our next FHFA director? OMG, all of the fellow travelers are such close friends in this recent video

 

 

 

Thanks for posting the video. Calabria is asked directly about shareholders at 1:55:00 and his response leaves the door wide open. It's worth listening to.

 

 

[rros]

Is this guy will be our next FHFA director? OMG, all of the fellow travelers are such close friends in this recent video

 

 

 

Thanks for posting the video. Calabria is asked directly about shareholders at 1:55:00 and his response leaves the door wide open. It's worth listening to.

Good catch, thank you. But for any icing on the cake the Srs. must go.

[Guest cherzeca]

my take is that Calabria is very smart, and is not afraid to be provocative.  he thinks the NWS is illegal and the conservatorship unwise, since receivership (speaking in 2014 about choices made in 2008-2012) was an option and preferred to this zombie conservatorship that he thinks is illegal.

 

but I very strongly doubt that Mnuchin et al want to end conservatorship by exiting into receivership in 2019, after GSEs have paid back entire govt advance with interest at original 10% rate.  anyone who watches this presentation and thinks that this is the best evidence of the admin plan should be short.

 

I expect that the admin plan will call for an explicit cat. govt guarantee that is paid for, and probably provision for competition, but these are congressional to-dos, and I don't see that admin will delay implementing a path to exit out of conservatorship for congress to act on what is a sidecar provision of the plan.

 

I think Calabria will be instrumental as a fhfa regulator in setting capital and g fees, and this ties into the ability to raise capital for the conservatorship exit.  but Calabria is not a banker and the first priority of the plan will be a banker's priority, raising capital.

[rros]

Overall, it looks like they want to end this thing now.

 

What is not clear is if they want to go the admin route alone and completely. It would make more sense from an investor's perspective -ours- to have definite legal backing so as to never see a nws again or, at a minimum, prevent whimsical actions from anyone in power down the road. After all, the biggest threat to us has been politicians. Consider the Trump team being on our side. Wouldn't themselves too like to see further investor protection? The administrative train alone may not be able to fulfill this. Thus, they may think it is essential from the perspective of shareholders (old and new) to see some bill. Perhaps even requested by big boys behind the scene.

 

So Calabria said something like this in that interview "receivership as an incent for Congress to act". Which ties a bit to Otting's recent leakage as part of a spark. Interestingly, Crapo crap out his outline within weeks after that. So the "incentivizing" route could be part of the plan. Which means when Calabria's hearing comes, the word receivership may float around numerous times. And if I am right, while he may not defend shareholders he may follow the line of thinking he presented in that 2014 interview: no further damage.

 

If receivership comes up don't let that scare you out of your position. Calabria appears to be in a different page re shareholders and will not look to create artificial damage that is not there and is not justifiable by present circumstances. In comparison to Obama's holy crusade that was more than willing to rewrite physics laws. Calabria is not going to go medieval on us.

[Guest cherzeca]

well put rros

 

I think the Calabria hearing will be fascinating. I think he will receive "leading" questions from almost everyone on committee (shouldn't we do this? is this an option? is admin thinking about this?) and I expect him to be quite circumspect (even though he is usually quite voluble).

[Guest cherzeca]

mortgage rag:

 

By Paul Muolo

 

pmuolo@imfpubs.com

 

We understand that some very large institutional investors are salivating at the chance to buy newly issued Fannie Mae/Freddie Mac common, should the Treasury Department decide to exercise its option and sell its 79.9% stake in the two (very profitable) mortgage giants to the public. Who are these institutional investors? Just go down the list of the nation’s largest institutional investors that like triple-A credits…

 

Of course, Treasury hasn’t made that decision yet – and may never. But one thing is certain: the Trump White House is not monkeying around with GSE reform. Acting Chief of Staff Mick Mulvaney (remember that name) wants it done, as does Treasury Secretary Steven Mnuchin…

 

We continue to hear chatter in the market that Treasury is pondering hiring an advisor in the event of a stock sale. And who might that lucky firm be? One name that’s come up is Perella Weinberg Partners, which assisted the federal government when it decided to free Ally Financial from the shackles of Uncle Sam’s control. We’ve heard two other names as well…

 

In short: If you think a stock sale by Treasury won’t happen, think again. Investors in GSE common and junior preferred are talking it up big time. Then again, they stand to benefit greatly…

 

What might derail a stock sale? If Congress comes up with workable legislation…

 

The National Association of Realtors held its GSE policy summit on Thursday. Roughly 400 people attended...

[rros]

From Tim Howard:

 

“There are a lot of odd things about the NAR’s proposal, not the least of which is their decision to outsource it to a professor from the Wharton school and an individual who works for a securitization consulting firm (and who predictably advocates for a major role in the capital structure of credit risk transfer securities, right after I said in this post that no one was doing that anymore).

 

To me, this is just the NAR saying to its members and fellow trade groups, “Hey, we’ve got a plan for mortgage reform, too!” But because it involves changing Fannie and Freddie into “Systemically Important Mortgage Market Utilities” (or, SIMMU’s, the NAR’s signature “new idea”) and giving their securities explicit government guarantees, it will require legislation, which puts it in the same pile as the other legislative ideas that aren’t going anywhere in the next two years.

I could make more comments about the NAR plan, but I really don’t see the point of it. I’d only add that I think we’ll see a number of other reform proposals from other sources in the coming weeks and months, as opponents of administrative reform seek to create an impression that there is “serious work” going on in this area that could lead to a breakthrough at any moment, so the administration need not be in a hurry to do anything on its own, without Congress.”

lol the battle of the pencil pushers.

 

Re Muolo: should we believe him this time?

[Guest cherzeca]

does anyone know more about Parrott and jumpstart than what was mentioned on Maloni's blog?

[Midas79]

does anyone know more about Parrott and jumpstart than what was mentioned on Maloni's blog?

 

Not me, but if Trump is serious about getting FnF released then he can just veto any bill that has Jumpstart-like language in it. He can get administrative reform done before Congress gets a chance to override the veto, if they can even get enough consensus to do so.

[rros]

does anyone know more about Parrott and jumpstart than what was mentioned on Maloni's blog?

 

Not me, but if Trump is serious about getting FnF released then he can just veto any bill that has Jumpstart-like language in it. He can get administrative reform done before Congress gets a chance to override the veto, if they can even get enough consensus to do so.

And that's why Corker inserted it in the end of the year omnibus bill. Any chance they throw this into the omnibus education bill being considered now?

[Midas79]

does anyone know more about Parrott and jumpstart than what was mentioned on Maloni's blog?

 

Not me, but if Trump is serious about getting FnF released then he can just veto any bill that has Jumpstart-like language in it. He can get administrative reform done before Congress gets a chance to override the veto, if they can even get enough consensus to do so.

And that's why Corker inserted it in the end of the year omnibus bill. Any chance they throw this into the omnibus education bill being considered now?

 

I'd say the big difference now is that Obama wanted the Jumpstart language, or at least didn't mind it. He had no reason to veto the spending bill because of it.

 

Trump, on the other hand, both has different goals for the GSEs and is more willing to engage in brinksmanship. I don't think he would blink at sending the spending bill back to Congress, telling them to take out the Jumpstart language and otherwise leave it intact. I don't think there's enough will in Congress to defy Trump over something relatively minor like this.

 

Not to say that it can't happen, but the circumstances are different enough this time around that I don't see it as a threat. If I remember right, Corker tried this same tactic in 2017 and it didn't work. The fact that Corker himself is no longer around is another reason I don't expect Jumpstart language to pop up.

 

http://www.valueplays.net/2015/12/16/corker-slips-jump-start-act-in-omnibus-bill-its-irrelevant/

 

In addition, the language of the last Jumpstart bill allowed for trickery like changing the dividend rate on the seniors to 0.000001% and the liquidation preference to $1. It only stopped Treasury from getting rid of the shares themselves.

[Guest cherzeca]

the big difference to me is the absence of corker.  Parrott isn't going to "convince" a senator to insert the jumpstart language; some senator is going to really want to insert the language.  clearly corker had that chutzpah (maybe because he was short...the GSEs not just in height) but I don't know if there is that same level of interest with another senator.

 

remember, Mnuchin is on record saying that admin will move forward if congress doesn't.  jumpstart would be a slap in the face of the admin, saying we are not letting you have that option. the folks who would like to slap trump in the face are not necessarily the same people who would want jumpstart.

[rros]

When do you all feel we may reach an inflection point, the "point of no return"?

 

a) Official announcement by Tsy designating a banker to restructure the companies: announces exercise of warrants placing a cap on price.

 

b) We hear Parrot's head knocking the floor.

 

c) Emily posts on the board she/(he?) has sold all shares and we may no longer hear from her(him?).

[Guest cherzeca]

I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept.  that and the sound of Emily's digital head hitting the floor

[rros]

I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept.  that and the sound of Emily's digital head hitting the floor

All eyes on earnings, then.

[ValueMaven]

Thursday cant come soon enough!!

[DRValue]

I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept.  that and the sound of Emily's digital head hitting the floor

 

I'm expecting the language stays the same until after the plan had been announced. Co's can always release an 8k on the day.

[allnatural]

I share similar sentiments. Otting clearly wants to retain capital with his recent commentary on capital being the "most important thing" in order to operate the GSEs in a safe and sound manner. But I am not convinced it happens tomorrow. Matter of when not IF.

 

I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept.  that and the sound of Emily's digital head hitting the floor

 

I'm expecting the language stays the same until after the plan had been announced. Co's can always release an 8k on the day.

[DRValue]

I share similar sentiments. Otting clearly wants to retain capital with his recent commentary on capital being the "most important thing" in order to operate the GSEs in a safe and sound manner. But I am not convinced it happens tomorrow. Matter of when not IF.

 

I'll be interested to see if the Thursday 4Q GSE earnings release indicates if dividends are to be swept.  that and the sound of Emily's digital head hitting the floor

 

I'm expecting the language stays the same until after the plan had been announced. Co's can always release an 8k on the day.

 

Really surprised nothing has leaked though.

 

Also, no matter how hard I try I cant imagine the announcement happening. My brain refuses to believe its going to happen, even though we know it is.

[Guest cherzeca]

if a capital restoration plan is to be released by admin "soon", I don't know why they would sweep a dividend now...just makes the amount of capital to be restored incrementally higher...but you never know with the govt

[Midas79]

if a capital restoration plan is to be released by admin "soon", I don't know why they would sweep a dividend now...just makes the amount of capital to be restored incrementally higher...but you never know with the govt

 

DR is right about the 8-K quick fix. The actual dividend isn't scheduled to be paid until March 29, plenty of time to do another letter agreement or more. Though no change in the 10-K language would be quite disheartening.

[muscleman]

I bought back most of the FNMAS and FMCKJ shares I sold. Technical turning bullish again. But earnings come out tomorrow. Who knows.... I may get slapped in the face really quick.