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

[Guest cherzeca]

Luke, I appreciate your close analysis but I would point out he never uses the term "internal".  he just didn't use external Tuesday.  you have to expect this ambiguity from calabria since, although he is clearly very smart and working hard, he has never done anything like a capital raise before.  so a little bit of flying by the seat of his pants

[Luke 532]

Luke, I appreciate your close analysis but I would point out he never uses the term "internal".  he just didn't use external Tuesday.  you have to expect this ambiguity from calabria since, although he is clearly very smart and working hard, he has never done anything like a capital raise before.  so a little bit of flying by the seat of his pants

 

I know he didn't say "internal" and I was trying to be careful in my post to make that point, and that is merely what I think he was referencing. Perhaps I'm reading into his comments too much, but I still find his talks this week encouraging.

[hardincap]

its pretty clear to me f&f are going to be building capital via earnings and then do a secondary offering. they may do a private placement in addition/prior to SPO but that is up to the companies, not calabria.

 

on the face of it, his statements were positive--specifically that shareholders aren't going to be wiped out, 4th amendment is WIP, and there are legal hurdles that is WIP by treasury.

 

BUT if there is an admin change, they might as well throw whatever plan they have out the window. maybe there is urgency behind closed doors because of this, maybe not, but i think markets are right in pricing this in.

[Guest cherzeca]

my take on the pace of developments is that the administration wants to appear thoughtful and deliberate.  be able to defend process in front of congress.  while I found that C/M did not respond that substantively to the D senators questions, their written response seemed dripping for respect for the role congress can play in the process, to the extent it wants to do something...and that includes oversight.  so this moving of the goalposts to 2021 for external capital raise seems consistent with this approach, extend the period for earnings retention, obtain additional time to get ducks in a row for external capital raise and, oh btw, give courts additional time to clarify things for everyone.  what is left unsaid is that if the administration wants to if trump loses, enough can be done to cement the process in place by end of year (even if no external capital raise by then)

[investorG]

my take on the pace of developments is that the administration wants to appear thoughtful and deliberate.  be able to defend process in front of congress.  while I found that C/M did not respond that substantively to the D senators questions, their written response seemed dripping for respect for the role congress can play in the process, to the extent it wants to do something...and that includes oversight.  so this moving of the goalposts to 2021 for external capital raise seems consistent with this approach, extend the period for earnings retention, obtain additional time to get ducks in a row for external capital raise and, oh btw, give courts additional time to clarify things for everyone.  what is left unsaid is that if the administration wants to if trump loses, enough can be done to cement the process in place by end of year (even if no external capital raise by then)

 

your last sentence is key and to date I haven't heard a conclusive rationale as to why any potential consent order executed during the lame duck is permanent when a new FHFA head takes over in 2021 (if Dem wins).  I wonder if a moderate bank friendly Dem president would keep Calabria.  Doubtful Bernie would.

[muscleman]

my take on the pace of developments is that the administration wants to appear thoughtful and deliberate.  be able to defend process in front of congress.  while I found that C/M did not respond that substantively to the D senators questions, their written response seemed dripping for respect for the role congress can play in the process, to the extent it wants to do something...and that includes oversight.  so this moving of the goalposts to 2021 for external capital raise seems consistent with this approach, extend the period for earnings retention, obtain additional time to get ducks in a row for external capital raise and, oh btw, give courts additional time to clarify things for everyone.  what is left unsaid is that if the administration wants to if trump loses, enough can be done to cement the process in place by end of year (even if no external capital raise by then)

 

your last sentence is key and to date I haven't heard a conclusive rationale as to why any potential consent order executed during the lame duck is permanent when a new FHFA head takes over in 2021 (if Dem wins).  I wonder if a moderate bank friendly Dem president would keep Calabria.  Doubtful Bernie would.

 

 

Watch out for Coronavirus. If we get a wide spread infection, it may cause Trump to lose the re-election.

[allnatural]

Whether or not consent decree is allowed to be rolled back by new FHFA director, a PSPA amendment / settlement that wipes out the snr pfds liq balance is not. At that point Jr pfds will sit atop of the cap structure with close to $40b of built of capital (total jr pfd principal is ~$33b).

 

my take on the pace of developments is that the administration wants to appear thoughtful and deliberate.  be able to defend process in front of congress.  while I found that C/M did not respond that substantively to the D senators questions, their written response seemed dripping for respect for the role congress can play in the process, to the extent it wants to do something...and that includes oversight.  so this moving of the goalposts to 2021 for external capital raise seems consistent with this approach, extend the period for earnings retention, obtain additional time to get ducks in a row for external capital raise and, oh btw, give courts additional time to clarify things for everyone.  what is left unsaid is that if the administration wants to if trump loses, enough can be done to cement the process in place by end of year (even if no external capital raise by then)

 

your last sentence is key and to date I haven't heard a conclusive rationale as to why any potential consent order executed during the lame duck is permanent when a new FHFA head takes over in 2021 (if Dem wins).  I wonder if a moderate bank friendly Dem president would keep Calabria.  Doubtful Bernie would.

[investorG]

Whether or not consent decree is allowed to be rolled back by new FHFA director, a PSPA amendment / settlement that wipes out the snr pfds liq balance is not. At that point Jr pfds will sit atop of the cap structure with close to $40b of built of capital (total jr pfd principal is ~$33b).

 

my take on the pace of developments is that the administration wants to appear thoughtful and deliberate.  be able to defend process in front of congress.  while I found that C/M did not respond that substantively to the D senators questions, their written response seemed dripping for respect for the role congress can play in the process, to the extent it wants to do something...and that includes oversight.  so this moving of the goalposts to 2021 for external capital raise seems consistent with this approach, extend the period for earnings retention, obtain additional time to get ducks in a row for external capital raise and, oh btw, give courts additional time to clarify things for everyone.  what is left unsaid is that if the administration wants to if trump loses, enough can be done to cement the process in place by end of year (even if no external capital raise by then)

 

your last sentence is key and to date I haven't heard a conclusive rationale as to why any potential consent order executed during the lame duck is permanent when a new FHFA head takes over in 2021 (if Dem wins).  I wonder if a moderate bank friendly Dem president would keep Calabria.  Doubtful Bernie would.

 

Ok.  But if new FHFA head halted progress towards release from conservatorship and they stayed as wards of the state for many years with no dividends, thats not good.  Or ran them through receivership because they deemed 40bn was still under-capitalized given a weakening economy.  IMO by waiting the admin has put the process under unnecessary risk.  The share prices reflect that.

[investorG]

rule of law guy's latest:  https://seekingalpha.com/article/4324008-for-fannie-and-freddie-shareholders-road-to-litigation-settlement-runs-through-seila

 

If they do as you suggest, grant backward looking instead of forward looking relief, what's to stop every party going forward who gets targeted by cfpb/fhfa to make a timely legal claim against the agency?    would ruling as you suggest effectively strip the agency of all powers going forward? thank you.

[allnatural]

If you care to learn more, the answer to your question can be found in both of these well written amicus curiae:

 

1) https://www.supremecourt.gov/DocketPDF/19/19-7/125744/20191216173550908_SeilaLaw.CenterRuleLawAmicusBrief.SupremeCourt.pdf

 

2) https://www.supremecourt.gov/DocketPDF/19/19-7/125587/20191216122131520_19-7%20Amicus%20Brief%20of%20Patrick%20J.%20Collins%20et%20al..pdf

 

rule of law guy's latest:  https://seekingalpha.com/article/4324008-for-fannie-and-freddie-shareholders-road-to-litigation-settlement-runs-through-seila

 

If they do as you suggest, grant backward looking instead of forward looking relief, what's to stop every party going forward who gets targeted by cfpb/fhfa to make a timely legal claim against the agency?    would ruling as you suggest effectively strip the agency of all powers going forward? thank you.

[Guest cherzeca]

" IMO by waiting the admin has put the process under unnecessary risk.  The share prices reflect that."  this is true.  this may be as fast as this administration can move.  on the flip side, by waiting, the court cases proceed.  the collins APA claim as well as backward relief can be pursued, both of which kill the NWS. so there is a benefit to waiting too, since no new administration can tell scotus how to decide these cases.

[Midas79]

rule of law guy's latest:  https://seekingalpha.com/article/4324008-for-fannie-and-freddie-shareholders-road-to-litigation-settlement-runs-through-seila

 

If they do as you suggest, grant backward looking instead of forward looking relief, what's to stop every party going forward who gets targeted by cfpb/fhfa to make a timely legal claim against the agency?    would ruling as you suggest effectively strip the agency of all powers going forward? thank you.

 

My understanding (though someone please correct me if I'm wrong) is that once one plaintiff has received a remedy for a particular constitutional violation, no future plaintiff can receive a different remedy for the same violation, kind of like double jeopardy.

[orthopa]

https://www.bloomberg.com/news/articles/2020-03-02/fannie-mae-and-freddie-mac-s-fate-is-in-the-hands-of-one-man. Couple more clues released but looks like Capital Rule maybe later then 1st quarter. Ho hum.

[Jcmeg35]

https://www.bloomberg.com/news/articles/2020-03-02/fannie-mae-and-freddie-mac-s-fate-is-in-the-hands-of-one-man. Couple more clues released but looks like Capital Rule maybe later then 1st quarter. Ho hum.

 

Given how he has consistently missed his own timelines, I don't doubt it will be later. I will note that the piece says:

"in an interview during a visit to the National Association of Home Builders annual trade show in January".

 

So clearly his mos recent comments are more timely. Hopefully, it happens within the next month, if not the next two, but I won't hold my breath...

[undervalued]

anyone have any idea why gselinks stop making updates?

[investorG]

" IMO by waiting the admin has put the process under unnecessary risk.  The share prices reflect that."  this is true.  this may be as fast as this administration can move.  on the flip side, by waiting, the court cases proceed.  the collins APA claim as well as backward relief can be pursued, both of which kill the NWS. so there is a benefit to waiting too, since no new administration can tell scotus how to decide these cases.

 

ok.  today's the day.

 

if the SC follows the WSJ recommendation and dismantles the whole CFPB (FHFA?) agency, what logistically would that mean for our situation?

 

on the other end of the spectrum, would it be net beneficial for us if they deemed agency constitutional as is?  Lose the Collins constitutional argument but less theoretical political risk from a presidential transition regarding calabria?

 

I think some suggested to pass on this case and go to Collins, I could see that playing out in addition to the other 2 base case alternatives of unconstitutional with prospective or backward looking relief.

[Guest cherzeca]

I expect the transcript for the seila oral argument to breast posted here: https://www.supremecourt.gov/oral_arguments/argument_transcript/2019

sometime Wednesday

[Luke 532]

I expect the transcript for the seila oral argument to breast posted here: https://www.supremecourt.gov/oral_arguments/argument_transcript/2019

sometime Wednesday

 

Thanks for posting.

 

CNBC's take, FWIW: https://www.cnbc.com/2020/03/03/supreme-court-looks-to-weaken-consumer-financial-protection-bureau.html

[investorG]

I expect the transcript for the seila oral argument to breast posted here: https://www.supremecourt.gov/oral_arguments/argument_transcript/2019

sometime Wednesday

 

Thanks for posting.

 

CNBC's take, FWIW: https://www.cnbc.com/2020/03/03/supreme-court-looks-to-weaken-consumer-financial-protection-bureau.html

 

thanks. 

 

if Roberts sympathizes with liberals regarding cfpb but doesn't like the solution kavanaugh advocates, should we root for a punt (and take up collins) or deeming cfpb/fhfa constitutional (lose our case but calabria theoretically more entrenched)?

[Midas79]

I expect the transcript for the seila oral argument to breast posted here: https://www.supremecourt.gov/oral_arguments/argument_transcript/2019

sometime Wednesday

 

Thanks for posting.

 

CNBC's take, FWIW: https://www.cnbc.com/2020/03/03/supreme-court-looks-to-weaken-consumer-financial-protection-bureau.html

 

thanks. 

 

if Roberts sympathizes with liberals regarding cfpb but doesn't like the solution kavanaugh advocates, should we root for a punt (and take up collins) or deeming cfpb/fhfa constitutional (lose our case but calabria theoretically more entrenched)?

 

I was about to start pontificating on how Calabria can't really do much towards recap and release if the Treasury Secretary is hostile to the process, which is what I have thought for a long time, but now I am not so sure. Assuming that Trump is voted out, if Mnuchin can get Treasury's part done before Trump leaves office (cancel seniors, exercise warrants, agree to release FnF or amend the PSPA to remove Treasury's release veto power) then Calabria could conceivably do the rest himself (the actual recap and release part).

 

If that is the case, we really should be rooting for the CFPB's leadership structure to be ruled constitutional after all, giving Calabria some tenure protection. Of course, a new president could just fire him anyway and deal with the consequences later. For a while I thought Trump would do that with Watt.

 

It would be ironic if the Collins case ends up being what scuttles recap and release rather than being what allows it, if it gives a new president the ability to fire Calabria immediately. That's somewhat of a parlay, but a plausible one imo.

[Luke 532]

Will the Seila Law case mean no more CFPB? Our expert says no. Check back later at http://respanews.com  for our reaction piece.

[Guest cherzeca]

arguably the best result, as I think about it, is to have cfpb single director for cause removal declared unconstitutional, provide backward relief to P (invalidating CID issued to Seila)(this is where the 5th C en banc screwed up, not granting backward relief to collins), and then severing the removal provision going forward so that there is no ambiguity whether the cfpb can continue in existence with enforceable orders (this would, by read through, enable calabria to continue doing his work).  if this is the result (I say this because the report indicated kavanaugh is warm to severance, which he was as well in PHH) then a VGR for collins "should" be in order

[Guest cherzeca]

seila transcript:  https://www.supremecourt.gov/oral_arguments/argument_transcripts/2019/19-7_j4ek.pdf

[investorG]

seila transcript:  https://www.supremecourt.gov/oral_arguments/argument_transcripts/2019/19-7_j4ek.pdf

 

imo low odds of a) FHFA is constitutionally structured b) punt c) invalidate the whole law

 

what they should do (objectively speaking):  Rule of Law's analysis:  unconstitutional and backward relief for those who timely requested it.

 

what they will likely do:  the Kavanaugh and 5th circuit's solution of unconstitutional + change to removable by president at will.

[Luke 532]

We'll have more on the ruling today in #CFPB v. All American Check Cashing but count us among the shocked who didn't expect an appellate court to rule on the constitutionality of the bureau the day after the Supreme Court heard arguments on the issue.

 

In Collins, the majority noted that the FSOC had some measure of oversight of the #CFPB in a way the FHFA did not have. Judge Smith didn't buy it: "Undeterred, the majority stubbornly asserts that the FSOC’s presence somehow makes the CFPB accountable. Not so."

 

Dodd Frank Update

@DoddFrankUpdate

Judge Smith: "The #CFPB and FHFA  are sister institutions. Only a judge who plays 'semantic games of reformulation and hair splitting in order to escape the force of a fairly resolved issue' can conclude ... that the agencies are sufficiently different."

 

Final note: Fifth Circuit becomes third appellate court to affirm #CFPB constitutionality (9th, D.C.) Federal courts in Mississippi, Montana, California, Minnesota, Pennsylvania and Indiana have ruled similarly. Only the NY and D.C. districts (vacated) ruled it unconstitutional.