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

[Guest cherzeca]

"no offense but that's a waste of time because the en banc already ruled 12-4 that it's the same situation as CFPB."

 

this is what you dont get.  before scotus ruled, 5thC was just doing its best somewhat in the dark without scotus guidance...did a great job as per Willett.  now that scotus has ruled, 5th C can rule in the reflected illumination of scotus guidance...and there is enough of a difference between the two agencies for the 5th C exercise to be meaningful (eg fhfa doesnt directly deal with "private parties", just a few institutions, while cfpb deals with consumers all the time)...though fhfa will lose.

 

"If the SC wants to differentiate between FHFA and CFPB, then they can take the collins constitutional appeal themselves on Thursday."  too much on scotus calendar.  let the 5th C do that work.  that's how appellate practice works. we will see if scotus says anything about the petition or just renders an order

 

Just to make sure I'm understanding things correctly:

 

If SCOTUS decides to take the GVR route for Collins, the Fifth Circuit would have to re-decide Collins using Selia as guidance. Until they do, Calabria can only be fired for cause. Since that decision could take a while, Calabria really could stay in office under Biden, maybe even long enough to get recap and release done, as long as he doesn't do anything stupid enough to get fired for cause.

 

Then all we really need is for Mnuchin to get UST's part out of the way before the end of January. Cancel/convert seniors, PSPA amendment (end the NWS, remove UST's ability to veto release, plus whatever else they need to do), exercise/cancel/sell back warrants, and settle/moot the cases.

 

I know you have said all this before, I just want to see if I am putting the pieces together correctly.

 

Three questions:

 

1) How long do you think it would take before the Fifth Circuit issues another decision?

2) Could Biden fire Calabria the day after that happens or would he have to wait until SCOTUS either denies cert or upholds the ruling?

3) Is anything missing from my list of what UST needs to do?

 

midas, you are sailing true.

 

until 5th C decides on a (what I expect to be a) scotus GVR (and any cert petition has been denied after 5th C briefing, oral arg and decision), Calabria is fireable with cause only.  a biden potus will of course fire at will if it wants to but Calabria can say up yours until a court decision with no further appeal.  squatters' rights.  how long after any GVR? 6 months? one year?  you have seen how these cases creep along calendars.  as to UST, the sticking point would be a settlement. that may take some time...a deal with fhfa wont take time.

[Midas79]

midas, you are sailing true.

 

until 5th C decides on a (what I expect to be a) scotus GVR (and any cert petition has been denied after 5th C briefing, oral arg and decision), Calabria is fireable with cause only.  a biden potus will of course fire at will if it wants to but Calabria can say up yours until a court decision with no further appeal.  squatters' rights.  how long after any GVR? 6 months? one year?  you have seen how these cases creep along calendars.  as to UST, the sticking point would be a settlement. that may take some time...a deal with fhfa wont take time.

 

Thanks for the confirmation and clarification.

 

If SCOTUS delays taking up Collins, i.e. neither denies nor grants cert and just pushes consideration into next year, that just extends Calabria's time in office under Biden, right? Is this likely at all?

[Guest cherzeca]

midas, you are sailing true.

 

until 5th C decides on a (what I expect to be a) scotus GVR (and any cert petition has been denied after 5th C briefing, oral arg and decision), Calabria is fireable with cause only.  a biden potus will of course fire at will if it wants to but Calabria can say up yours until a court decision with no further appeal.  squatters' rights.  how long after any GVR? 6 months? one year?  you have seen how these cases creep along calendars.  as to UST, the sticking point would be a settlement. that may take some time...a deal with fhfa wont take time.

 

Thanks for the confirmation and clarification.

 

If SCOTUS delays taking up Collins, i.e. neither denies nor grants cert and just pushes consideration into next year, that just extends Calabria's time in office under Biden, right? Is this likely at all?

 

not likely imo.  but calabria doesnt have to have to really have to go unless he wants to or unless a court order says he must....he can string it out and become very unpopular with some folks

[investorG]

July 2 will be Cherzeca day on COBF if they pull a GVR on Collins constitutional with a focus on remedy while declining the APA.

 

However we'll most likely receive an APA cert acceptance instead as an 8 year saga of injustice continues.

 

 

[Guest cherzeca]

read pps. 11-12 of Ps collins reply in. connection with cert petition. https://www.supremecourt.gov/DocketPDF/19/19-422/122234/20191113112833296_19-422%20Reply%20Brief.pdf

 

"If the Court determines in Seila Law that the CFPB Direc- tor’s for-cause removal protection is unconstitutional and can be severed from the rest of the statute, it may go on to explain that this “remedy” is not meant to foreclose backward-looking relief for litigants who bring successful separation of powers suits based on violations of the President’s removal authority. Such a ruling would provide a compelling reason to send this case back to the Fifth Circuit for further consid- eration."

 

that clear language that severance doesnt foreclose backward relief is not in Seila, but I believe it is implicit.  and I believe a GVR would serve the purpose...though scotus doesnt usually explain its remand decisions so explicitly

[Guest cherzeca]

fwiw:  https://seekingalpha.com/article/4356651-interview-christian-herzeca-rule-of-law-guy-fannie-and-freddie?utm_medium=email&utm_source=seeking_alpha&mail_subject=fnma-fmcc-interview-with-christian-herzeca-the-rule-of-law-guy-about-fannie-and-freddie&utm_campaign=rta-stock-article&utm_content=link-0

 

[Luke 532]

fwiw:  https://seekingalpha.com/article/4356651-interview-christian-herzeca-rule-of-law-guy-fannie-and-freddie?utm_medium=email&utm_source=seeking_alpha&mail_subject=fnma-fmcc-interview-with-christian-herzeca-the-rule-of-law-guy-about-fannie-and-freddie&utm_campaign=rta-stock-article&utm_content=link-0

 

Excellent!

[SnarkyPuppy]

When is the legal update released today?

[SnarkyPuppy]

When is the legal update released today?

 

Looks like it was released w/ nothing on our cases - https://www.supremecourt.gov/orders/courtorders/070220zor_apl1.pdf

[Guest cherzeca]

Would that mean 'not denied' and no gvr and something else?

 

When is the legal update released today?

 

Looks like it was released w/ nothing on our cases - https://www.supremecourt.gov/orders/courtorders/070220zor_apl1.pdf

 

it means they did nothing.  when nothing works, Emily, do nothing.  sound advice.

[investorG]

Last year, the final opinion came on June 27.

 

Then, on Friday June 28 there was a 'miscellaneous order' that had a ton of grants and declines -- what scotusblog has called a cleanup order list.

 

After that, they went dormant for the summer break.

 

So maybe we have to wait for the final opinion to come out and then look for a clean up order list.  Or another day where there's a pre-announced order list incoming.

[Guest cherzeca]

Last year, the final opinion came on June 27.

 

Then, on Friday June 28 there was a 'miscellaneous order' that had a ton of grants and declines -- what scotusblog has called a cleanup order list.

 

After that, they went dormant for the summer break.

 

So maybe we have to wait for the final opinion to come out and then look for a clean up order list.  Or another day where there's a pre-announced order list incoming.

 

there will generally always be a final clean up order.  what I dont know is how many more conferences and order days they will have.  the scotus schedule calendar is blank

[Midas79]

Hannah Lang wrote an interesting article with some things I hadn't thought of.

https://www.americanbanker.com/news/fhfa-leadership-structure-on-shaky-ground-after-cfpb-ruling

 

Some even noted that a Biden administration could choose to rely on the Seila ruling to change the FHFA's leadership instead of waiting for a separate decision on the agency's structure.

 

...

 

Even if Calabria and the FHFA maintain that the Seila Law ruling does not affect the agency, he would be left with little choice if the president were to move to replace him, said Naimon.

 

“Calabria could try to resist being replaced by taking the position that he can only be fired for cause, but I think that is unlikely,” he said. “The Department of Justice would point to the Seila Law decision, but more importantly, any additional progress on his agenda would be impossible. Who would ever commit capital in that context? It has the effect of freezing everybody in place.”

 

Let's say SCOTUS goes the GVR route on Collins and Biden is elected, but when he takes office the Fifth Circuit hasn't ruled yet. What would the ramifications be if Biden just tells Calabria "you're fired"?

 

If Calabria just extends the middle finger and says "you can't do that", wouldn't recap and release be in trouble anyway because investors would have no idea what to expect from FHFA going forward? Presumably all this would happen before any re-IPO.

[orthopa]

Hannah Lang wrote an interesting article with some things I hadn't thought of.

https://www.americanbanker.com/news/fhfa-leadership-structure-on-shaky-ground-after-cfpb-ruling

 

Some even noted that a Biden administration could choose to rely on the Seila ruling to change the FHFA's leadership instead of waiting for a separate decision on the agency's structure.

 

...

 

Even if Calabria and the FHFA maintain that the Seila Law ruling does not affect the agency, he would be left with little choice if the president were to move to replace him, said Naimon.

 

“Calabria could try to resist being replaced by taking the position that he can only be fired for cause, but I think that is unlikely,” he said. “The Department of Justice would point to the Seila Law decision, but more importantly, any additional progress on his agenda would be impossible. Who would ever commit capital in that context? It has the effect of freezing everybody in place.”

 

Let's say SCOTUS goes the GVR route on Collins and Biden is elected, but when he takes office the Fifth Circuit hasn't ruled yet. What would the ramifications be if Biden just tells Calabria "you're fired"?

 

If Calabria just extends the middle finger and says "you can't do that", wouldn't recap and release be in trouble anyway because investors would have no idea what to expect from FHFA going forward? Presumably all this would happen before any re-IPO.

 

Doesnt the consent agreement take care of all of this? If Treasury is out of the picture and conservator enters into a consent agreement with FnF how can a new FHFA head alter the agreement and not follow the law as Calabria has said? That sound like a situation for more lawsuits.

[Guest cherzeca]

I don t have access to am banker but if any deal settling the senior prefs and exiting into consent decree involves the GSEs and cant be amended or terminated without all parties consent then you can imagine a flight path that cant be changed

[orthopa]

I don t have access to am banker but if any deal settling the senior prefs and exiting into consent decree involves the GSEs and cant be amended or terminated without all parties consent then you can imagine a flight path that cant be changed

 

At that point since all parties would have to agree the GSEs largest or majority shareholders would have say since the GSEs would be out of conservatorship correct?

[Guest cherzeca]

I don t have access to am banker but if any deal settling the senior prefs and exiting into consent decree involves the GSEs and cant be amended or terminated without all parties consent then you can imagine a flight path that cant be changed

 

At that point since all parties would have to agree the GSEs largest or majority shareholders would have say since the GSEs would be out of conservatorship correct?

 

right.  you have to believe the GSEs would like to get right for once and all

[Midas79]

Someone in the Twitter chat asked what we thought the chances were of SCOTUS just straight up overturning the NWS rather than just denying cert on the APA claims or upholding the Fifth's decision to remand that claim. Here is a repost of my response:

 

Until recently i would have said 1% also, if not less.

Now i'm no legal expert, but there is a distinct circuit split over the APA claims against the NWS, as to whether it was ultra vires or not. the Fifth said it was, all others said it wasn't. I don't think remand solves that.

 

So i'm gonna go with 5% that SCOTUS actually overturns the NWS because there has already been a split.

 

I thought for a while that SCOTUS would just not touch it, let the Fifth's decision to remand the APA claims back down to Atlas stand, and wait for that decision to come back up the pipeline before deciding (this is my base case, 95% chance).

 

But the Fifth's wording leaves no wiggle room for Atlas to deny the APA claims, so SCOTUS might not think it worth waiting for something they know is coming.

 

Is this line of thinking valid or have I made a mistake somewhere?

 

I suppose I haven't accounted for the possibility that SCOTUS overturns the Fifth majority's APA claim decision, which would solve the circuit split in the other direction (a final ruling that the NWS is not ultra vires). That's a chilling possibility.

[DRValue]

Is it easier for SCOTUS to do nothing this term and see if a settlement takes place?

[Guest cherzeca]

@midas

 

my 2 cents...the const claim will be GVRed back to 5th C, with typical language saying redo case in light of Seila.  leaving up to 5th C to i) determine whether fhfa=cfpb, and ii) provide backward relief (unless it can distinguish NWS from CID...courts do the damnedest things).

 

I dont know about APA claim...I expect it will remain in suspension at scotus until const claim is sorted out since Ps seek same relief from both.

[investorG]

Is it easier for SCOTUS to do nothing this term and see if a settlement takes place?

 

Possible but unlikely.  The collins case appeared on the conference distribution list for a 3rd time today.  I'll stick with a prediction of Yes on the ACA (split circuits and cleanest approach) and No on the constitutional (to avoid dangling calabria's status for a year plus). 

 

Good luck everyone.

[Guest cherzeca]

Is it easier for SCOTUS to do nothing this term and see if a settlement takes place?

 

Possible but unlikely.  The collins case appeared on the conference distribution list for a 3rd time today.  I'll stick with a prediction of Yes on the ACA (split circuits and cleanest approach) and No on the constitutional (to avoid dangling calabria's status for a year plus). 

 

Good luck everyone.

 

GVR on const; no action on APA.  what you betting IG?

[SnarkyPuppy]

Cert granted

[DRValue]

So we buy the inevitable dips right?

[investorG]

Is it easier for SCOTUS to do nothing this term and see if a settlement takes place?

 

Possible but unlikely.  The collins case appeared on the conference distribution list for a 3rd time today.  I'll stick with a prediction of Yes on the ACA (split circuits and cleanest approach) and No on the constitutional (to avoid dangling calabria's status for a year plus). 

 

Good luck everyone.

 

GVR on const; no action on APA.  what you betting IG?

 

Is this case even settle-able?  I could see the APA side settling if they had denied on the constitutional side but now that they have granted on both does it have to go thru to verdict next june so that the SC can rule on if the head of the FHFA is fire-able at will?  or could they settle the APA claim and still go thru with the constitutional side?