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

[Jcmeg35]

Hopefully, this is completely unrelated to the prospects of a PSPA over the next few weeks:

 

https://www.housingwire.com/articles/david-brickman-to-step-down-from-freddie-mac/

[allnatural]

Bold assumption by Tim Howard:

 

jtimothyhoward

NOVEMBER 13, 2020 AT 10:59 AM

I saw that, and, given the timing–a November 9 resignation date–viewed it as the first tangible external sign of a possible negotiated deal to end the lawsuits being pushed though before the December 9th oral argument at SCOTUS. While I certainly could be wrong, one interpretation of the resignation is that Brickman did not agree with one or more of the key terms of the proposed settlement, and his board did not back him up, so he resigned. If that is correct, it also would imply that Fannie’s board and management DO agree with, or at least are willing to accept, the proposed terms of settlement, and that it will go forward. But there could be other reasons for the Brickman resignation as well. Perhaps we’ll learn more soon.

 

Hopefully, this is completely unrelated to the prospects of a PSPA over the next few weeks:

 

https://www.housingwire.com/articles/david-brickman-to-step-down-from-freddie-mac/

[COBFInfinity]

Bold assumption by Tim Howard:

 

jtimothyhoward

NOVEMBER 13, 2020 AT 10:59 AM

I saw that, and, given the timing–a November 9 resignation date–viewed it as the first tangible external sign of a possible negotiated deal to end the lawsuits being pushed though before the December 9th oral argument at SCOTUS. While I certainly could be wrong, one interpretation of the resignation is that Brickman did not agree with one or more of the key terms of the proposed settlement, and his board did not back him up, so he resigned. If that is correct, it also would imply that Fannie’s board and management DO agree with, or at least are willing to accept, the proposed terms of settlement, and that it will go forward. But there could be other reasons for the Brickman resignation as well. Perhaps we’ll learn more soon.

 

Yeah, he is reading a lot into it considering that no reason for the resignation was given.

[Jcmeg35]

I agree that the scenario TBH seems a little far fetched. However, with a lack of explanation for the resignation, and given the timing, it seems hard to think it somehow is not related to either the finalized capital rule or PSPA (or lack of an expected PSPA).

 

Bold assumption by Tim Howard:

 

jtimothyhoward

NOVEMBER 13, 2020 AT 10:59 AM

I saw that, and, given the timing–a November 9 resignation date–viewed it as the first tangible external sign of a possible negotiated deal to end the lawsuits being pushed though before the December 9th oral argument at SCOTUS. While I certainly could be wrong, one interpretation of the resignation is that Brickman did not agree with one or more of the key terms of the proposed settlement, and his board did not back him up, so he resigned. If that is correct, it also would imply that Fannie’s board and management DO agree with, or at least are willing to accept, the proposed terms of settlement, and that it will go forward. But there could be other reasons for the Brickman resignation as well. Perhaps we’ll learn more soon.

 

Yeah, he is reading a lot into it considering that no reason for the resignation was given.

[TwoCitiesCapital]

https://www.wsj.com/articles/freddie-mac-ceo-quits-as-prospects-dim-for-exit-from-government-control-11605292952

 

WSJ's view is he's leaving due to LACK of forward looking progress, not that progress is being made in settlement discussions :/

 

All speculation, but doesn't sit well with me.

[COBFInfinity]

https://www.wsj.com/articles/freddie-mac-ceo-quits-as-prospects-dim-for-exit-from-government-control-11605292952

 

WSJ's view is he's leaving due to LACK of forward looking progress, not that progress is being made in settlement discussions :/

 

All speculation, but doesn't sit well with me.

 

Gasparino saying the same thing. The curious thing is that there was below average volume and no real price action based on the resignation news today. So smarter money than me appears to have been unaffected by this. But as I said yesterday, the smart money already has the preferreds at 27% of par, so they already weren't believers in an imminent recap.

[WB_fan82]

Isn't the simplest answer on Brickman that Calabria is molding these companies in his own image and he wants him gone?

 

Read the Propublica piece on the loans from Freddie to Kushner.  It stinks to high heavens:  how it happened, the terms, and the subsequent performance.  Calabria criticized the corporate cultures... that loan should have been investigated.  And I bet it probably was, under MC's direction.  So now a head will roll.  But it's not material to shareholders, so no need to disclose it.

 

In fact, earlier in 2020, MC mentioned supervisory actions that need to be cleaned up and they aren't made public.  This seems like an obvious one.  Don't make incredibly generous loans at far better than normal rates for the economic benefit of the President's son - in - law and daughter...  Doesn't seem so hard.  And MC seems like an idealistic sort of guy that would despise this sort of thing.

 

I don't know if it's a positive, but it's not as negative as I first assumed.

 

 

[orthopa]

Isn't the simplest answer on Brickman that Calabria is molding these companies in his own image and he wants him gone?

 

Read the Propublica piece on the loans from Freddie to Kushner.  It stinks to high heavens:  how it happened, the terms, and the subsequent performance.  Calabria criticized the corporate cultures... that loan should have been investigated.  And I bet it probably was, under MC's direction.  So now a head will roll.  But it's not material to shareholders, so no need to disclose it.

 

In fact, earlier in 2020, MC mentioned supervisory actions that need to be cleaned up and they aren't made public.  This seems like an obvious one.  Don't make incredibly generous loans at far better than normal rates for the economic benefit of the President's son - in - law and daughter...  Doesn't seem so hard.  And MC seems like an idealistic sort of guy that would despise this sort of thing.

 

I don't know if it's a positive, but it's not as negative as I first assumed.

 

I agree on the corporate culture angle. Most of us were taken a back and didn't really understand what Calabria meant during the most recent Senate hearing. I think we know now. There has been alot of shuffling at the top of these companies over the last 2 weeks. Sheila Bair at Fannie, David Brickman gone as well as many EVP https://www.businessinsider.com/fannie-mae-single-family-business-leadership-mortgage-conservatorship-capital-markets-2020-11.

 

If it was purely due to capital plan or PSPA I would expect the Fannie CEO to be gone too if the future was absolutely bleak. The good thing is we have a comparison with these 2 companies. There certainly seems to be a clearing out of some of those in charge, many have been with the companies for a long time. Tim Howards angle is interesting but not too sure I agree with it. If thats the case great but I think the corporate culture angle makes more sense.

 

David Metzner from ACG said he left amicably for whatever that is worth.

[Guest cherzeca]

the most sensible explanation is that Brickman saw the final of the cap rule and saw that he was going to be paid well below what he thinks he is worth for far longer than he wanted.  one consequence of the GSEs getting recapped is that the GSEs will become more important in the marketplace, more financial firms will want to make nice...which is good for landing a job if you are the ex ceo of a GSE.

 

gasppo and Ackerman are pure hacks. write things with no investigation, little backup, crap sources.

[WB_fan82]

I think you have a good point about the money.  There is a gold rush in mortgage finance right now across originators, brokers, the whole industry.  Brickman could be making a lot more money than his current paycheck.  He could get involved w/ a finance SPAC.  There must be a dozen more lucrative options.

 

Which leads to the facts... do the pay limitations fall off upon a c-ship exit?  Or are they legislatively set in stone forever?

 

As an aside, WSJ is a marquis paper of the highest journalist standards.  Disagree w/ any idea that their reporting isn't well sourced.

 

 

[WB_fan82]

https://www.washingtonpost.com/business/2019/04/22/how-fannie-mae-freddie-mac-dodged-cap-ceo-pay/

 

"At about the same time, Freddie Mac’s longtime chief executive, Donald Layton, announced he would be stepping down this summer. Freddie also created a new position, promoting the head one of its largest business units, David Brickman, to the president’s job, earning $3.25 million. But unlike its sister housing company, Freddie Mac says that when Brickman becomes chief executive in July, his pay will fall to $600,000 and the president’s job will disappear."

 

...

 

"Still, the inspector general’s office has challenged the arrangement. Freddie Mac now spends $3.85 million to pay two people for work that used to be done by one person for $600,000, according to the report. Both companies are involved in “financial engineering” meant to allow them to “circumvent” the salary cap put in place by Congress, the report said."

 

 

The bill on GSE CEO comp limits:

 

https://www.congress.gov/bill/114th-congress/house-bill/2243/text?q=%7B%22search%22%3A%5B%222243%22%5D%7D&resultIndex=1

 

My read is that this $600k is set in stone for all time until Congress changes it.  It doesn't seem to me like the CEOs would be eligible for stock-based comp on any IPO, either, but I could be wrong about that.

[Guest cherzeca]

I think you have a good point about the money.  There is a gold rush in mortgage finance right now across originators, brokers, the whole industry.  Brickman could be making a lot more money than his current paycheck.  He could get involved w/ a finance SPAC.  There must be a dozen more lucrative options.

 

Which leads to the facts... do the pay limitations fall off upon a c-ship exit?  Or are they legislatively set in stone forever?

 

As an aside, WSJ is a marquis paper of the highest journalist standards.  Disagree w/ any idea that their reporting isn't well sourced.

 

Ackerman is a hack, as was Joe Light before him

[orthopa]

https://www.washingtonpost.com/business/2019/04/22/how-fannie-mae-freddie-mac-dodged-cap-ceo-pay/

 

"At about the same time, Freddie Mac’s longtime chief executive, Donald Layton, announced he would be stepping down this summer. Freddie also created a new position, promoting the head one of its largest business units, David Brickman, to the president’s job, earning $3.25 million. But unlike its sister housing company, Freddie Mac says that when Brickman becomes chief executive in July, his pay will fall to $600,000 and the president’s job will disappear."

 

...

 

"Still, the inspector general’s office has challenged the arrangement. Freddie Mac now spends $3.85 million to pay two people for work that used to be done by one person for $600,000, according to the report. Both companies are involved in “financial engineering” meant to allow them to “circumvent” the salary cap put in place by Congress, the report said."

 

 

The bill on GSE CEO comp limits:

 

https://www.congress.gov/bill/114th-congress/house-bill/2243/text?q=%7B%22search%22%3A%5B%222243%22%5D%7D&resultIndex=1

 

My read is that this $600k is set in stone for all time until Congress changes it.  It doesn't seem to me like the CEOs would be eligible for stock-based comp on any IPO, either, but I could be wrong about that.

 

If I was a CEO Ill admit I wouldnt stick around to take pay 90% below what I could get elsewhere. Maybe at the end of my career but taking this position, now truly is an act of public service.

[WB_fan82]

Hugh Frater at FNMA is 64 and as a founding partner of Black Rock and with a long career in the private sector, is probably financially set.

 

Brickman, on the other hand, is a Freddie lifer and only 54.  He's in his prime earning years.

 

Perhaps FHFA asked for commitments from both executives and it just didn't make sense for Brickman to hold it as a public service.

[COBFInfinity]

As an aside, WSJ is a marquis paper of the highest journalist standards.  Disagree w/ any idea that their reporting isn't well sourced.

 

They may have sources, but they interpret everything in the most anti-GSE way they can.

[typicalvalue]

Don't be caught off guard by the finalized capital rule this week (I would guess Friday after market close).  And then, more importantly, about two weeks after finalized capital rule the amendment to the PSPA. Just a hunch.  ;)

 

Update: source is telling me capital rule might get pushed to next week.  No update on timing of PSPA.

 

Hope this week Capital rule is finally out. Crucial 3/4 ahead will tell us where this saga is heading. GLTA

[WB_fan82]

Fannie Mae just said on their earnings call late 2020 or early 2021.

 

I'd be shocked to see it in November, given that context.

[SnarkyPuppy]

Fannie Mae just said on their earnings call late 2020 or early 2021.

 

I'd be shocked to see it in November, given that context.

 

Not sure you can read much into this.  Today is "late 2020". 

[typicalvalue]

Steve Mnuchin Federal Housing Finance Oversight board meeting . Green light to cap rule and PSPA? Interesting

https://www.treasury.gov/press-center/daily-guidance/Pages/11162020.aspx

[orthopa]

https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2020-PAR.pdf

 

There is mention of capital plan once capital rule finalized. If they were not going to go through with this they sure are doing a good job and spending a lot of time/money faking it.

[allnatural]

It also states that "FHFA plans to finalize the rule in the first quarter of FY 2021."

Q1 FY 2021 = Q4 2020 (now)

[COBFInfinity]

It also states that "FHFA plans to finalize the rule in the first quarter of FY 2021."

Q1 FY 2021 = Q4 2020 (now)

 

Good find. But of course, history of delays implies it will still be next quarter!

[SnarkyPuppy]

It also states that "FHFA plans to finalize the rule in the first quarter of FY 2021."

Q1 FY 2021 = Q4 2020 (now)

 

Sorry?  How does Q1 FY2021 = now?

[Jcmeg35]

I think it pertains to US Gov fiscal year which begins  in October.

[allnatural]

FHFA's fiscal year (FY) ends on Sept 30.