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

[doughishere]

Morning star, did you read the brief?

 

His argument has nothing to do whit preferences over one class or another but rather that "Section 151©’s use of the term “rate” reflects this fundamental principle of corporate finance as well as that term’s legal definition, which involves concepts of proportionality and relativeness"

 

100% dividen can be a part of "senior shares"

 

 

Section 151© provides:

The holders of preferred or special stock of any class or of any series thereof shall be entitled to receive dividends at such rates, on such conditions and at such times as shall be stated in the certificate of incorporation or in the resolution or resolutions providing for the issue of such stock adopted by the board of directors as hereinabove provided, payable in preference to, or in such relation to, the dividends payable on any other class or classes or of any other series of stock, and cumulative or noncumulative as shall be so stated and expressed. When dividends upon the preferred and special stocks, if any, to the extent of the preference to which such stocks are entitled, shall have been paid or declared and set apart for payment, a dividend on the remaining class or classes or series of stock may then be paid out of the remaining assets of the corporation available for dividends as elsewhere in this chapter provided.

 

he Net Worth Sweep lacks either a specific rate of return that would not participate in the Companies’ growth or any proportional or relative connection to Treasury’s Senior Preferred Stock investment or the Companies’ capital structures. Instead, the Net Worth Sweep directs all of the net worth of the Companies to one corporate constituency in perpetuity, irrespective of the capital attributable to Treasury’s Senior Preferred Stock or other stockholders’ significant capital contributions. As such, the Net Worth Sweep is not a “rate” and, accordingly, violates Section 151©.

 

The rate was set 10% before the NWS. Meek is right as usual that the argument is much better because as Steele argues the NWS is "unenforceable ab initio"....from the beginning.

[morningstar]

Morning star, did you read the brief?

 

 

 

Section 151© provides:

The holders of preferred or special stock of any class or of any series thereof shall be entitled to receive dividends at such rates, on such conditions and at such times as shall be stated in the certificate of incorporation or in the resolution or resolutions providing for the issue of such stock adopted by the board of directors as hereinabove provided, payable in preference to, or in such relation to, the dividends payable on any other class or classes or of any other series of stock, and cumulative or noncumulative as shall be so stated and expressed. When dividends upon the preferred and special stocks, if any, to the extent of the preference to which such stocks are entitled, shall have been paid or declared and set apart for payment, a dividend on the remaining class or classes or series of stock may then be paid out of the remaining assets of the corporation available for dividends as elsewhere in this chapter provided.

 

he Net Worth Sweep lacks either a specific rate of return that would not participate in the Companies’ growth or any proportional or relative connection to Treasury’s Senior Preferred Stock investment or the Companies’ capital structures. Instead, the Net Worth Sweep directs all of the net worth of the Companies to one corporate constituency in perpetuity, irrespective of the capital attributable to Treasury’s Senior Preferred Stock or other stockholders’ significant capital contributions. As such, the Net Worth Sweep is not a “rate” and, accordingly, violates Section 151©.

 

The rate was set 10% before the NWS. Meek is right as usual that the argument is much better because as Steele argues the NWS is "unenforceable ab initio"....from the beginning.

 

That was the rate before the Sweep. Steele's argument is that the current dividend isn't a rate at all; why 10% of face value is a rate and 100% of net worth is not where I lose him. I just think that a judge is very unlikely to make a $100+ billion ruling against the government on the basis that this preferred stock structure doesn't look like typical preferred stock.

[doughishere]

Tough job but somebody has to do it wether it's 100m or 100b the amount shouldn't matter.

 

Is Fannie Deleware incorpwrated? I'm on my phone again and am having trouble finding if it is or isn't.

[merkhet]

I think the issue Steele is pointing out is more than just a technicality. (Though even if it were a technicality, it's still a question of whether or not it's legal.)

 

The issue is similar to the brief that Pershing Square put through at one point stating that a preferred stock with these characteristics is akin to putting a second class of common on top of the original class & junior preferred. That is more than a technicality under Delaware law and under the PSPA/HERA because there are rules about issuing more common stock.

[Luke 532]

Kudlow interview with Rosner...

About the 1 hour, 18 minute mark of July 18th podcast: http://www.wabcradio.com/2012/12/09/kudlowpodcasts/

[intothebreach]

NY Times Op-Ed by Bethany McLean, author of "The Smartest Guys in the Room", who is now apparently writing a book on Fannie and Freddie titled “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants.”

 

http://www.nytimes.com/2015/07/20/opinion/fannie-and-freddie-are-back-bigger-and-badder-than-ever.html?action=click&pgtype=Homepage&version=Moth-Visible&module=inside-nyt-region&region=inside-nyt-region&WT.nav=inside-nyt-region

[doughishere]

Seeking alpha has been promoting a number of Glen Bradfords articles.

 

There seems to be a greater awareness in f&f in mainstream media these days.

[muscleman]

Seeking alpha has been promoting a number of Glen Bradfords articles.

 

There seems to be a greater awareness in f&f in mainstream media these days.

 

Be aware of Glen Bradford. Back in 2011, he had a lot of articles like the following, and he had a slogan in Seeking Alpha like: "Follow me to be a millionaire", and this guy recommended selling puts to buy call options on these Chinese companies. Eventually all those reverse merger Chinese companies were proven to be fraud and got delisted. This guy probably got wiped out along with all his followers. I am surprised that this clown had the courage to try again after 4 years, which makes me start to worry about my Fannie positions.  ::)

http://www.thestreet.com/story/10986595/1/ccme-the-biggest-short-squeeze-of-2011.html

[tede02]

NY Times Op-Ed by Bethany McLean, author of "The Smartest Guys in the Room", who is now apparently writing a book on Fannie and Freddie titled “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants.”

 

This is an interesting development.  I never read her first book but I did see the movie which was excellent.  It just appears that the pressure on this entire situation continues to build.  I agree with doughishere that it appear that maintstream media is starting to catch on to this story more.  My instincts say that the pressure alone will force an outcome at some point. 

 

This is really an interesting story.  I haven't followed it as closely as others here.  My exposure is indirectly through my holding in FAIRX.  Nonetheless, thanks to Merket in particular for the ongoing deep analysis and commentary on this subject. 

[TwoCitiesCapital]

NY Times Op-Ed by Bethany McLean, author of "The Smartest Guys in the Room", who is now apparently writing a book on Fannie and Freddie titled “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants.”

 

This is an interesting development.  I never read her first book but I did see the movie which was excellent.  It just appears that the pressure on this entire situation continues to build.  I agree with doughishere that it appear that maintstream media is starting to catch on to this story more.  My instincts say that the pressure alone will force an outcome at some point. 

 

This is really an interesting story.  I haven't followed it as closely as others here.  My exposure is indirectly through my holding in FAIRX.  Nonetheless, thanks to Merket in particular for the ongoing deep analysis and commentary on this subject.

 

+1

 

Definitely a big thank you to Merkhet who continues to provide extremely valuable commentary on the matter.

[Luke 532]

I found this interesting in Document 212 recently filed:

The court finds no need to await a response from defendant to plaintiffs’ motion. Plaintiffs’ motion is GRANTED.

[Mephistopheles]

I found this interesting in Document 212 recently filed:

The court finds no need to await a response from defendant to plaintiffs’ motion. Plaintiffs’ motion is GRANTED.

 

Interesting, do we know what motion this is referring to?

[Luke 532]

I found this interesting in Document 212 recently filed:

The court finds no need to await a response from defendant to plaintiffs’ motion. Plaintiffs’ motion is GRANTED.

 

Interesting, do we know what motion this is referring to?

 

Case 1:13-cv-00465-MMS Document 212 Filed 07/21/15 Page 1 of 1

 

In the United States Court of Federal Claims

No. 13-465C

(Filed: July 21, 2015)

*************************************

FAIRHOLME FUNDS, INC. et al., *

*

Plaintiffs, *

*

v. *

*

THE UNITED STATES, *

*

Defendant. *

*************************************

ORDER

On July 20, 2015, plaintiffs in the above-captioned case filed a motion for leave to file certain materials designated as “protected information” under seal with the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) and the United States District Court of the District of Columbia. The court finds no need to await a response from defendant to plaintiffs’ motion. Plaintiffs’ motion is GRANTED.

 

Plaintiffs are (1) authorized to file under seal in the D.C. Circuit certain protected

materials contained in the appendix attached to their motion, which were disclosed to plaintiffs through discovery in this case; (2) granted the general authority to file the protected information disclosed in this case under seal in the D.C. Circuit, and (3) authorized to file under seal in Fairholme Funds, Inc. v. Federal Housing Finance Agency, No. 13-1053 (D.D.C.), the protected

information disclosed in this case.

 

IT IS SO ORDERED.

s/ Margaret M. Sweeney

MARGARET M. SWEENEY

Judge

[Luke 532]

Thoughts on attached?  It's from Dick Bove so there may be bias...

 

"Courts may demand parties mediate differences; sees potential mediation resulting in settlement giving shareholders their ownership rights back..."

[doughishere]

I wish i had a bloomberg terminal.

[Luke 532]

I found this interesting in Document 212 recently filed:

The court finds no need to await a response from defendant to plaintiffs’ motion. Plaintiffs’ motion is GRANTED.

 

Further commentary on this... http://www.housingwire.com/articles/34550-judge-orders-massive-release-of-fannie-freddie-conservatorship-docs?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire

[doughishere]

Call me strange but when i saw the headline i was like "Woah....they released the docs to the public!" Talk about a disappointment.

 

 

[Luke 532]

Call me strange but when i saw the headline i was like "Woah....they released the docs to the public!" Talk about a disappointment.

 

I'm not sure that would be in our best interest.  In the words of Merkhet...

 

If the judge grants the motion to unseal, I think the government won't settle. At that point, the damaging information is already out there, and they might as well bet their bottom dollar and see if they can be redeemed through the legal process. Imagine borrowing money from a loan shark to go gambling and losing 80% of the money. Well, you might as well bet the remaining 20% because if you don't, you're going to get your legs broken anyway but if you win, you might come out even.

 

Further...

 

The threat of making things public is what might force a settlement. Actually making things public would remove the incentive to settle.

 

Things are setting up very nicely for us.  All documents will be used in multiple cases.  The government knows (or should know) that this likely doesn't get any better for them.  Therefore, I believe the possibility of release or settlement is pretty high right now.

[Eye4Valu]

Settlement or release is certainly the hope, but I'm not getting my hopes up. This has already played out over an extended time period, with more waiting to come I imagine. That said, I hope you're right. I think eventually the parties will reach a favorable outcome for all involved.

[Luke 532]

Settlement or release is certainly the hope, but I'm not getting my hopes up. This has already played out over an extended time period, with more waiting to come I imagine. That said, I hope you're right. I think eventually the parties will reach a favorable outcome for all involved.

 

Here are just a few of the reasons why I believe we're closer to a resolution than we have been in the past.  In no particular order...

 

-Sweeney granting plaintiff motions without even waiting for a government response.

-Lamberth appeal case looks much stronger with actual facts being used vs. previous judgement made on he said/she said nonsense.

-Schwind resigning as "one of the primary attorneys" on the government's team just as these documents were coming to light.

-Greenberg's win vs. the government, and I would imagine proving 2012 NWS is much easier.

-Apparent accounting fraud in 2008 which if just partially true could only make the 2012 NWS case that much stronger for us.

-Position increases from the big boys (Ackman, Berkowtiz, etc.).  I know they "can't" see what their lawyers see.

-Reading between the lines on the depositions and guesstimating what the blacked-out portions might say.

-MSM getting involved (Gretchen Morgensen/NY, Larry Kudlow, etc.) which, in theory, puts more public opinion pressure on the gov't..

-Prominent people that have filed Amicus Briefs on our behalf: a former state chief justice (Steele), a former FDIC chief counsel, a former FDIC chairman, and a former Fannie Mae CFO.

-The fact that the government is making strange moves (asking for deadline extensions without giving a reason, for example).

-The fact that the government is fighting very hard to keep information hidden.  If the effort being put forth to hide documents is comparable to the importance of the documents, well, that could be very interesting.

-Both Waters and Lew in the past month or so saying that GSE's have paid it all back (tone seems to be changing a bit).

-and much more

 

It seems to me the odds of a release or settlement (in other words, a win for FNMAS) is increasing as time goes by but the price per share hovers around $4.  Therefore, the risk/reward increases as each day passes.

[deadspace]

I would also add Lews phrase regarding. It is not yet time to consider paying out dividends to shareholders suggests that this is something that is conceivable in the future.

[Mephistopheles]

I would also add Lews phrase regarding. It is not yet time to consider paying out dividends to shareholders suggests that this is something that is conceivable in the future.

 

I'm long and hopeful for the shares but I think that was just a diplomatic answer, not really signaling anything. They (Treasury) and Congress will take the money for as long as possible to help feed their chronic spending spree.

 

What we need is a Congressman or woman who would like to be a hero and bring what's going on to light. While the sweep is great for everyone in Washington, it would be even better for one person to stand out and expose the wrongdoing.

[Mephistopheles]

How many courts, cases, and judges now have access to discovery/depositions? I know there are multiple cases in the Court of Claims and the one in the D.C. Court of Appeals. Any other ones?

 

We just need one of the judges in one of the courts to take our side, and that will be a huge boost for the shares.

[Luke 532]

Kudlow, per his Twitter account, will be discussing FannieGate again this morning on his radio show.

[orthopa]

Kudlow, per his Twitter account, will be discussing FannieGate again this morning on his radio show.

 

I wont be/wasnt able to listen. Please let us know if anything good was said.