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

[TwoCitiesCapital]

15 hours ago, Mephistopheles said:

But what the govt wants in perpetuity is irrelevant to what Trump wants over the next 4 years.

 

 The amount they will get the gov't is largely insignificant relative to the types of deficits he ran and likely will run. This isn't going to be a priority for him I don't think. Just like it wasn't last time. 

 

15 hours ago, Mephistopheles said:

 

By now the companies have retained enough earnings (built enough capital) that it should be easier.

 

It's not really retained earnings - it's an increased liquidation preference to the government. It's asking them to give up even more money today, than 4-years ago, to let them go. Every year, the governments position becomes more entrenched with people asking the government to give up more and more of what it owns in favor of common/preferred shareholders. What incentive does the government have to do that? 

 

 

15 hours ago, Mephistopheles said:

But the first time, all the incentives were there: John Paulson, Steve Mnuchin, Calabria…and somehow it wasn’t done.

 

Is it the bank lobby that stopped it?

 

 

I think you're making this harder than what it is. It didn't get done because the gov't doesn't want it done. Why should the government do anything/give up anything. They already beneficially own 100% of the enterprises capital/profits into perpetuity without having to put in another cent, do any hard work, put it on the government's liabilities, or giving anything up to new shareholders. 

 

At any point, the Treasury could have forfeited the lawsuits. They didn't. They continued to fight them. Trump was just fine pillaging them for 4-years like Obama had done in years prior. All he changed at the end of his term was a new agreement that hamstrung Biden from being able to use the cash. 

 

It was political vindictiveness. Not b/c he wanted a fix for shareholders. 

Edited 5 hours ago by TwoCitiesCapital

[This2ShallPass]

17 hours ago, sleepydragon said:

thinks if commons is wiped out, treasury will have a harder time to moneylize any of its 100% because there’s no natural shareholder base (wiped out) and they have to find new shareholders (who will be reluctant)

This happens all the time in bankruptcy. Given how big the GSEs are I'm sure finding new shareholders is not hard. But I like Ackman vocally pushing the case, govt doesn't act purely with financial gain in mind so maybe he can make them take this deal:)

 

@TwoCitiesCapital so you're arguing that they won't come out of conservatorship. It seems like there's consensus that it needs to end. Also, if the pause on net worth sweep was just to spite Biden, are they going to undo it now? if the new treasury secretary can undo it, don't you think Biden would have done it in the last 4 years? 

[TwoCitiesCapital]

2 hours ago, This2ShallPass said:

This happens all the time in bankruptcy. Given how big the GSEs are I'm sure finding new shareholders is not hard. But I like Ackman vocally pushing the case, govt doesn't act purely with financial gain in mind so maybe he can make them take this deal:)

+1 

 

2 hours ago, This2ShallPass said:

 

@TwoCitiesCapital so you're arguing that they won't come out of conservatorship. It seems like there's consensus that it needs to end.

 

My base case is the status quo will continue. Is why I have been selling shares this entire run-up. 

 

2 hours ago, This2ShallPass said:

 

Also, if the pause on net worth sweep was just to spite Biden, are they going to undo it now? if the new treasury secretary can undo it, don't you think Biden would have done it in the last 4 years? 

 

It's possible we get a other amendment to change the current arrangement, but I do not believe it's a priority for Trump. I expect a whole lot of nothing to happen.