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I don't care that you won't accept the fact that you are also trying to twist my entire service to call out idiots on their bad calls with good encouraging information never shared entirely factual and to hold onto their commons.
Eat a D bud. I mean I seriously do not care about you.
Why are you stressed? I just share information that should make you feel better.
Don't buy more - but don't listen to assholes like the guy who said SELL last summer
on commons that >225% since.
I just give you info to convince you to hold what you may still have.
That's literally a nice thing to do and it shouldn't stress you out.
It's more stressful for me. But I'm pretty nice to people who are lied to.
And I'm a SOB to people who try to lie to you. The good news is,
The guy who told people to SELL all commons going to 0 before >225% in 2023 to now.
Against Bill Ackman's Q1 advice even haha.
He will just try to twist my words and tell ppl now why me being unafraid of dilution is discrediting me when it's just another attempt after he failed to be correct about SELL ALL YOUR COMMONS to $0 in early 2023.
He's moving on trying to do so for his own ego. But he's a fool. He proves himself an idiot. He can't discredit me. Time proved his call to SELL YOUR COMMONS in 2023 wrong.
Time will prove my call to keep holding onto your commons and PFDs is in fact - a great call that I feel is needed when there's so much discouragement and outright idiocy in this community trying to make calls they have no credibility now to make. I believe that if he apologized for making that call instead of trying to point at me for being factual and letting time prove holding onto your commons is a great call then he wouldn't be trying to come at me. He's a sad nobdoy.
are you still buying more? kudos to you. it is hard to be optimistic for me with 16 years of 'hoping' and $2100 down to $0.40.
I don't know about you, but I don't give a crap about some dude that bought a hotel and a vineyard; some lying old man from Omaha that made the bulk of his money in the '70s with junk bonds/insider trading before the computer age; and last but not least the 4 people on your list.....I want the FNMA valuation according to the super duper software.
Distortion of my words. Anyone knows its Trump that directs FnF free. See you're a friggin coward that has to take one part of something anyone can read to try and make my argument "that".
I will just remind everyone you're a coward because you got caught by someone else saying last year early SELL YOUR COMMONS! and then they went up 225%.
Clown college!
I do welcome dilution you idiot. This isn't 2008 - you told people to sell commons because it's going to 0 before 225% ride up?
I am done with you I already proved you an idiot but I will take one more punch.
I explained the diff between 30% of the 2008 mortgage buying bundling and selling of MBS the two GSEs had upon entering conservatorship. It's now as of 2023 70%.
I explained the expansion of the MBS market and know how the company makes its revenues - you will never be worth the time to teach more. But I would say CME Group offering it to the entire WORLD - that is MBS to retail and institutions on the globally connected CME Group's network buying MBS with BrokerTec platform offering that due to HIGH customer demand increases the odds that there's gonna be not only a greater amount of GSE duopoly in selling MBS in private sector state bw 2008 and 2025, but more ACCESS and the 2008 electronic connected market vs people AT home globally buying MBS?
I even addressed and doubled down with Buffett's bets that macroeconomics show the 2025 market is due for a cycle #2 of the US Housing boom and FnF are going to be ACCELERATED in profiting from buying and bundling massive amounts of private sector driven homebuilds and buyers applying for mortgages.
You ignorant little baby. You laugh all you want. I am doing you a favor but you were the one trying to get people to sell in 2023 to miss out of 225% gains.
Now you're trying to cling onto dilution oh poor baby needs to be right.
Do you think dilution really fn holds up when you actually are making shares for a global 2025 accessible and god damn financial powerhouse juggernaut of a company because smart people consider the conditions?
Only losers come here to say baseless crap.
J0oa0ky - you are never right. And I will double down on that but I won't respond to you unless you take my points from today's post and actually think you can factually prove me wrong. Use citations and make your case.
BRYNDON FISHER?!
TIM HOWARD?!
LAMBERTH?!
PAGLIARA?!
SCOTUS?
POTUS?!
Nope.
Argentina will free FnF.
Viva la Javier Milei
I thoroughly enjoyed your fnma post.
Keep them coming, they’re light years ahead of the going to zero no shame clowns.
Fnma
thank you for taking the time to write. this is all beyond my pay grade. i am tired, really tired and losing hard earned money has drained my soul further. 16 years is a long time. my foster parents were much nicer than the fellow travelers who ambushed us shamelessly taking away our hard earned money with overnight conspiracy. be well, this isn't worth stress, health and peace, imo. just money. god has a way to take care of things, in his own ways, let him.
Jim Parrott is explicit on attempting to wipe out JPS. $FNMAS $FNMA #fanniegate pic.twitter.com/fwyBKBUArP
— Swamps & Shitholes 🇯🇵🇱🇷🇺🇦🇮🇱 (@AZbroker) August 13, 2023
Also to take a shot at the guy who criticized my Argentina ties to the GSEs that no one found but he told you commons were DONE to sell in early 2023 and miss out on what 225% growth? I will share this bit of news he cracked a veiled shot about the FNMA FMCC down day Tuesday because of the "Argentine Market" being down (dumb "donkey" do you not know what an ETF is that's only a small amount of NYSE and 1 NASDAQ listed Argentine company ADR with only certain picked shares that are held in custody and the ETF price tracks? The "market" that is like saying an ETF of only select businesses is the equivalent of the DJIA or the NASDAQ 100 or S&P 500. To the doofus who cracked that joke the Argentine market equivalent is not the $ARGT ETF - it's an index called MERVAL.
Moving on...
I have great info to share related to the media attacks on Trump, the institution in power who are socialists and I have shared proof of their lying and even in FHFA reports on 2023 FHLBanks which they oversee in addition to being conservator of Fannie Mae and Freddie Mac...
This is time to explain Argentina, all my own DD but things that the man Scott L. Mathis I mentioned last night - a wall street titan gone to Argentina in 2007 with his 1999 founded operations that run thru a US Miami based parent company and derives its entire revenue from it's luxury real estate, wine, ecommerce, LVMH type fashion with Argentine made products and more all in Argentina.
Argentina and Javier Milei are helping reject the administrations abuse and long overdue release of the GSEs to the NYSE and private sector. I got this article from Scott L Mathis because he is someone I mentioned last night that has been in Argentina building real estate luxury vineyards hotels and more thru the parent holdco Gaucho Group Holdings Inc in Miami. Do not buy that stock it is still going to dip. Buy more commons now. Here's why. The Milei and Trump hug at CPAC and Milei being in the American private sectors hearts and future - near future investment is also seeing MEDIA attack his image like Trump - a man we want to release our GSEs and on record via the Rand Paul letter doing just that.
https://blog.independent.org/2024/06/18/milei-steering-argentina-toward-economic-stability/
This is what Scott sent me today about what it is like on the ground there (he tells me all the time the media lies) - but since the Media has focused form the EU to the US to lie about Milei and his IMPLEMENTATION of all the reforms and changes to minimized govt spending size and laws just passing that deregulate and privatize similar companies that shareholders (even my $YPF stake) have lost value and investment due to the gov't intervening in a NEGATIVE way. I want you to have hope that Trump 2.0 is VERY much the reason Milei is being attacked and let me remind you Trump sent a Make Argentina Great Again video out on TruthSocial that went all over the news the night Milei was elected by 57% over his socialist opponent! Trump polls show on polymarket regularly at 56%. In 6 months of implementing policies like Trump promised from "DAY ONE" in his letter that he would've removed FHFA director Mel Watt and directed to new FHFA Director he chose to end the conservatorship >> This glowing report on the ground about Milei (Trump's model and honestly he's saying things Milei says bc he will do them as Americans are wanting that type of executive action Argys have) is something I share to give you hope we will get what we were promised and Trump will ALSO be doing much BUSINESS with Milei's Argentina - hell I get mocked for pointing out since 2011-2019 FHFA allowed the OTC common shares to be held at BNY Mellon to let the Banco Comafi issue CEDEARS (like ADRs here) in the Buenos Aires Stock Exchange and trade FNMA and FMCC common "ADR like" shares redeemable for BNY Mellon held true FNMA and FMCC shares at any time - to this day even if they held - but due to Gov't currency restrictions they were priced in $ARS.
https://www.tradingview.com/chart/nWJ8kvyf/?symbol=BCBA%3AFNMA
Go find FMCC yourselves I'm not your ChatGPT or butler this is an Fannie Mae board ;)
Here is the Banco Comafi - the issuer of these depositor receipt-like list of Fannie and Freddie common shares on their CEDEARS list of American companies traded in $ARS but it is obviously out of date on the ration as trading view shorts 3 CEDEARS:1 FNMA share held at Bank of New York since 2011. It started out at 1:1. CEDEAR trading of Fannie Mae and Freddie Mac on the Argentina BA stock exchange had been going on since the year 2000 (the Menem 1989 regime had pegged the peso to the USD 1:1 and that stopped in 2001. When the shares of Fannie and Freddie were delisted from the NYSE June 2010 - they went to the OTCBB and NYSE:FNM became OTCBB:FNMA. Similar ticker and movement to the OTCBB occurred with Freddie Mac commons. OTC Markets Group was the only way to keep a "listing" of USA OTC listings and USD stocks when the OTCBB closed sometime around 2020 I forget maybe it was 2019. Who cares. The point is the common stock has traded and is the same as the NYSE listed shares folks bought back in the day - and since 2000 the CEDEARS have been provided by Banco Comafi (a bank that lineage is back to a 15th century Bank in Italy... yeah) and custodied by Bank of New York (founded originally by Alexander Hamilton - the first Treasury sec -- for those of u with tinfoil that are intrigued) and continue to be held in accounts in the Argentina brokerages who hold them just like they can also still exchange 3:1 for a share of real FNMA once allowed to do so (Milei is likely heading there). I believe if you have a dual citizenship there's a way to do it from the US side but not within BA. This is leading to a further important and self conviction but also with reason a hypothesis becoming more of a theory as time rolls on.
First if you wanna know who CEDEARS were first issued by it was before Banco Comafi merged/took over Deutsche Bank S.A.:
https://www.comafi.com.ar/custodiaglobal/assets/docs/prospectos-cedears-rg/13586-21112000.pdf
There's your 2000 document if you must read it to believe me - I do my fucking homework.
Here's the Banco Comafi outdated list of current CEDEARS (I assume these all are outdated because of the inflation issues since the end of 2018 with Alberto Fernandez presidency going back to complete isolationists and many gov't restrictions on USD, forex, and a money printer that had ruined the $ARS when the IMF and foreign countries decided to stop lending to the country inflating their currency and isolating any incentive for the people to believe in the improvement of Argentines under a socialist abusive gov't like our own FHFA and FED and TREASURY (even FDIC) under the Biden Yellen Thompson Powell directed to act basically in lock w the regime. You can say the Fed Gov is independent after appt and he was appointed by Trump but when Powell began raising interest rates too fast Trump "bullied him" to stop and it worked. Now the same Biden admin and leftists like Elizabeth Warren are begging the FED to lower FFR (interest rates). Is that bullying? Gimme a break.
https://www.comafi.com.ar/custodiaglobal/Programas-Cedear-2483.note.aspx
So when I share info here- instead of being mad I also call it like I see it with people trying to sell their advice and are present in my stake in this community too - I still share other valued info and my opinion and analysis as well:
https://blog.independent.org/2024/06/18/milei-steering-argentina-toward-economic-stability/
Here's another thing about private sector Fannie Mae and Freddie Mac operations. There is NO law to prevent them from listing the CEDEARS on the BA stock exchange 1:1 and later 3 CEDEARS of FNMA:1 FNMA and a different than 1:1 ratio I forget for FMCC to adjust for the post 2011 inflation issues til Macri left office and all heck broke loose in Argentina due to the money printing of the ARS (arg peso) under the non center-right Macri regime but the Peronist and Isolationist Alberto Fernandez admin...
Argentina equivalent of the Mortgage Bankers Association here has been public about wanting a Fannie Mae system to provide liquidity to its mortgage market since 2007 publicly.
https://www.thebanker.com/Regulations/Argentina-looks-to-Fannie-Mae-model
Coincidentally 2007 was the year my friend and CEO of GGHI (NASDAQ: VINO) began his real estate operations with purchase of $300K USD now worth $10M USD but worth far more, 5 star rated, Algodon Mansion in the diplomat city of Argentina. The parent company he launched to make a USD listed NASDAQ tightly held share issuance (it's so small because he can prevent people from taking control of his assets that are far more valuable than the entire market cap of the NASDAQ listing - obviously) after leaving Lehman in 1999- to focus on Argentina - a place that needed a better mortgage system that modeled Fannie Mae. I can't get Scott to ever do anymore than nod or go that's great info. If you remember the scene in the Big Short where the two Brownfield Capital dorks walk into Lehman Brothers and the guy screaming "DO NOT TALK TO THE PRESS" at the collapsed investment bank employees leaving with their possession in boxes - that's bc of NDA's that they take seriously. BUT If the Argentines wanted a Fannie Mae system - and they want to DOLLARIZE under Milei - Fannie Mae and Freddie Mac have a growth opportunity to operate in countries that are OPEN to their liquidity model for their private banks (now allowed to deposit as many dollars as they wish) to lend more than the 2023 rate of mortgage issuances in Argentina (1%...). The dollars entering Argentina's private banks have skyrocketed due to confidence of people who held 10% of the circulating worldwide USD including US in mostly $100 bills at home in their bed mattresses into Argentina's banks. Even before he was able to decree that the govt would allow banks to allow deposit of any currency. Naturally - the dollars led to the initial growth of Argentine private banks to issue mortgages to (off thetop of my head) about 15% or more of applicants? Now add in our Fannie and Freddie and the compatibility of a free market privatized and globally connected MBS market buying USD denominated MBS bundled in US issued mortgages + the fact even in 2007 and to today the Argentine banks denominate their mortgages in the US Dollar!!!
It's an opportunity I argue that besides the 70%+ duopoly Fannie and Freddie have in buying and bundling US mortgages from lenders today as opposed to 30% in August 2008 when taken into conservatorship due to less competition from priv-label and the credit checks on what banks and the GSEs will buy being reformed responsibly -> look for growth not just in a US Housing Market boom 2.0 that is where my mind is logically thinking inevitable in Trump 2.0 (Investment that moved in a 2008 stimulus China CCP gave to keep it's ponzi Real Estate boom going is where our institutions went to invest in Real Estate and left officially in Fall 2021-2023 due to the Evergrande property market and real estate/ghost city collapse and to this day they are done growing bc they cant' bail out even with no western investment).
In case you're wondering a similar period of FUD on Fannie Mae stock was after the Jimmy Carter administration and the US misery of the 70's that began with the demonization of President Nixon who was actually a President pushing for the release of the Kennedy assassination even though Kennedy was his opponent in previous decades and he was well loved for his pro-American stance even if he gets blamed by everyone for the gold standard ending (who cares besides whacko libertarians who are leftists in their party - but not in Milei economics. Austrian economists like Milei are Libertarian who call for small govt and letting private sector and market decide the price and who they want to do business with - and it works. He's realistic too in that the dollar would not be fixed by GOLD but by letting private markets flourish in the Rothbardian Austrian economic policies he implements and successfully reduces the STATE from any control and politicians (not markets and business and trade experts) decide how the market should be operating. That is not FREEDOM. That is what we all want for the GSEs and what I've proven the FHFA and Biden Admin and all his admin that have shit to do with money and American market operations prevent from doing so freely. Deregulation is not their friend and it doesn't make them rich, subverting your participation and ability to achieve real success as a shareholder of what Warren Buffett himself called a financial powerhouse in 1991 - to get back to the reason I went back to the Carter admin and Fannie Mae's not so good stock prices and need to put in a successful reform that is profitable and understood by Buffett to be a long term investment that he usually makes "buy and hold" and with dividends - we are going to get our dividends back too folks:
Funny it took until December 2023 for anyone to report on Warren Buffett's regret for selling out of his position early and wishing he went long (at least until 2008) from 1988 entry and previously admitting owning Fannie Mae stock before under Berkshire with Charlie Munger:
https://acquirersmultiple.com/2023/12/warren-buffett-fannie-mae-fumble-a-1-4-billion-mistake-learned-the-hard-way/
In his 1991 Berkshire Hathaway Annual Letter, Warren Buffett discusses the two critical mistakes he made when Berkshire Hathaway had the chance to acquire a significant stake in Fannie Mae in 1988.
Stopping buying after an initial price increase: This prevented him from fully seizing the potential growth.
Selling their existing shares due to a dislike for small positions: This was a knee-jerk reaction based on personal preference, not sound investment logic.
Buffett estimates that these mistakes cost Berkshire Hathaway approximately $1.4 billion by 1991. Here’s an excerpt from the letter:
Every writer knows it helps to use striking examples, but I wish the one I now present wasn’t quite so dramatic: In early 1988, we decided to buy 30 million shares (adjusted for a subsequent split) of Federal National Mortgage Association (Fannie Mae), which would have been a $350-$400 million investment.
We had owned the stock some years earlier and understood the company’s business. Furthermore, it was clear to us that David Maxwell, Fannie Mae’s CEO, had dealt superbly with some problems that he had inherited and had established the company as a financial powerhouse—with the best yet to come. I visited David in Washington and confirmed that he would not be uncomfortable if we were to take a large position.
After we bought about 7 million shares, the price began to climb. In frustration, I stopped buying (a mistake that, thankfully, I did not repeat when Coca-Cola stock rose similarly during our purchase program). In an even sillier move, I surrendered to my distaste for holding small positions and sold the 7 million shares we owned.
I wish I could give you a halfway rational explanation for my amateurish behavior vis-a-vis Fannie Mae. But there isn’t one. What I can give you is an estimate as of yearend 1991 of the approximate gain that Berkshire didn’t make because of your Chairman’s mistake: about $1.4 billion.
You can read the entire letter here: https://www.berkshirehathaway.com/letters/1991.html
Thanks for that tweet. I've got my popcorn ready.
Well... better fasten your seat belt so you don't fall off your chair. He welcomes dilution. 🫨
I laugh that people actually fear dilution in a "duopoly" that makes profits from govt guar MBS that are desired globally increasingly over Treasuries... Literally makes enough revenues right now in a chokehold by our gov't and people think the warrants dilution matters?
— Stankonia Capital (FTP FJB VLLC MAGA) (@StankoniaCap) June 16, 2024
I see Pags for what he is and he's certainly no Nostradamus. Just one more talking head....seeking attention like a needy woman.
But since you apparently have some super duper trading software that does predict the future, just what does it say FNMA commons are worth, this year? Upon release?
I'd like to hear your arguments for a valuation, since you poo poo'd JOoa0ky. I'm all ears.
He is/was just an opportunist. He took their donations before the conservatorship. Afterwards, he took all their equity knowing most of the Republicans hated them and wouldn't object.
https://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni/
all of this "commons v preferred" has been going on for years, and it's all just noise. This is a rigged game. No one wins on the shareholder side.
I get it and appreciate your effort. Bottom line is this: it's "frozen" because it hasn't been taken since the guy(s) you love to hate halted it. They didn't end it, but halted it.
SCOTUS rubber stamped its' legality, and also said the conservator could impose it at the time and amount of their discretion. It's always available for the taking. In a c-ship where the conservator can take all the money they are charged with overseeing for soundness and safety, does that explain why no serious investor will touch these stocks with a 10' pole? Does to me.
You are not wrong. But if we are forced to meet some stupid number at least it is getting done efficiently and in a manner that sets us up for success over a longer period of time. Otherwise they could let us out, but never have dividends on commons until they meet the number which could easily mean that it could be 10-15 years if cash is going to pref holders/senior preferred. Instead we should reach their stupid number within 3-4 years and they should be capable of having dividends going immediately or perhaps within a year and no dilution to raise cash.
Happy to see all the talk is back on Fannie here. Thanks for allowing this place to be an information sharing community among actual stakeholders with no agenda to sell influence and just share their info as we all have stakes. Thank you for letting me defend my reputation of my intent too. I will continue to provide info as I come across it if it's helpful to share. $FNMA stake still 72,000 under LLC.
GSE's capital levels are already sufficient.
Stress tests have been passed for several years.
FHFA invented the "valuation analysis" to make it look like they may not pass the stress test.
Without the "valuation analysis" USG has no reason to keep them in C-ship.
Go FNF.
Countdown days remaining 138
Vote 2024
If you are a common holder you should honestly be grateful they are still in conservatorship. If they were out they’d be paying preferred shares dividends reducing their profits. They’d potentially be paying dividends on senior prefs OR they’d have diluted commons with a cash raise via equity. By waiting and stacking cash as efficiently as possible they’ll be at the necessary cash levels before too long and then they won’t have an excuse to leave them in conservatorship. I realize it sucks looking at our portfolios especially those of us with preferred shares but I think within the next 4 years we will be rewarded for the risk we’ve taken.
In the meantime, where does the windfall go? Yep, to Treasury! Thanks Treasury for taking one for the team. 🙄 Heaven forbid the legal shareholders of the company receive any of the profit.
Wait... Isn't there a reasonable expectation to reap in the company profits embedded in the Shareholder agreement? Wasn't there a jury verdict that the Govt should not breach the good faith and fair dealing with Shareholders?
What will happen next? Stay tuned to The Old and the Restless...
cant do anything about it
Just sit and watch is the best we can do.
Then why the famous phoenix speech?
I don't think Obama likes them too much. Donno why
The bully attitude against Obama is just a guess on my part. May be he loathes them for other reasons.
Or it could be Golan greased his plans so much that he turned anti and hence the phoenix speech
Money speaks in this country and that's why it Trump, it's so easy to buy him out to do nothing in. November. All they need to do is, take care of some payments for his fines
President Obama didn’t turn down their money. They were his biggest donors.
the history on this is very dark rife with corruption, overnight ambush of gullible innocent investors who put in their hard earned money. hedge funds and private equity came in after the nws.
Jim Parrott is explicit on attempting to wipe out JPS. $FNMAS $FNMA #fanniegate pic.twitter.com/fwyBKBUArP
— Swamps & Shitholes 🇯🇵🇱🇷🇺🇦🇮🇱 (@AZbroker) August 13, 2023
We are too low profile to know why the bullying happened etc. But I do know frank reines was so powerful in DC that he can make anything happen if the GSE wants
"did you even think to consider the Gse's were right about "pooh poohing" them?"
LOL! You know when those senators and representatives contacted F&F back in the day, they just wanted to shoot the breeze and talk sports.
written by clayton , not fhfa or treasury, clayton is a stooge and a scumbag
you missed these?
“Treasury will be compensated for its support to the GSEs by an increase in the value of the senior preferred shares (technically known as the “liquidation preference”) dollar for dollar for any sweep payments foregone.”
“Windfall to the “investors.” By having the amount of the PSPA’s senior preferred stock increase in the exact same amount as the foregone net worth sweep payments (a conventional fee would have almost undoubtedly been a smaller amount), Treasury cannot be accused of transferring any economic value to the “investors,” i.e. the owners of the pre-conservatorship common and preferred shares. Since those investors are now dominated by institutions, such as private equity or hedge funds, that purchased their shares at steep discounts after the two companies were placed in conservatorship, anything that looks like a windfall to them will be subject to substantial criticism by virtually every Democrat in Congress, and also probably many Republicans as well.”
While the link does not answer the question of WHY the warrants - it does answer many other issues that continue to be debated here - over and over (e.g. loan versus investment and shares; and how do Preferred Shares have an LP outside of CH 11 ; etc.)
many here have read this or similar many times and a tip of the hat to you all . I have read stories about it -- but admit this is the first time I read the way the GOV TELLS THE STORY in such detail and more detail . Very recent
https://fiscal.treasury.gov/files/reports-statements/financial-report/2022/notes-to-the-financial-statements8.pdf
more to come about the change that followed re the SP and fees and dividends and ..
more to come about the change that followed re the SP and fees and dividends and ..
Skeptic
So I tried to search for a definitive answer -- and the below link seems the best --- and I posted the contents as well. Seems to me the status of the NWS is FROZEN - big time - and the final status is as clear as mud
Anyone know better than the below? (OR - bluntly - big changes since the below was written)
https://cei.org/blog/treasury-fhfa-reverse-net-worth-sweep-at-fannie-and-freddie/
TEMPORARILY ENDING THE GSE NET WORTH SWEEP: A LIMITED BUT IMPORTANT STEP TOWARDS GSE REFORM
Wednesday, October 2, 2019 | Don Layton
On Monday, September 30, the US Treasury and the Federal Housing Finance Agency (FHFA), the independent agency that is the regulator and conservator of Freddie Mac and Fannie Mae, the two government-sponsored enterprises (GSEs), announced a start to their much-awaited ending of the “net worth sweep.” While ending the sweep is only temporary and challenging decisions needed to make it permanent were put off until the future – very possibly until after the upcoming presidential election – this is nevertheless a momentous event as finally, after more than a decade, the first concrete step has been taken to actually implement GSE reform and end the conservatorships.
As a reminder, in September 2008 the two GSEs were placed in conservatorship – a legal status where they essentially operate as wards of the government – after losing the confidence of the financial markets that they would meet their obligations. To restore that confidence, Treasury pledged to maintain their net worth at a positive level by injecting funds into the companies whenever needed, in exchange for senior preferred equity shares. (By structuring the support in this manner, Treasury keeps the confidence of the debt markets but also does not allow the owners of pre-conservatorship common and preferred shares to get any value from the rescue until, at least in theory, Treasury’s senior preferred is fully paid off. Treasury took an option on 79.9 percent of the common equity as well.)
This was done in a legal agreement called the Preferred Stock Purchase Agreement (PSPA).
Initially, the GSEs had to pay a 10 percent dividend on the amount of the preferred shares outstanding; today that would be almost $20 billion of annual dividends on the almost $200 billion of senior preferred currently outstanding.
But, at the end of 2012, this was revised – it eliminated the fixed 10 percent dividend but substituted a payment equal to all the earnings of the companies (after allowing a small capital buffer of $3 billion each). This clause, which became known as the net worth sweep, was designed to end the problem wherein the two GSEs had to take funding from the Treasury under the PSPA only to turn around and give it back to meet the 10 percent dividend requirement (which became known as “circular” payments).
This revised structure relieved the GSEs of ever having to draw under the PSPA to make dividend payments, but it also prevented the GSEs from building up capital in their own name.
As a result, they continue to be creditworthy to the financial markets only because of their ability to call capital from Treasury via the PSPA at any time needed and in very large amounts.
With the release by Treasury of its Housing Reform Plan on September 5, there was significant disappointment that the plan had many generalities but few specifics, and no deadlines. But immediately thereafter, statements by Secretary of the Treasury Mnuchin and FHFA Director Calabria – both of whom must agree to any changes to the PSPA – indicated that they were prioritizing the ending of the net worth sweep so that capital building by the GSEs could finally begin (which the industry had expected to be part of the announced plan), and that they looked to complete it by the end of the month.
So, in terms of timing, they met their committed deadline. But, in terms of what was announced on September 30, the net worth sweep is only being ended temporarily, so it is just a partial step forward in ending the conservatorships of the two GSEs.
Specifically, the PSPA agreements between Treasury and Freddie Mac and Fannie Mae are being revised. This revision has two key features:
First, the capital buffer of each GSE, as described above, is being increased from its current $3 billion level to $20 billion and $25 billion, respectively, which allows them to retain an additional $17 billion and $22 billion of earnings. These amounts, probably not coincidentally, are enough so that at recent earnings levels the new caps will only be hit after the November 2020 election.
And second, Treasury will be compensated for its support to the GSEs by an increase in the value of the senior preferred shares (technically known as the “liquidation preference”) dollar for dollar for any sweep payments foregone. Conventionally, such support would be paid for via some sort of fee tied to the amount of GSE obligations being supported (e.g. the $5 trillion-plus of their balance sheets), so this unusual treatment stands out more than a bit. This mechanism is also now the third incarnation of the payment to Treasury – the first having been the 10 percent dividend requirement and the second the now temporarily-discontinued net worth sweep.
Importantly, by temporarily ending the net worth sweep in the manner announced, the Treasury and FHFA are able to avoid having to design all the required specifics of a permanent cessation. This both enabled them to move fast to meet the September month-end deadline and also to push into the future – maybe even conveniently until after the November 2020 election – making the following difficult decisions that require detailed analysis and which would also likely generate political criticism:
Support Fee.
As Secretary Mnuchin explained in Senate hearings on the reform plan, with the ending of the net worth sweep, the GSEs instead would have to pay a fee to compensate taxpayers for their ongoing support to the companies. In the announcement, because the cessation is temporary and ongoing support by Treasury is paid for by the unusual feature that the PSPA preferred shares increase in value in an amount equal to the foregone sweep amounts, Treasury and FHFA did not need to specify the amount or structure of the fee to be paid by the companies for Treasury’s support. No matter what is eventually permanently chosen for such a fee, it predictably will be criticized as too low by those mostly concerned about the risk to taxpayers of this backstop from the federal government and simultaneously as too high by those concerned with the cost of mortgages for homebuyers.
Reserve fund. The Treasury also wants a reserve fund to be built up, so that if post-conservatorship the GSEs generate losses beyond what each company’s net worth can absorb, the reserve fund will then in turn absorb such losses before the taxpayer might be called on to do so. The announced temporary end to the sweep is able to avoid saying anything about the reserve fund’s size, how quickly it will be built up, or how it will be funded. Again, it is predictable that no matter what level is chosen it will at least be criticized as too little and being built up too slowly.
Windfall to the “investors.” By having the amount of the PSPA’s senior preferred stock increase in the exact same amount as the foregone net worth sweep payments (a conventional fee would have almost undoubtedly been a smaller amount), Treasury cannot be accused of transferring any economic value to the “investors,” i.e. the owners of the pre-conservatorship common and preferred shares. Since those investors are now dominated by institutions, such as private equity or hedge funds, that purchased their shares at steep discounts after the two companies were placed in conservatorship, anything that looks like a windfall to them will be subject to substantial criticism by virtually every Democrat in Congress, and also probably many Republicans as well.
As I wrote in the paper Treasury’s GSE Reform Plan: My Top Ten Political Economy Insights last week, inside the Trump administration are three groups which together are driving GSE reform. One of them consists of White House-centered staff who are focused on the election in November 2020, and who do not want GSE reform to become an election issue through controversial actions. The overall direction of Treasury’s plan is therefore to defer controversial decisions, maybe even until after the election. And, as listed above, many of the necessary features of a permanent cessation of the sweep would definitely generate controversy.
There are two big political economy takeaways from this announcement beyond its specifics.
First, there is an old phrase “well begun, half done.” It says in just four words how getting started on a task is one of the biggest challenges to accomplishing it, even though starting is in reality nowhere near actually doing half the work. In this case, after more than a decade, the release of the GSEs from conservatorship has been finally “begun” (it’s in the eyes of the beholder if it has begun “well”), with something actually moving forward after many years of talk but precious little action. The temporary ending of the net worth sweep represents a very small portion of the total work to be done, but, even with the avoidance of so many decisions needed to make its ending permanent, it is a giant step forward, hopefully breaking the reform logjam that has been in place for so long.
Second, when policy experts make proposals for housing finance reform, they usually present a soup-to-nuts plan (albeit almost always at a high level with few specifics). Similarly, if housing finance reform were to be undertaken via legislation, the specific legislation would have to present a comprehensive program, although many details would be left for various government agencies to fill in. But for something large and complicated, like the reform of America’s $11 trillion system of housing finance, it is difficult for Congress to be comprehensive and not produce legislation with missing or ill-considered pieces, or which creates many unintended consequences.
By contrast, with housing finance reform being done via administrative means, this is all being turned on its head. What we are seeing is Treasury and the FHFA looking to take discrete steps to “move the ball down the field” a bit each time. (The announcement also included a comment that further revisions to the PSPA to implement reform would follow, implying without inordinate delay.) This is all perfectly fine, even a good thing – there is likely to be better consideration of the right way to do each step and minimize unintended consequences. So, expect this pattern to continue, with specific steps announced from time to time, adding up over some years to become a full and comprehensive program – and one more likely to work well than would otherwise be the case.
Ha ok thanks Guido.
Very interesting
did you even think to consider the Gse's were right about "pooh poohing" them?
did you like them then and how about now?
too funny
LOL
I wonder if attached has something to do with yesterday's drop.
https://asia.nikkei.com/Business/Finance/Japan-s-Norinchukin-Bank-to-sell-63bn-of-U.S.-and-European-bonds#:~:text=TOKYO%20--%20Norinchukin%20Bank%20will%20sell%20more%20than,the%20risks%20associated%20with%20holding%20foreign%20government%20bonds.
Alito never thought he made a mistake with the prior collins ruling, unless he told you in a pvt setting
Done nothing wrong, is debatable
The GSEs were truly bullies of the 90's with their lobbying power and Pooh poohing most senators. Obama, I am sure was rubbed the wrong side when he was a senator, by the GSEs which is why he made sure he pushed them to the basement a dumpster
The GSEs with their bully attitude dictated most policies and am sure Goldman and JPM were waiting for its moment to pounce on the neck
So in a way, it's karma. The wrong folks are paying along with them (is, coz of our stupid investment decisions, partially greedy too)
No point following any legal cases because that avenue is dead. That includes Barron & Co's lawsuit.
Today is June 19 , no trading on Juneteenth holiday, officially Juneteenth National Independence Day,
sorry i don't follow these cases anymore. what is unique about it? also do you know what is up with bryndon fisher case?
not trading? strange. maybe fidelity knows something as catbirdseat posted on getting the call from fidelity. weird.
They stopped posting on X and no longer have an account. Probably because of Hunter's legal problems. There's a fake account on X mocking him.
"Real long shot but looks like Wazee will still try to fight for justice?"
Wazee.....YES!
Wazee's lawyers . . . or billable hours!
You could be right
Bonjour Monsieur! Slavery in the US officially ended January 1, 1863. But it continued till middle of June 1865 as many slaves were unaware and the plantation owners were reluctant to let go of what they considered their property.
I acknowledge it is in questionable taste on my part to compare the conservatorship to slavery, but unfortunately, there are too many similarities.
I don't know how "they" got this idiotic BS known as Juneteenth past Congress, which, in turn, got the stock market shut down. Wasn't there something of even less importance "they" could have found?
The sooner the litigation is over the better.
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