Big, big news. Thanks for posting.

Some things covered in the call could change in the future. 2019 will be a year of transition and change. CFO and CEO were available to answer calls at the end. 2 reporters asked a quick question. No one else was waiting to ask a question, so, call was ended.

Testimony of Mark A. Calabria, Ph.D., nominee for Director, Federal Housing Finance Agency Before the United States Senate Committee on Banking, Housing and Urban Affairs
February 14, 2019
Chairman Crapo, Ranking Member Brown and distinguished members of the Committee, I thank you for the opportunity to appear before the Committee today as the nominee for Director of the Federal Housing Finance Agency (FHFA).
I also want to thank the President for the trust and confidence placed in me for this nomination. Additionally I want to express my deep appreciation to Vice President Pence. Serving as Chief Economist for the Vice President has been one of the greatest honors of my life.
It perhaps rivals the other great privilege of my career, which has been to serve on the staff of this Committee. I take tremendous pride in having served on the Committee staff under Senator Shelby. While GSE reform was eventually passed in 2008, the structure of that reform largely mirrors the Shelby bills of 2004 and 2005. If anyone is the legislative father of FHFA, it is Senator Shelby.
I believe being part of the process that resulted in the Housing and Economic Recovery Act of 2008 (HERA) has also given me unique and valuable insights into the mission and history of FHFA. I well remember the short comings of its predecessors, OFHEO and the FHFB.
I was also extremely fortunate to serve on the Committee staff during the leadership of Senator Paul Sarbanes. While I did not always agree with his policy positions, I have strived to live up to the standards of professionalism and conduct he set for this Committee. Particularly Senator Sarbanes’ belief that it is indeed possible to disagree without being disagreeable.
I take great pride in the fact that I continue to count a number of former Sarbanes staff as friends.
Speaking of friends, it is also a true pleasure to be sitting at the table today with three gentlemen I have the privilege of calling friends.
I also want to recognize my partner, Allison Randall, who is here with me today. Allison’s life-long work to end domestic violence has been a daily inspiration to me.
I have to thank the Committee here as well, as Allison and I met working on the 2005 reauthorization of the Violence Against Women Act, whose Title VI: Housing Opportunities and Safety for Battered Women and Children, was the product of this Committee.
Lastly, I want to recognize my mother, Janie Jones, who is here with me today. I know my sitting at this table is only possible due to the many sacrifices made by my mother. I doubt I could have done half the job she did, for many years as a single mother raising four children.
It was also my mother’s twenty plus years working for the County of Fairfax Virginia that instilled in me a deep respect for public service.
2
As she spent her service there in the Comptroller’s office, she also instilled in me the unavoidable reality that whatever the goals of government, the numbers have to add up.
While the primary focus of FHFA is on our nation’s mortgage markets, the last piece of legislation I was privileged to work on for this Committee was the Homeless Emergency Assistance and Rapid Transition to Housing Act of 2009. It was a particular honor working with Senator Reed and his staff to strengthen our nation’s homelessness assistance programs to better service homeless families, especially those living in rural America.
Homelessness and rural housing are only a few of the areas I have worked on. During my service on the Committee staff I worked on over 20 pieces of legislation that became law, mostly in the areas of housing and mortgage finance.
In addition to my Committee experience, I briefly oversaw HUD’s regulation of the mortgage market, primarily under RESPA.
I have also spent a number of years performing economic research on the housing and mortgage market for two of the largest housing industry trade associations.
I have spent the last twenty some years researching and writing about our nation’s housing and mortgage markets. I believe I have successfully mastered not just the economics of our housing and mortgage markets, but also the legal and policy details. I believe that particular combination of skills and strengths makes me uniquely qualified to serve as the director of FHFA.
As the members of the Committee are perhaps aware, I have an extensive record of writings in the area of mortgage finance. I have on a few occasions expressed strong opinions on the history and future of our mortgage finance system. I have most definitely expressed, and express here today, a frustration with the current state of our mortgage system and the need for reform.
Despite that frustration, I want to very clearly state to this Committee, that if confirmed, my role as Director of FHFA is to carry out the clear intent of Congress, not to impose my own vision.
I have even brought with me today my nearly decade old, dog-eared personal copy of HERA. Whatever the policy issue, my first question will always be “what does the statute say?”
Let me close by emphasizing that I believe we are truly at a critical juncture in housing finance policy. Families across America face heavy burdens making their rent or mortgage payments in many cities, towns and states, as well as the unique barriers faced in our rural and tribal communities.
I also strongly believe that shelter is one of the most critical of basic needs facing any family. Whether it is rented or owned, American families need an affordable place to call home.
I thank you for your consideration today and look forward to your questions.

“Common and preferred shares trade roughly in-line with year-end 2017 levels despite recent developments that have increased the likelihood of GSE reform

Note: The companies shown on this page reflect all of the companies in the portfolio of PSH as of February 12, 2019 that have been publicly disclosed through regulatory filings or
otherwise.”
55

Pages 52-54

https://assets.pershingsquareholdings.com/2014/09/13094310/PSCM-Annual-Investor-Update-Presentation.pdf

Pershing Square Holdings London Investor Meeting
February 13, 2019

Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”)
? Recent developments have increased the likelihood of a resolution
? Treasury Secretary Mnuchin has cited GSE reform as a priority for 2019
? Taxpayer investment of $191bn fully repaid with 10%+ annual return
? Newly divided Congress increases the odds of administration-led reform
? New Trump-appointed leadership at FHFA, with Joseph Otting serving as Acting Director while Mark Calabria awaits Senate confirmation
? These developments have driven a sharp recovery in Fannie and Freddie shares in 2019
? Common and preferred shares now trade roughly in-line with year-end 2017 levels
? Last year’s weakness was primarily driven by investor frustration at the lack of progress on housing finance reform efforts in Congress
? Additional headwinds in 2018 from forced selling by certain investment firms that wound down operations, as well as tax loss selling at year-end
We believe that there is near-term potential for a favorable resolution of the status of Fannie and Freddie
52
FNMA and FMCC: Path Towards Reform
? We continue to believe that any proposal for housing finance reform must satisfy the following conditions in order to succeed
? Simplicity to ensure broad support and minimize systemic risk
? Appealing investment proposition to raise new private capital, including
visibility into long-term earnings power
? Fair treatment of current investors in Fannie and Freddie in order for new private capital to be raised
? We believe the administration will act expeditiously while the window of opportunity for GSE reform remains open
? Robust economy with ~3% GDP growth, unemployment at record lows, and national home prices above the 2006 peak
? Stock market indices near all-time highs, even after late 2018 declines
? Presidential election year in 2020
? Opportunity for Treasury to exercise its warrants and utilize the ~$150bn+ of future proceeds to fund key priorities
The dialogue around GSE reform in both the administration and Congress has intensified over the last few weeks
53

Pershing Square Capital Management, L.P. cordially invites you to our 2019 Annual London Investor Meeting
Wednesday, February 13, 2019
2:30 PM – Registration
3:00 PM – Presentation and Q&A
Cocktails and Canapés to follow.

The Berkeley
Wilton Place
Knightsbridge, London SW1X 7RL
United Kingdom

Pershing Square Capital Management, L.P. cordially invites you to our 2019 Annual London Investor Meeting
Wednesday, February 13, 2019
2:30 PM – Registration
3:00 PM – Presentation and Q&A
Cocktails and Canapés to follow.

The Berkeley
Wilton Place
Knightsbridge, London SW1X 7RL
United Kingdom

Yes

Forgot a “C”

Just release them and let them operate as trillion dollar, Fortune 500, publicly traded corporations! Many thanks to all the hard working employees that have kept them intact.

Full Summary

https://www.nar.realtor/sites/default/files/documents/2019-Executive-Summary-Vision-For-Housing-Finance-Reform-02-07-2019.pdf

Agreed

Yes

https://www.nar.realtor/events/nar-policy-forum/agenda-nar-policy-forum

2-13-19 approx.

An invitation for a select group of shareholders to the White House to share our concerns. Fast food is fine. Hey Calabria, Kudlow

NAR’s first annual policy forum will unveil a new comprehensive vision for GSE reform.
WASHINGTON (February 1, 2019) – On February 7, dozens of industry stakeholders and hundreds of invested attendees will gather for the National Association of Realtors®' first-annual Policy Forum at the Grand Hyatt in Washington. As Congress and the Federal Housing Finance Agency work to develop a framework for GSE reform, NAR will bring together some of the most engaged and influential figures in America's housing finance system. The nation's largest trade association, with its 1.3 million members, remains a leader in pursuing reforms that will ensure Fannie Mae and Freddie Mac can effectively serve taxpayers and the U.S. housing market after conservatorship.

"As the individuals most closely tied to the process of home buying and selling in America, Realtors® believe strongly in the role Fannie and Freddie play in our housing market," said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. "NAR and our members remain committed to ensuring the GSEs continue providing liquidity and stability in the mortgage market for decades to come. Next week's forum will showcase NAR's leadership to advance reforms that are most favorable to consumers, taxpayers and our overall economy."

NAR's Policy Forum will allow hundreds of industry stakeholders, policymakers, academic experts and financial regulators to evaluate the opportunities and challenges facing the housing finance system in the coming years. Panels will focus on industry efforts to advance housing finance reform, critical lessons learned from the housing crisis and innovative solutions for the future role of the GSEs.

In the forum's final session, Dr. Susan Wachter, Professor of Real Estate and Finance at the University of Pennsylvania, and Dr. Richard Cooperstein, head of Risk Management at Andrew Davison and Company, Inc., will unveil a new, comprehensive vision for GSE reform. This research is intended to provide a pragmatic, bipartisan solution that prioritizes and protects a liquid mortgage market for Middle America and underserved borrowers alike. Unlike a recapitalization and release plan, NAR's vision offers policymakers a responsible proposal that protects taxpayers, minimizes costs to consumers and promotes housing accessibility and affordability across America.

"More than a decade has passed since the federal government assumed control of Fannie Mae and Freddie Mac. While the housing market today is in a significantly better state than it was before the financial crisis, NAR continues to urge policymakers to address challenges that could arise in future economic downturns. Our first-annual Policy Forum will move these discussions forward as Realtors® remain a vocal and engaged advocate for housing finance reform legislation that will ensure a smooth transition out of conservatorship," said NAR Senior Vice President of Government Affairs Shannon McGahn.

The National Association of Realtors® is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

https://www.nar.realtor/newsroom/realtors-to-again-lead-industry-talks-on-fannie-mae-freddie-mac-reform

Agreed!

Glad he didn’t use the word thanks, just first step, applauds him for efforts. Checked off the “working with Congress box.” Next!

Statement by Secretary Mnuchin on Chairman Crapo Housing Finance Reform Outline
February 1, 2019
Washington – U.S. Treasury Secretary Steven T. Mnuchin released the following statement today in response to Chairman Crapo’s outline for housing finance reform:

“Protecting American taxpayers by ensuring the safety and stability of the United States housing finance system is a priority for the Treasury Department. The outline for housing reform legislation released by Chairman Crapo is a productive first step toward that goal, and I applaud him for his efforts.”

Only call these days that gives an update to common shareholder interests is the one from Ackman’s Pershing Square investor meeting, next one 2-13.

Hmmm.
““We applaud Chairman Crapo for his leadership in putting forward an outline to fix the housing finance system,” said Eric Kaplan, director of the Milken Institute Housing Finance Program. “Upon initial review, this outline has the potential to achieve many of the housing finance reform principles and objectives we support.”

“The first step in the application process is to contact NYSE to request a confidential review of eligibility. A company should not file an original application until NYSE has provided a notification letter of eligibility clearance and conditions of listing.”

Has anyone anywhere requested to see that review of eligibility?

Correction- letter to BOD

Thinking back to Berkowitz letter to BOD
“Third, the Board of Directors should inform the conservator of the Company’s desire to relist its common stock and preferred stock on the New York Stock Exchange. Given that Fannie Mae’s financial performance, stock price, and average daily trading volume exceed the criteria set forth in the relevant listing requirements, it is appropriate for the Company to once again be registered on this national exchange. The Company’s equity securities, which are held by thousands of investors, should trade on a transparent and orderly basis.”

Did anybody comment on latest 8-k yet?

Sorry for the quick response. I was just trying to let you know you could still dial in. I thought the call would last a bit longer. You don’t actually have to be preregistered. Next time just use that conference id on the webpage. I need to listen to the recording as well. I only got pieces of it while in the car. $$$fnma$$$

Nvmd. Call just ended. There will be a recording available within 48 hours.

Good information. You can still listen now.

Yes

White House briefing now. Sanders, Mnuchin

Richard X. Bove, Chief Strategist | (516) 535-3829 | bover@raffcap.com
VOL. 6 NO 4 JANUARY 28, 2019

Keep Updated on Fannie Mae and Freddie Mac: More news coming
Politico has indicated that there is serious conversation in the Administration to free these companies from their conservatorships. This very likely means sizable capital gains for shareholders of the preferreds. There is also danger for housing lurking here if the government walks away from the 30-year fixed rate mortgage (see page 4)

MORE ON FANNIE AND FREDDIE
There is Movement
The shares of Fannie Mae and Freddie Mac made new 52-week highs this past week. In fact, if one looks at a chart of either stock, it appears that they have been shot out of a cannon from the beginning of January to the present.
The reason for this was laid out in two of these commentaries in early January. The Administration had nominated Mark Calabria to head the Federal Housing Finance Agency (FHFA). Mr. Calabria’s views were clear on the subject as to what should be done with these two companies:
They should be released from their conservator status as was intended by the Housing and Economic Act of 2008 (HERA).
The holders of these shares should obtain the payments they were entitled to if this happened or the credibility of the government in these matters would be shattered.
These concepts were furthered by statements made by Joseph Otting, the Comptroller of the Currency, and the acting head of the FHFA. It appears that Mr. Otting will be holding meetings to discuss the status of Fannie and Freddie while Mr. Calabria goes through the nomination process in the Senate.

Current Status
From my personal perspective, the actions of the government toward these two companies is more than a little discouraging since it appears that the government made a conscious decision to avoid the law.
In 2008, the two government sponsored enterprises were supposedly facing mortgage losses that would drive them into bankruptcy. The government reacted by putting both companies into a conservatorship with the requirement that they be returned to public status once their balance sheets were restored to financial health.
For long-term observers of these companies, the reasoning for placing the companies into conservatorship in the first place was highly suspect because they were both cash flow positive. Subsequent events would strongly conform this view.
Once they were in the conservatorship, it was made very clear by Congress that the FHFA was to regulate these companies and that neither the Treasury Secretary nor the President were to interfere with their operation. Simply stated the Treasury Secretaries have simply considered the demand of Congress, which is U.S. law, to be a joke worth ignoring and they have clearly interfered with the decision making in these companies.
Enterprising hedge fund managers recognizing that the law was being broken acquired large positions in these stocks and they went to court to force the government to obey the law.

The Federal District Court under Judge Royce Lamberth refused to read the monographs provided by the plaintiffs in the key case and refused to allow plaintiff lawyers to speak in his court on the matter. He decided that the government could do whatever it chose and threw the case out. Courts around the country followed Judge Lamberth’s lead and threw out case after case on the matter. The Federal Claims Court was more amenable to the plaintiffs and aided them in obtaining discovery documents. However, it has refused to this point to make any judgments on what was discovered.
Only when the Federal Appeals Court reviewed the Lamberth decision was some light seen in this matter. The Appeals Court directed Judge Lamberth to review one portion of his decision. The Appeals Court acknowledged that there was a contractual relationship between the companies and the preferred shareholders and that Judge Lamberth should review this matter. He has not done so.
Congress got into the Act by writing a number of pieces of legislation concerning what the new mortgage would look like without Fannie or Freddie. The legislation was so unbelievably convoluted that it was never voted on by either House of Congress. Bottom line these bills would have created enormous multilayered bureaucracies that would have completely nationalized residential mortgage originations in the United States.
Ultimately, it was recognized by the Congress that the housing industry in the United States could not do without the 30-year fixed rate mortgage. This led to an understanding that this mortgage could not exist without Fannie and Freddie. Once Congress understood this it did nothing to change the current situation.

We are now going into the 11th year since this series of events occurred. Now, there is some possibility that there will be a resolution to the dilemma. This is being driven by the understanding that by any fair assessment of Fannie and Freddie the government has driven the two companies into insolvency. They lack the capital to back their guarantees. At some point if this continues their debts will be put on the budget of the United States adding $5 trillion.
Thus, maybe Calabria and Otting will take the necessary steps to right the incredible wrongs of the past ten years. If they do there is money to be made by the U.S. taxpayer here.

Sometime around 2-13-19

2-13-19 Pershing Square annual investor meeting, Fannie Mae 4th quarter earnings report around that time also

Thank you!

Richard X. Bove, Chief Strategist | (516) 535-3829 | bover@raffcap.com
VOL. 6 NO 3 JANUARY 22, 2019
CURRENT ISSUES
Last December, there were back-to-back commentaries in these Briefings concerning the future of Fannie Mae and Freddie Mac as a consequence of Mark Calabria being nominated by the President to become the new director of the Federal Housing Finance Agency. It was noted that if Mr. Calabria was approved by the Senate, there would be two results (See page 2).

FANNIE AND FREDDIE SET FREE
Money to Be Made


First, Fannie and Freddie would be spun out of their conservatorships and the preferred stockholders in these companies would get some of the dividends that they missed. This would push these stocks higher and, in fact, on Friday this is exactly what happened as the acting Director Joseph Otting intimated that the conservatorships would be brought to an end.
If Mr. Otting adheres to the Mark Calabria’s plan, these two companies would become traditional banks that focus on mortgage lending. It is believed that for this to happen, the holders of the junior preferred shares in both companies would be paid some of the dividends that they have missed going back to 2008.
There are two reasons that this may occur. First, the Federal Appeals Court in Washington ruled a
few years ago that there was a contractual relationship between the companies and these preferred shareholders. It requested that the lower Federal District Court determine what and how much should be paid to meet the terms of these contracts. The Federal District Court has done nothing but the Appeals Court ruling still stands.
More compelling, Mr. Calabria has written on this subject in the past. He argued forcefully that the government destroys its credibility if it ignores contractual relationships. He understands that if the two agencies are to gain the capital backing that they need to be successful, the money must come from the private sector. Therefore contracts must be honored by the government. The preferred shareholders must be paid back.
I continue to believe strongly that this will happen. The government cannot flagrantly ignore the laws of this country as it has done since 2012. Moreover, the housing industry needs Fannie and Freddie if it is to obtain the funding it needs.
High Risk to Follow
Once the two companies are set free the big question is will they obtain government backing for their loans. This is absolutely necessary. If it does not happen, the home finance industry will lose the 30-year fixed rate mortgage. This would devastate housing values. Rather than repeating what I have written on this subject, the first issue at hand is how much might the preferred shareholders expect.

It’s going to be that way until release.

https://www.bloomberg.com/news/articles/2019-01-22/fannie-freddie-share-rallies-go-unchecked-amid-analysts-doubt

Parasol Up DT!