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Check out appendix and check out the CBO analysis that she references.
Common go to near $0 in 2 of 3 scenarios. Preferred go to par in 2 of 3 scenarios.
Guido think that seniors are getting written down AND the GSEs are getting $125B back.
Not AND... OR.
Seniors to zero PLUS $125 billion IS NOT POSSIBLE. That would be Collins getting BOTH of their 2 suggested options for remedy when only 1 is possible.
It’s impossible to get both (1) write down and then (2) $125 billion returned. Each is a separate remedy suggested by Collins; (2) is only remedy in Court of Claims but would be moot if (1).
FOLLOWING TERMINATION OF THE COMMITMENT.
That means AFTER the Treasury LOC is terminated, which it isn’t and will never be.
Do you ever listen to David Thompson's calls on litigation? Warrants are not being challenged in SCOTUS, Courts of Claims, DC Circuit, etc.
Payback of senior preferred is complicated. The original PSPA does not allow this, so SCOTUS would be fixing one violation (NWS) by altering another part of the contract that is unchallenged. And SCOTUS may not address directly but send back down to lower courts for remedy.
You're welcome and thanks for the kind words.
Clearly not.
Common is in purgatory until 2025 at the earliest without proper administrative action. Preferred have direct claims in DC Circuit which is the quickest route without proper administrative action.
The Biden administration isn’t going to touch this and the courts cannot fully deliver what shareholders need (except direct claims in DC Circuit).
We'll see. I think that there are enough ride-or-die $FNMAS holders and buyers to support 10%+ par value, but there's no knowing at this point.
Court cases are coin flips and don't necessarily deliver resolution (except direct claims in D.C. Circuit). SCOTUS/Court of Claims - 2021. D.C. Circuit - 2022.
Anyone buying after no administrative action better only check every 3 months, because it's going to be a long road.
This should not be considered midnight action as it's been well telegraphed for years - White House Memo, Treasury Housing Reform Plan, etc.
$FNMAS ~$5 / ~20% of par if action is closer to a Letter Agreement. Maybe as low ~15%, but that was pre-Trump and there are 3 live cases (SCOTUS, Court of Claims, D.C. Circuit).
It's early for post mortems. Last week's situation aside, there's no difference between 11/25, 12/18 and 1/15 with regard to any PSPA amendment. I don't think last week mattered, but maybe it did.
“Cake is baked” means that whatever is going to happen was decided weeks if not months ago.
I continue to outline all of the scenarios and discuss what I think of each and what I think will happen.
Wedbush botches the litigation aspect and I wouldn’t consider the PIMCO proximity significant. Moreover, the expectations of common is very bearish and an unlikely outcome in this restructuring and recapitalization.
Coverage initiated on FMCC by Webush
$0 price target
Congrats on winning the 1/1-1/7 common vs. preferred race. You should hang a banner.
PAGE NOT FOUND!
Used to be ACCESS DENIED!
Barrario and Navy killed the PSPA with their leaks!
https://home.treasury.gov/news/press-releases/sm1227
If it's a taking, it's suited for Court of Claims not SCOTUS.
SCOTUS is coin flip at best. Court of Claims odds better.
Refund? LOL.
Convertible debt? No dilution?
What do you think the debt converts to - unicorn farts?
Because there was a takings. This case belongs in Court of Claims. Not SCOTUS.
Judge Sweeney said that the NWS was within FHFA authority. If SCOTUS agrees, Collins is toast.
Not specifically because it’s just a framework. Minimum capital requirement must be met in 4 years, by end of 2024.
Thank you.
CRPs? Already done, buddy.
Capital rule will be implemented on February 16, 2021.
You didn’t know that?
Must read. Irrefutable arguments.
Nope. Late next week.
C. Issue $100 billion of common equity.
Cutting capital rule in 1/2 only benefits shareholders and executives due to buffers. More likely, once GSEs super capitalized, admin. will approach FSOC about SIFMU status.
Minnow eats plankton; thinks he’s at the top of the food chain.
A takings claim is not a constitutional issue for SCOTUS. It's for Federal Court of Claims. Come on, Guido. You're here every day. Read up!
The capital rule is so onerous that it requires both the "slow and long" and "quick and short" recapitalization route. No matter how you slice it, you need to raise AT LEAST $100 billion. The consent orders will expire in 3-5 years and you need to be comfortably above regulatory minimum at that point. The math doesn't work another way. Massive dilution coming. Sorry.
Yellen doesn't have the authority to fire Calabria.
5 more years of retained earnings is still ~$30 billion short of minimum capital and ~$140 billion short of minimum + buffers capital.
Why are you so excited about that?
(I am using a very favorable $20 billion per year in R/E; I expect it to be closer to $15 billion with commitment fee.)
That was part of it.
I don't know why people dismiss "may" vs. "shall."
It's critical, and often used, language in contract law.
3 more years of retained earnings is still ~$70 billion short of minimum capital and ~$180 billion short of minimum + buffers capital.
Why are you so excited about that?
I do it to share knowledge and educate people. It's not very fruitful, but I enjoy when someone says, "you saved me money and heartache" by explaining the benefits of different class ownership. I started in common and read enough preferred shareholder posts to make the switch; very happy that I did. Paying it forward.
Capital market standards would be 10:1 on $25 and 20:1 on $50. Stated/par value of preferred divided by fair market value of common.
Best JPS situation is conversion at low valuation and ride potential common appreciation. Worst case in dividends in a few years. Both results in significant gains from today's prices. It's a pretty clear path with the main variable how long the path takes.
It's hard to evaluate common because it's not just the length of the path but the obstacles along the way - warrants, JPS conversion, SPS conversion, commitment fee, capital standards, etc.
In the next few years, most likely scenario us JPS 3X from here and common 2X from here.
All that extra risk for lower retruns? Shame.