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Deutsche Bank Is First to Settle Fannie Mae, Freddie Mac Bond Rigging Lawsuit
So did FnF get ripped off in these bond rigging lawsuits? Is treasury taking more $$ from them? Yes I am being lazy and I do not want to take the time to research the lawsuits.
https://money.usnews.com/investing/news/articles/2019-09-12/deutsche-bank-is-first-to-settle-fannie-mae-freddie-mac-bond-rigging-lawsuit
Watch CNBC's full interview with Treasury Secretary Steven Mnuchin
https://www.valuewalk.com/2019/09/steven-mnuchin-fannie-mae/amp/
Analyst Raises Fannie Mae Price Target Following Mnuchin Comments
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Wayne Duggan
BenzingaSeptember 11, 2019, 7:07 PM UTC
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Federal National Mortgage Association (OTC: FNMA) and Federal Home Loan Mortgage Corp (OTC: FMCC) are having another big day on Wednesday after investors got some much-needed clarification following last week’s release of a somewhat lackluster Trump administration housing reform plan.
Shares of Fannie Mae and Freddie Mac are each up roughly 30% this week after a key court ruling and testimony by Treasury Secretary Steven Mnuchin have investors feeling much more optimistic about the companies’ future.
Positive Developments
On Friday after the market close, an appellate court overturned a previous ruling upholding the legality of the Treasury’s “net worth sweep” of Fannie and Freddie’s profits. Since 2012, every cent of earnings by Fannie and Freddie have gone directly to the Treasury as part of their ongoing conservatorship.
Investors have sued the Treasury claiming the the net worth sweet was implemented illegally, and Friday’s ruling opens the doors for investors to pursue claims that profits were seized unlawfully.
Following last week’s ruling, Mnuchin said this week he is now negotiating with the Federal Finance Housing Agency, and the Treasury now expects “a near-term agreement to retain their earnings.”
Mnuchin told the Senate Banking Committee that his proposal would be to allow Fannie and Freddie to recapitalize their balance sheets in exchange for a fee paid to the Treasury for its ongoing support throughout the process.
Experts Weigh In
Former hedge fund manager Whitney Tilson said this week the court ruling is a major step in the right direction for Fannie and Freddie investors and has applied significant pressure to the Treasury. Tilson originally recommended Fannie Mae shares to his newsletter subscribers last Thursday, but recommended they take only a 1.5% stake.
Tilson said Fannie Mae shares should be up 50% following Mnuchin’s comments.
“It's clear that investors don't yet fully appreciate the implications of this ruling. That's why today, we recommend buying the second half of the position, making it a 3% holding,” Tilson wrote Tuesday.
B Riley analyst Randy Binner said Wednesday he remains cautious on the outlook for Fannie Mae given all the risks involved in the recapitalization process. However, Mnuchin’s comments were positive enough for him to raise his price target for Fannie Mae from $2 to $3.
“This is a speculative call, but we view FNMA common and preferred securities as a call option on a large and increasingly sophisticated financial company that we believe would thrive in the private market,” Binner said.
B Riley maintains a Neutral rating for Fannie Mae stock.
Benzinga’s Take
If Fannie Mae eventually gets released from government control, it could be a huge home run for investors. However, how, when or if that actually happens is a gamble until a clear plan is officially in place. Regardless, recapitalizing the balance sheet will be an extremely long process, making Fannie Mae a high-risk/high-reward lottery ticket play at this point.
https://finance.yahoo.com/amphtml/news/analyst-raises-fannie-mae-price-190738312.html
Fannie Mae and Freddie Mac Take on the Free Market
? 71 Republic
6 mins ago
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Michael Hoffman | United States
The privatization of Fannie Mae and Freddie Mac seems to be on the U.S. Treasury and Trump administration’s agenda, and with everyone predicting that a recession is on the horizon, it’s starting to feel like 2008 again.
From the Austrian perspective, allowing the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to revert back to quasi-market-based institutions is optimal because it will open up competition and more realistic price discovery in terms of home financing and real estate prices (though not as much as we’d like to see).
With over 50 proposals to overhaul the real estate market, including a “smaller” role in the housing market for the Federal Housing Administration (FHA), the plan seeks to aid those who want to see housing become more affordable. Sounds good right? Not so fast. As the proverbial saying goes, be sure to read the fine print, since no one will be more affected by these potential political and economic changes than prospective American homeowners.
The Faults of Fannie Mae and Freddie Mac
Recall that Fannie Mae and Freddie Mac are, at their core, Government Sponsored Enterprises (GSE). Both are never far from government interference and entanglement. In fact, it looks as if both of them will be paying fees to the American taxpayer through the Department of Housing and Urban Development (HUD) for their protection by the U.S. government. In other words, a bailout.
While some may claim that this is positive news because it makes these two institutions more accountable to Americans, there are two problems. On the one hand, the taxpaying public being accommodated is not a bad thing… assuming that compensation actually reaches their wallets. “But fees paid by the companies would inevitably be absorbed into HUD’s budget rather than going directly to help low-income borrowers,” according to the chief executive of the National Housing Conference, David M. Dworkin.
More importantly, it still leaves room for moral hazard and thus bailouts. A company that believes, or in this case knows, that it will be protected by the government should it get into financial trouble will take on more risk relative to potential profits. These two housing giants have a deep history of dancing with the risk-taking devil, so one should be more than skeptical of any proposal that allows for a de facto bailout.
But wait, there’s more. It’s been argued that these plans are “shameful” and will make housing less affordable. Mortgages will, allegedly, be more difficult to obtain for credit-worthy borrowers. Does this ring a bell?
The Necessity of a Sustainable Economy
The U.S. is now in the longest economic boom in its history, and any Austrian economist worth his salt who’s been paying attention for the last decade knows that this false boom is a bubble just waiting to pop. Rising housing prices are an indication of a lack of supply of affordable housing, and artificially low-interest rates influenced by Federal Reserve monetary policy. This has created a boom in housing which has seen an immense rise in mortgages and rents.
The question, therefore shouldn’t be whether housing is affordable. It should be whether housing prices are sustainable. In the Austrian theory of the business cycle, resource constraints and relative prices reveal that the pattern of investment in industries such as real estate has been mistaken, and this malinvestment must be liquidated in order for labor and capital to be reallocated to industries that in more need of such services. It’s become evident that current housing prices cannot be justified with the supply of moderately-priced housing inadequate with the current demand.
The only way for housing to be more affordable in the long-run is to let the price mechanism work without interference from central banking or government policy, even if their aim is to increase homeownership. The plans of the U.S. Treasury and Trump administration seem to bring the economy closer to this ideal, which does sound enticing. But if history is any lesson, the government should sever its ties with these institutions entirely because if it doesn’t, we’ll repeat the housing crises of the past.
https://71republic.com/2019/09/12/fannie-mae-freddie-mac-free-market/amp/
Certainly the fifth circuit decisions empowered the plaintiffs tremendously. They have leverage/time and leverage/fifth circuit rulings
Also who would buy not knowing the outcomes of pending lawsuits?
I have read the opinions of many on this board and also in the interviews that all lawsuits must be settled to interest new buyers. Who would buy thinking that this could happen again?
Thank goodness their backs are to the wall
There is a lot to do and....tic toc. After listening in yesterday it is obvious that plaintiffs have a lot of leverage. Negotiating a settlement quickly is imperative for govt.
Go FnF!
And yes we are looking better than ever.
Watch CNBC’s full interview with Treasury Secretary Steven Mnuchin
https://timothysumer.wordpress.com/2019/09/12/watch-cnbcs-full-interview-with-treasury-secretary-steven-mnuchin/amp/
Mnuchin says the Treasury is ‘seriously considering’ issuing a 50-year bond next year. Video
https://www.cnbc.com/2019/09/12/mnuchin-says-the-treasury-is-seriously-considering-issuing-a-50-year-bond-next-year.html
Can you say "The Art of the Deal"?
U.S. Treasury eyes action on Fannie Mae, Freddie Mac by month's end: Mnuchin
https://wincountry.com/news/articles/2019/sep/12/us-treasury-eyes-action-on-fannie-mae-freddie-mac-by-months-end-mnuchin/936592/?refer-section=national
Gap will fill faster than you can say Jack Robinson
The president approved the plan. You do not think that is news. You are hard to impress.
Go FnF!
I bet some TBTF representatives are slapping Mnooch about the face and neck for spilling the beans.
$4.00 Plus
Go FnF!
I think this is a well orchrestrated plan that began with Trump's run for president. All involved knew the theft would be revealed by the courts eventually. The administration just had to wait on them. The administration didn't want to run afoul of so many in Congress. Now they can say that their hands are forced. The courts require shareholders to be made whole for the unconstitutional taking of the (OBAMA) NWS. Blaming Democrats is a cherry on top. Very politicly savy. The Trump administration just had to be patient and wait on Lady Justice in some form.
Go Fnf
P.S. the game is still on!
The real plan is to negotiate with lawsuit defendants. No settlements=no recap
Yes he really said that
Great coverage. This is what we need from Fox
I can not get the idea of risk out of my head. If the committment fee is low and the government backstop is there because FnF are fully capitalized and their credit is as high as credit can be rated, investors would be lured. Also they are no risk for the government. They wouldn't even need a backstop except for the perceived security that the government would never have to provide. Nice racket!
Did you listen to the call? Remember the attorney said that they would go back for every penny of overpayment. They may collect it but they will not keep it.
Sorry that was supposed to read govt. grip
At least I cought spell check changing tentacles to testicles
Trying to get out of the goat's grip is like wrestling with an octopus. I can't get all of their tentacles off of my fannie.
Insurance policy payments
Why would they need a funding commitment after they are fully self funded and have paid treasury back and cancelled the new senior preferred shares. Surely there could be some continually lesser committment fee. In any case the risk dissipates as they become more funded. The govt could just go after the new competition for the commitment fees.
I am just trying to think about this like other insurance in broad easy terms.
My Fannie needs a make over!
Don't think every bit of it is not true. Truth is stranger than fiction. Or...
You can't make this shit up!
Welcome aboard. The Polar Express is warming up her engines.
That article is from yesterday!
Sike!
What happened to the original FnF windfall that started the third amendment nws. Where did the 42? Billion go? Where did the bank lawsuit money go?
Kthomp what are your thoughts on another SPSA. One that has a modest and reasonable return for treasury. One with clear language terminating the agreement when treasury is paid back. I am not talking about anything like this mess that we are in. If treasury wants a return for their explicit guarantee it could be worked into that. Again I am talking about a reasonable fee. I read earlier someplace 7 billion a year for such which is way too high. If govt wants a deal done quickly they should be reasonable. Work it into the lawsuit settlements so that they are not held responsible for the fraudulant accounting. DOJ could still go after them for criminal activity but not shareholders. Just a thought.
Agreed. The share price was much higher than it is now when congress was still trying to push wind down legislation through. We need a public image makeover. Maybe Calabria can be on Dances with the Stars!
Is it possible that treble damages and fake accounting and loan shark interest rates etc. will be discussed/negotiated now? Are all of these things separate and have to be litigated separate.
Did anyone hear the atty. say that there is another lawsuit that needs to be settled before they can ipo? The lawsuit must be paid by the companies. This lawsuit is in the billions of dollars. Nobody will be a part of an ipo if FnF have a pending possible multi billion dollar tab to pay plaintiffs.
Time is of the essence.
Good for you navy. You got through. You actually asked 3 questions right? Can we stick it to them?
Thanks brooge. I forgot it was eastern time I would have missed the whole thing.
Mnooch said hopefully in September. He seems even less committed the Mnooch.
I believe we are setting up for a stairway to heaven pattern followed by ascending nervana
Go FnF!
Mnooch is always noncommittal, vague and general.
We MAY appeal.
That is what we are looking at.
Those are the two responses that I remember. He knows exactly what the process is.
No, the Fidelity $7.50 limit. I imagine I could live with selling at $150.00