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The activist investor has increased his ownership of the government-sponsored enterprises
Published: October 13, 2014 at 9:17 am EST
By: Troy Kuhn
Billionaire activist investor, Bill Ackman has increased his stake in the mortgage finance companies, Fannie Mae (FNMA) and Freddie Mac (FMCC).
Last year, Mr. Ackman revealed a near-10% stake in the mortgage giants, which is believed to have been extended. The majority ownership of both government-sponsored enterprises (GSEs) resides with the US government.
Mr. Ackman continues to have faith in the GSEs, despite the problems they have lately faced. Following a federal court ruling last month, Fannie and Freddie shares plunged. These issues are mostly down to the dispute between shareholders and the government. On September 29, Perry Capital and Fairholme Capital, major stakeholders in Fannie and Freddie, filed a suit against the government in a US District Court.
The suit alleged that the government had mistreated shareholders after the 2008 bailout. Under a 2012 amendment to the bailout conditions, the Treasury seized most of Fannie Mae and Freddie Mac’s profits. Judge Royce Lamberth dismissed the suit, which drove down the stock prices of the two companies by about 50%.
Under the initial bailout conditions, the government was entitled to receive a 10% dividend on the preferred shares of both GSEs. The 2012 amendment entitled the government to receive nearly all the profit generated by the GSEs. However, no amount would be transferred in the event of a loss.
Mr. Ackman did not lag behind, filing his own suit with the Court of Federal Claims. His case was not dismissed by Judge Lamberth last month, despite being similar to those of Perry Capital and Fairholme Capital.
With this increased investment, Mr. Ackman continues to see great upside potential in the mortgage giants. Earlier this year, he claimed that their prices could go up to the $23-47 range. However, Pershing Square did not disclose the actual heft of its ownership.
Mr. Ackman believes that the 30-year fixed mortgage market Fannie and Freddie cater to is of immense importance to the overall housing market. He asserted that Fannie and Freddie should dispense with their fixed-income arbitrage business, which he claimed suffered the brunt of the 2008 financial crisis. He added that the focus should instead be on guaranteeing middle-class mortgages for credit-worthy borrowers.
Confidence in these GSEs by Bill Ackman and others investors has helped Fannie and Freddie slightly recover its stock price losses. As Fannie and Freddie’s financial troubles continue, these investors could serve as a last-ditch effort for the mortgage giants.
By close of trading on Friday, shares of Fannie and Freddie had regained 7.39% and 10%, respectively.
http://www.bidnessetc.com/27144-bill-ackman-extends-stake-in-fannie-freddie/
Ackman eyes new purchase, talks Frannie, Allergan
Oct 13 2014, 08:58 ET | By: Stephen Alpher, SA News Editor
"The cash that we've raised we intend to use for a new commitment," says Bill Ackman tells Bloomberg following the European IPO of Pershing Square Holdings. "We have a new investment we're going to announce probably in the next 45-60 days."
"We bought a lot more Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC) stock in the week or so since the adverse court decision ... I think we increased our position by about 20%." Ackman finds it interesting Judge Lamberth weighed in on the taking plan even though it's out of his court's jurisdiction.
"I think a new board will likely be installed at that date," says Ackman of Allergan (NYSE:AGN) and the December 18 shareholder meeting. He thinks it highly remote that he won't be able to vote his 9.7% stake in the company.
http://seekingalpha.com/news/2027125-ackman-eyes-new-purchase-talks-frannie-allergan
Misery loves company. I bought some more today below $2.00. There could be a light at the end of this tunnel.
Has this news factored into the stock price yet?When Southwest Airlines called for the repeal of the Wright amendment 10 years ago, the shouts of alarm and anger were immediate. American Airlines, Dallas/Fort Worth International Airport and their supporters launched massive campaigns that made one consistent point: Opening up Dallas Love Field would cause major damage to D/FW, American and the other airlines there.
But with the 1980 law set to expire on Oct. 13, there is no such noise resounding. The reaction now from both American and airport officials: Eh, whatever.
“Will it have an impact? Sure, it’ll have an impact,” D/FW Airport chief executive Sean Donohue says. “Do I think it’ll be a big impact? No.”
“Net-net, we’re not going to say that’s not a financial hit to the company,” American Airlines executive Andrew Nocella said. “But at this point, I just don’t believe it’s material.”
Wright Amendment FAQ
The Wright amendment, with its limits on flights at Dallas Love Field, is nearly 35 years old, and its history is tied closely to Dallas/Fort Worth International Airport and its two owner cities, Dallas and Fort Worth. For those unfamiliar with its background, we offer this primer.
QUESTION 1 OF 7
What is the Wright amendment and why are we talking about it?
The Wright amendment was a federal law signed in early 1980 that limited service at Love Field. Now, much of the law goes away as of Oct. 13.
The end of the Wright amendment and the opening up of Love Field will bring consumers more choices and lower fares — at least initially. But experts note that D/FW and American will continue to dominate the market with many more gates, flights and destinations, including international cities that Love Field airlines cannot serve.
The Wright amendment, enacted when D/FW Airport was barely 6 years old, put limits on potential competition from smaller, older Love Field.
The law, named after its author, U.S. Rep. Jim Wright, D-Fort Worth, allowed nonstop flights from Love Field only to Texas and four adjoining states. Not only could airlines not fly beyond those states from Dallas, they could not sell a ticket for a flight from Dallas to points beyond that handful of states.
Dallas-based Southwest grudgingly lived with the law for nearly 25 years. But in November 2004, its new CEO, Gary Kelly, declared that the law had outlived its usefulness and had to be repealed.
His declaration of war kicked off 1½ years of debate, consulting studies, closed-door meetings and tough negotiations. Then, in June 2006, the mayors of Dallas and Fort Worth, the top executives of Southwest and American and airport officials announced they had come to a compromise that would do away with the Wright amendment — eventually and mostly.
Under the compromise, airlines would be allowed to fly nonstop anywhere out of Love Field — but only to U.S. cities. International cities were still off limits to nonstop service.
And the repeal wouldn’t come until eight years after Congress passed a bill and President George W. Bush signed it into law, which occurred Oct. 13, 2006.
Until then, airlines could sell tickets to any U.S. destination, but their flights and their passengers had to make at least one stop in the five original states or four others that had been added since 1980.
The compromise also said that all the existing gates at Love Field would be replaced with a new 20-gate terminal. The old facilities would be torn down and paved over. The 2006 deal even prohibited airlines from parking an airplane away from a gate and rolling out stairs to unload the passengers as a way to add a little capacity. Twenty gates. That was it.
View from both sides
One participant with a view from both sides of the D/FW vs. Love Field controversy is David Cush. As an American Airlines senior vice president, he helped lead that carrier’s fight against changing the Wright amendment and helped craft the eventual compromise.
But in November 2007, he left American to take the CEO’s job at Virgin America, a new carrier that began flying out of San Francisco and Los Angeles that summer.
Virgin America will move it’s North Texas flights from D/FW to Love Field on Oct. 13. (David Woo/Staff Photographer)
Virgin America will move it’s North Texas flights from D/FW to Love Field on Oct. 13. (David Woo/Staff Photographer)
It was a well-planned-out sunset of the Wright amendment that allowed everyone to adjust accordingly, and allowed the city of Dallas to go in and build a beautiful new terminal.
— David Cush, CEO at Virgin America
Virgin started service to D/FW Airport in December 2010. It will leave D/FW and move its North Texas flights to Love Field on Oct. 13.
Cush fought hard against opening up Love Field as an American executive, then fought hard this year to get Virgin America into Love Field. In an interview last week, he explained why it was a bad idea then, but is a fine idea now.
“A couple of things have changed. One thing is that American Airlines is a much stronger carrier than it was in 2006. It was still reeling from the recession, 9/11 and everything else. I think within our headquarters we just thought we were at a particularly vulnerable time for our airline,” Cush said.
“Secondly, I’d say the biggest headache we had with it at the time was that Southwest was arguing for an immediate repeal rather than a sunset. Where we ended up was a sunset that allowed the carriers as well as the airport to prepare for the change,” Cush said.
He called the Oct. 13 opening up of the Dallas airport “one of the most significant network changes in the U.S. in decades. Essentially, you’re going from a constrained environment to an unconstrained environment in one of the largest aviation markets in the country.”
However, he said: “I think ultimately where we ended up — where the city ended up, where American ended up, the airport and Southwest — was the best place. It was a well-planned-out sunset of the Wright amendment that allowed everyone to adjust accordingly, and allowed the city of Dallas to go in and build a beautiful new terminal.”
Donohue, a former United Airlines and Virgin Australia executive who took over the D/FW Airport top job last year, said that even with new nonstop destinations out of Love Field, airlines at D/FW will offer more flights on those routes than airlines at Love Field.
“If you look at the new cities that are going to be flown to out of Love Field and you compare the service out of D/FW, the service out of D/FW will still be 70 to 75 percent of the market,” he said.
Since Oct. 13, 2006, travelers could fly to any U.S. city out of Love Field as long as they made that one stop within the Wright perimeter. That new freedom concerned some who worried that it would draw traffic away from D/FW Airport.
http://res.dallasnews.com/interactives/dfw-love-field/
Ackman Boosts Fannie Mae, Freddie Mac Positions By Approximately 20% by VW StaffOctober 13, 2014, 8:41 am
In an interview with Bloomberg’s Hans Nichols from the Euronext Amsterdam, Pershing Square Holdings Founder and CEO Bill Ackman said, he’s preparing to buy a ‘decent-sized stake’ in a U.S. based company, “The cash that we’ve raised we intend to use for a new commitment. So we have a new investment we’re going to announce probably in the next 45-60 days, and the capital will go for that new investment.”
Ackman told Nichols that Pershing Square can exist and do well without him, ” I’m not planning on going anywhere. But we’ve actually built Pershing Square Holdings with a key man provision that says if I were to disappear, then shareholders could elect — would have vote to continue the entity and I think that vote would be a favorable vote. It’s been a very good, it’s been a good place to have capital for the past 11 years.”
Ackman and Nichols also discussed Allergan, Inc. (NYSE:AGN), Herbalife Ltd. (NYSE:HLF) and Federal National Mortgage Assctn Fnni Me (OTCB:FNMA) and Federal Home Loan Mortgage Corp (OTCB:FMCC).
Bill Ackman
Bill Ackman
Bill Ackman video and transcript below
On whether he considers himself a crybaby shareholder:
“No. Maybe Carl Icahn might call me that in the old days, but no. The answer is — I think the reference was to the fact that in those days governance was not something top of mind for many corporations. I think it’s become much more top of mind as a result of shareholder activists and shareholders being more engaged in the businesses that they own. So I think it’s a very positive trend.”
On seeing ‘trades’ to the end of the earth:
“We do not even called them trades. No, I mean, they’re investments. Pershing Square Holdings, we think of it like an investment holding company. We are not Berkshire Hathaway, but I think that’s not a bad business model. You think about a long duration investment strategy. We will only invest in the public markets but we will buy large stakes in public companies like we did in the past. This will enable us to have a capital base that matches the duration of our investments.”
On thinking of himself more like a Warren Buffett instead of a Carl Icahn:
“I think — I think that’s a better choice. I mean, I’m friendly with Mr. Icahn and he’s done a fabulous job but in terms of investment strategy, we’re much more like Berkshire Hathaway than Icahn.”
On his definition of an activist investor:
“I think it’s not necessarily related to duration. I mean, there’s all different kinds of shareholder activism and there are all different ways to make money. What we like about what we do is we buy a large minority stake in an underperforming business. We will work with the management teams and boards and shareholders to make changes that help the business become more profitable. And we’ll get the benefit of that. Typically, our typical holding period for an active investment is four, five, six years. What’s good for other shareholders is most of the capital in these large companies. And as a result, shareholders have very little input over the companies that they invest in. But because we are sort of a lead shareholder, we can create options, alternatives, sometimes management change, sometimes board change, and all of the shareholders benefit. We do all of work and all the shareholders benefit. The quid pro quo is we get supported by the large and the small shareholders.”
http://www.valuewalk.com/2014/10/ackman-fannie-mae-freddie-mac-positions/
Google is my friend.
Elizabeth Warren: Obama sided with Wall Street over people losing their homes
an interview with Salon’s Thomas Frank, Massachusetts Senator Elizabeth Warren lashed out President Barack Obama and his administration for repeatedly protecting Wall Street’s interests over those of the American people.
She began, however, on a somewhat conciliatory note, saying that “Democrats have not done all that they should, but at least we’re out there fighting for the right things,” whereas “Mitch McConnell has announced that if he gets the majority in the Senate, his first objective is to repeal healthcare and his second is to roll back the financial reforms, and in particular to target the Consumer Financial Protection Bureau — the one agency that’s out there for American families, the one that has returned more than four billion dollars to families who got cheated by big financial institutions.”
“When I think about the president, for me, it’s about both halves,” Warren continued. “If Barack Obama had not been president of the United States we would not have a Consumer Financial Protection Bureau. Period. I’m completely convinced of that.”
“[H]e was the one who refused to throw the agency under the bus and made sure that his team kept the agency alive and on the table. Now there was a lot of other stuff that also had to happen for it to happen. But if he hadn’t been there, we wouldn’t have gotten the agency.”
And yet, she added, “[a]t the same time, he picked his economic team and when the going got tough, his economic team picked Wall Street.”
“They protected Wall Street. Not families who were losing their homes. Not people who lost their jobs. Not young people who were struggling to get an education. And it happened over and over and over. So I see both of those things and they both matter.”
She concluded on a somewhat more hopeful note, saying that while corporate entities have the “advantage, and boy have they played it out for 30 years now — concentrated money and concentrated power. And you can do a lot with concentrated money and concentrated power.”
“But our side — we have our voices and we have our votes. If people get engaged on the issues, the votes are on our side. Seventy-five percent of America wants to raise the minimum wage. That’s where we’ll head.”
http://www.rawstory.com/rs/2014/10/elizabeth-warren-obama-sided-with-wall-street-over-people-losing-their-homes/
Federal government/mafia extortion....seems to be no difference
Just after announcing his resignation as U.S. attorney general, Eric Holder has accepted a top job with Wall Street finance giant JPMorgan Chase.
Starting in early November, Holder will serve as JPMorgan Chase's chief compliance officer, where his responsibilities will include lobbying Congress on the company's behalf and ensuring it "gets the best deal possible" from any new proposed financial regulations. Holder will also fetch morning coffee and breakfast orders for CEO Jamie Dimon and board members.
Jamie says "I am thinking of a position for you." Eric says "I am thinking of a higher position." Jamie says"It's a deal."
“I’ve become a symbol of what they don’t like about the positions this Justice Department has taken. I am also a proxy for the president in an election year. You have to be exceedingly naive to think that [contempt] vote was about .?.?. documents.”
http://www.drudge.com/news/182278/eric-holder-takes-77-million-job
The central bank introduced the New Deal ten trillion mortgage balance or the securitization
People Beijing October 12 electric central bank, the China Banking Regulatory Commission on September 30 jointly issued the ” Circular on Further Improving housing finance service notice” content , in addition to arouse great concern mortgage release policy , but also to encourage the banking industry financial institutions to support through the issuance of mortgage-backed securities (MBS), a variety of measures issued for a period longer special financial bonds to raise funds dedicated to increasing the first set of ordinary housing and improve the type of ordinary housing loans content. Experts interviewed pointed out that the current size of about ten trillion of bank housing loans securitized most worthy , once securitization will have 10% of the premium. But its scale will take time.
“The most worthy of securitization is the size of about one hundred thousand million of bank housing loans , which is part of the loan assets with high market value , once securitized approximately 10% of the premium .” Tsinghua University professor David told People when financial exclusive interview that he found around the research, now for various reasons , the market focus is on the securitization of corporate loans . But he believes that this is the most difficult “because companies only banks have a lot of information , this information is listed after the package lost .”
David pointed out that securitized assets are those most worthy of mortgage , asset quality is good , the underlying assets can be appropriately transferred . Housing loan comes as such assets .
MBS (Mortgage Backed Security mortgage- backed securities ) first appeared in the 1960s in the United States , refers to banks and savings institutions to use their mortgage lending , and an asset securitization products issued . Combing through the media , our country so far from the 2005 decade , successfully issued only had three single MBS. 2005 ” Chien 2005-1 issuance of mortgage-backed securities became the country’s first single- MBS, after two years, the total amount of 4.021 billion yuan of ” Chien 2007-1 personal housing mortgage loan securitization trust asset-backed securities . ” again the issue , then , MBS business into a seven-year period of stagnation , therefore , in the promotion of MBS business, the industry believes that its scale will take time.
Institute of Finance, the State Council Development Research Center researcher before WU Qing said in an interview , due to narrowing spreads , as well as preferential mortgage interest rates , the interest rate market environment, coupled with the already-formed , high funding costs of banks, these factors determine the bank will not positive for through the issuance of mortgage-backed securities (MBS) financing .
Shanghai Pudong Development Bank according to the report , despite the central bank and the CBRC to encourage banking institutions to issue MBS, but the stock of mortgage securitization will not launch a large scale in the near future .
The report notes , first , there are more alternative asset markets high-yield , high when investor risk appetite , MBS assets may be less attractive ; Second, in debt for a long period of decline in overall financial institutions , long period of MBS assets docking difficult to find funding ; third , the last 10 years is the real estate boom , the lack of micro- pricing default rates , prepayment rates and other parameters of reliable empirical estimation .
Another industry in media admitted that China lacks similar to the United States , ” two rooms” ( Fannie Mae and Freddie Mac ) in the body. “Two rooms” for the American mortgage secondary market provides a strong liquidity and stability , while domestic banks to issue MBS not a foothold that boost the real estate industry , but also from the current time point of view, then large lending to real estate companies do not meet the bank’s risk management principles to stimulate the real estate market through the issuance of MBS utility will not be too obvious.
http://www.enews163.com/2014/10/12/the-central-bank-introduced-the-new-deal-ten-trillion-mortgage-balance-or-the-securitization-76601.html
GIBI gurus suggest feasting on the market’s downtrodden
Published: 11 October 2014 07:56 PM
Updated: 11 October 2014 07:56 PM
Last week’s GIBI Investment Symposium at the Winspear Opera House dished out an eclectic
assortment of tips — from the maker of Barbies and Hot Wheels to a luxury goods company in Switzerland.
The eighth annual charitable GIBI, which stands for Great Investors Best Ideas, featured nine high-profile money managers who offered their picks for getting rich — or richer — in the upcoming months.
T. Boone Pickens likes Marathon Oil Corp. His reasoning: The stock is cheap. The company is leading production growth in the lower 48 states vs. its industry peers, and it’s reining in its international risk.
Michael Price, managing member of MFP Investors LLC, likes Dolby Laboratories Co. Its stock is down. Eighty-five percent of its revenue comes in the mailbox as royalties. Sales of PCs (which use Dolby’s patented noise reduction technology) have stabilized. And there is $11 a share in cash sitting on its balance sheet, which also happens to be debt-free.
“Dolby is a way undervalued stock,” Price said. “It would be very attractive to private equity firms that take intellectual property companies private and to companies like Apple that use its technology.”
Bill Ackman, best-known in these parts for his unsuccessful foray with J.C. Penney Co., pushed the idea of buying Fannie Mae and Freddie Mac common stock. The Pershing Square hedge fund manager is among the institutional holders suing the government over its bailout agreement with the two companies. Ackman is convinced the plaintiffs will be victorious in the end.
Bill Miller, portfolio manager for Legg Mason Opportunity Trust, likes depressed housing stocks, particularly Pulte Homes Inc., Lennar Corp. and KB Home Co. “The housing companies are doing fine, but their stocks are not,” he said.
U.S. household net worth, GDP, corporate profits and cash balance sheets are at all-time highs, and the stock market is close to its highest point ever, Miller said. “Yet single-family housing starts are a third of what they were at the peak.”
He pointed out that former Federal Reserve Chairman Ben Bernanke was recently turned down when he tried to refinance his mortgage. “True story,” Miller said. “Credit’s pretty tight out there.”
So why on earth is he betting against the den of housing bears?
The Fed won’t increase interest rates until it sees more recovery in the housing industry. All the big builders are trading at below-market multiples. He and his team expect earnings of Pulte, Lennar and KB Home to grow 15 to 20 percent annually for the next several years.
Tom Russo, managing member of Gardner Russo & Gardner LLC and a protege of Warren Buffett’s, likes Compagnie Financiere Richemont SA, a Swiss family-controlled global consumer products company. It’s built a terrific franchise in its jewelry and watch businesses, he said. The stock has been unduly depressed by fears of the Apple watch, a slowing Chinese economy and currency concerns.
Some suggestions were too complicated for my mind to absorb, such as Japanese general trading companies and conversion of paper-and-packaging companies into a master limited partnership.
$1,000 a ticket
The audience paid $1,000 per ticket to attend the annual event. All proceeds, about $1 million this year, go to the Michael J. Fox Foundation for Parkinson’s Research and Vickery Meadow Youth Development Foundation — favorite causes of GIBI’s founders, investment manager Shad Rowe and real estate developer John Neill.
But GIBI is as much about how these guys — and yes, this year they were all men — make decisions as it is about the choices they make.
Legg Mason’s Miller enjoyed an unprecedented string of 15 years of beating the market, from 1991 to 2006, before getting his comeuppance. He’s back in the saddle as a top performer.
He told the gathering to forget about what economists predict or market timing. “Both are fruitless exercises,” Miller said.
Since 1982, economists asked by The Wall Street Journal to predict the direction of interest rates in the next six months have been wrong nearly three times as often as they’ve been right, he said.
Trying to time the market is an even bigger mistake. From 1928 to the time of Miller’s talk, there have been 31,633 trading days. “If you missed the 90 best days, you had a negative rate of return. And those 90 best days most often occurred in the bottom of a bear market,” he said.
October fallout
You could call Ray Nixon’s strategy the Hunt for Red October.
Five of the six worst drops in the S&P 500 came in the month of October. There are a number of reasons for October fallout, said Nixon, portfolio manager at Barrow, Hanley, Mewhinney & Strauss.
Retail brokers want to make commissions. So they entice clients to sell off the pigs in their portfolios — which they previously enticed them to buy — by waving the opportunity to use the losses as tax write-offs.
The fiscal year for mutual funds ends in October. Portfolio managers don’t want to talk about their worst performers when they write their annual reports.
So Nixon looks for tax-loss candidates.
The stock price has taken a pretty good hit but has a good dividend yield. The company’s balance sheet indicates that it won’t become insolvent in the next quarter or two.
He also looks for insider buying, which he isn’t seeing much these days.
You should begin buying these outcasts in October but spread out your purchases through December, he said. Try to hold your positions until February.
“When the selling subsides at the end of the year, there is a good chance that these stocks will bounce,” Nixon said.
If you get lucky, these short-term trades become long-term investments. He bought Southwest Airlines at the end of 2012 as a possible short-term rebound. He’s still holding the airline stock.
Tax-loss candidates
“Every single idea that was presented was
a tax-loss candidate,” Nixon said after the event. “The market is on a five-year tear. We didn’t pitch stocks that are hitting new highs.”
So what’s his tax-loss candidate thi
s year?
Mattel, which is down 34 percent year to date.
Its troubles started last December when Christmas shoppers didn’t buy as many toys as expected. The company has missed quarterly earnings estimates for three consecutive quarters. Two weeks ago, it lost its all-important Disney Princess license.
So why did Nixon decide to buy it?
Mattel still has the princess rights through 2015. Growth in the middle class overseas will be good for toys. Richard Dickson, who turned Barbie around in the mid-2000s, rejoined the company a few months ago. And Mattel has $1 billion in cash on the balance sheet.
And besides, he has eight grandkids and a ninth on the way.
http://www.dallasnews.com/business/columnists/cheryl-hall/20141011-gibi-gurus-suggest-feasting-on-the-markets-downtrodden.ece
Masters in Business: Buckingham Principal Larry Swedroe [Audio]
by VW StaffOctober 11, 2014, 8:33 pm
Bloomberg View columnist Barry Ritholtz interviews Larry Swedroe, principal and director of research for Buckingham Asset Management, LLC and principal of BAM Advisor Services, LLC. They discuss interest rate risks, investments and economic forecasts. This commentary aired on Bloomberg Radio.
http://www.valuewalk.com/2014/10/masters-business-buckingham-principal-larry-swedroe-audio/
The Fannie Mae and Freddie Mac Conservatorship: Bankruptcy Without Rules by Investors Unite
The Fannie and Freddie Conservatorship: Bankruptcy Without Rules
Slush Fund. Say it with us: Slush. Fund.
Those two words are the only two words that come to mind when certain bureaucrats think of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). Otherwise, they would free them from the shackles of the conservatorship. Putting aside the need – and yes, we agree there is a need – for overall reform of the government-sponsored enterprises, Fannie and Freddie are doing quite well, and have been doing quite well for some time now. In fact, as Investors Unite Executive Director Tim Pagliara likes to say, there’s only one kind of institution that repays a $187.5 billion loan at 10 percent interest in under four years: the kind that didn’t need it in the first place.
Cliff Rossi, former Chief Risk Officer for Citigroup’s Consumer Lending Group, authored an op-ed in today’s American Banker that puts to rest of the misunderstanding that the only way out of the conservatorship is through congressional action or the courts. In fact, it is fully within the scope of the Federal Housing Finance Agency to end the conservatorship, which would resolve a lot of the outstanding issues to shareholders and protect taxpayers. Dr. Rossi is also the Executive in Residence and Professor of the Practice at the Robert H. Smith School of Business at the University of Maryland, and last week, he presented a paper on this topic at an Investors Unite event on Capitol Hill in Washington, D.C.
From Dr. Rossi’s op-ed in today’s American Banker:
“One approach to accelerating a recapitalization of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) would be to cancel the Treasury’s senior preferred stock by declaring it “paid back,” re-characterizing past payments of the profit sweep (minus the 10% dividend sweep) as a paydown of principal. The value from that cancellation would flow up through to the remaining common stock, benefitting the Treasury as owner of 80% of the common stock through the warrants that it still would hold.
“Taking the step to end the conservatorship and recapitalize Fannie Mae and Freddie Mac is in the best interest of the taxpayers by monetizing a substantial profit from their investment in the GSEs over the last six years. And with changes already in place, coupled with strict risk-based capital rules, this step would virtually eliminate future taxpayer exposure to housing crises.”
Lawmakers have been vocal in their criticism of the firm “no release” policy FHFA seems to have taken on the conservatorship, which at this point is nothing more than a bankruptcy without any rules. For example, Congressman Maxine Waters (D-CA) served in Congress with FHFA Director Watt, who represented parts of North Carolina in the House before being appointed to the FHFA post, and understands the harm in a permanent conservatorship. She is also a passionate voice for minorities, many of whom are seeing even fewer opportunities for home ownership as Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) linger in bureaucratic limbo. Dr. Rossi goes on:
“As many, including Congresswoman Maxine Waters, have noted, the conservatorship — now in its sixth year — was never meant to be permanent; nor was the government’s 100% profit sweep meant to be perpetual. With the agencies in conservatorship, the federal government has effectively engineered a redistribution of capital out of housing and into the budgetary ether to help cover costs associated with the payroll tax cut extension through higher guarantee fees and by siphoning off profits from the companies well in excess of the costs incurred by the government to cover GSE credit losses.
“To date the agencies have paid back either through dividend or profit sweeps a total of $218.7 billion against draws of $189.4 billion, putting the taxpayer back in the black. That’s without taking into account the value of the preferred shares or warrants received by Treasury that give the holder the option to purchase up to nearly 80% of the common stock of both companies. Conservative estimates on the preferred share and warrants provide another $200 billion or more to the taxpayer.”
Another former U.S. House colleague of Watt’s, Eva Clayton, authored an op-ed recently in the Charlotte (North Carolina) Observer:
“The conversation has floundered on finding the best policy prescription to reform Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) in a way that prevents the organizations from further burdening taxpayers, while putting in place housing policy that builds wealth for communities and families. Regrettably, this is typical Washington: trying to solve problems that don’t exist or pushing a legislative solution that addresses the wrong problem.
“There is an immediate and clear path forward. It begins with ending the federal government’s conservatorship of Fannie Mae and Freddie Mac and thereby allowing them to rebuild and flourish in the marketplace.”
Despite the preponderance of voices calling for an end to the conservatorship – and an end the illegal takings under the Third Amendment – we can certainly understand government bureaucrats’ opposition to it. After all, with Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) continuing to send tens of millions of dollars to the U.S. Treasury general fund, Treasury can claim the deficit isn’t as bad as it actually is. And so we end this exactly where we began: SLUSH. FUND.
http://www.valuewalk.com/2014/10/fannie-mae-freddie-mac-conservatorship-bankruptcy-without-rules/
Yes. This circus just keeps getting better and better. I am happy that more articles are being written and more light is being shed on the blatent theft.
If Congress Won't End GSE Conservatorship Soon, FHFA Can
Clifford V. Rossi
OCT 9, 2014 10:00Last week, a D.C. District Court Judge struck down a lawsuit brought by shareholders in Fannie Mae and Freddie Mac who had been seeking to stop the government from taking the profits from the two agencies. The suit will be appealed, but setting aside the legal disputes for a moment, the U.S. government still has a big issue to confront: what to do about the two government-sponsored enterprises.
Congressional inaction has effectively forestalled any serious plan for bringing Fannie and Freddie of conservatorship. The sheer complexity of GSE reform, coupled with a nearly unprecedented schism between political parties, explains why comprehensive change is, for the time being, elusive at best.
The situation is untenable. Under the current provisions of the agreements swapping preferred stock in the agencies for a Treasury backstop against credit losses, taxpayers effectively remain on the hook for future losses associated with outstanding mortgage-backed securities guaranteed by the agencies — which total approximately $6.5 trillion — until some resolution of Fannie and Freddie is completed.
Meanwhile, the U.S. housing finance system languishes in a form of suspended animation that poses considerable uncertainty to private investors and potential homebuyers alike. The right outcome for GSE reform, namely comprehensive legislation addressing Fannie Mae and Freddie Mac, is unlikely to occur for the reasons cited above.
However, a solution is feasible that would bring private capital back to housing markets, prevent future taxpayer bailouts of the agencies in all but extreme scenarios, and address the issues that precipitated the demise of the GSEs is feasible.
This solution is already possible within the Housing and Economic Recovery Act of 2008 by granting the Federal Housing Finance Agency authority to bring the housing GSEs out of conservatorship. It is important to keep in mind that conservatorship was not meant to be a long-term solution for the GSEs and the same broad powers that allowed the federal government to place the agencies into conservatorship also allow it to reconstitute both companies.
The principal factors directly attributable to the GSEs entering conservatorship -weak regulatory oversight, low capital requirements, unchecked retained portfolio growth, and poor underwriting standards — have effectively been addressed with one exception (the capital part). And with stronger regulatory oversight in place in the form of the FHFA, establishment of strong capital requirements would also be feasible and a prerequisite to any post-conservatorship environment for the GSEs. Had these deficiencies been addressed earlier, Fannie and Freddie would have survived the mortgage crisis battered but intact.
As many, including Congresswoman Maxine Waters, have noted, the conservatorship — now in its sixth year — was never meant to be permanent; nor was the government's 100% profit sweep meant to be perpetual. With the agencies in conservatorship, the federal government has effectively engineered a redistribution of capital out of housing and into the budgetary ether to help cover costs associated with the payroll tax cut extension through higher guarantee fees and by siphoning off profits from the companies well in excess of the costs incurred by the government to cover GSE credit losses.
To date the agencies have paid back either through dividend or profit sweeps a total of $218.7 billion against draws of $189.4 billion, putting the taxpayer back in the black. That's without taking into account the value of the preferred shares or warrants received by Treasury that give the holder the option to purchase up to nearly 80% of the common stock of both companies. Conservative estimates on the preferred share and warrants provide another $200 billion or more to the taxpayer.
One approach to accelerating a recapitalization of the GSEs would be to cancel the Treasury's senior preferred stock by declaring it "paid back," re-characterizing past payments of the profit sweep (minus the 10% dividend sweep) as a paydown of principal. The value from that cancellation would flow up through to the remaining common stock, benefitting the Treasury as owner of 80% of the common stock through the warrants that it still would hold.
Taking the step to end the conservatorship and recapitalize Fannie and Freddie is in the best interest of the taxpayers by monetizing a substantial profit from their investment in the GSEs over the last six years. And with changes already in place, coupled with strict risk-based capital rules, this step would virtually eliminate future taxpayer exposure to housing crises.
http://www.americanbanker.com/bankthink/if-congress-wont-end-gse-conservatorship-soon-fhfa-can-1070408-1.html
Do you remember the Blackstone leak? The Blackstone documents were not turned over to the plaintiffs. There could be more documents out there that have not been turned over to the plaintiffs.
The 2014 Deficit Is the Smallest In Six Years. But Here’s the Bad News
Romina Boccia focuses on federal spending and the national debt as the Grover M. Hermann fellow in federal budgetary affairs in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Read her research.
The Congressional Budget Office released Wednesday the figures for spending, revenues and the deficit in 2014. At $486 billion, the 2014 deficit is the smallest since the pre-stimulus and pre-bailout level of $498 (adjusted for inflation to 2013) in 2008.
This means the household national debt burden rises by about $4,000. The total household debt burden exceeds $150,000.
While some, like President Obama and Treasury Secretary Jack Lew, see today’s announcement as cause for celebration, others are looking with great concern at the tidal wave of trillion dollar deficits clearly visible on the horizon.
The average annual deficit over the next decade is projected at $950 billion, just shy of a trillion. This is because after 2014, the deficit–absent further policy changes–is only heading in one direction: UP.
BL-deficit-reduction-temporary
The deficit fell as spending increased because tax receipts increased faster than spending. This is in no small part due to a range of tax hikes, increasing the tax burden on American families, enacted during Obama’s term in office. Tax revenue grew by 9 percent, or $239 billion compared to last year, according to the CBO
Entitlement spending, the biggest driver of growing deficits and debt, continued its unchecked growth. The implementation of Obamacare drove health spending on Medicaid and exchange subsidies up by $49 billion or 19 percent. Social Security and Medicare spending rose by $37 billion (5 percent) and $14 billion (3 percent) respectively.
Improper accounting for the budgetary effect of the Treasury’s conservatorship over Fannie Mae and Freddie Mac reduced the total spending figure by $74 billion in 2014. Fannie’s and Freddie’s current profits are used to offset actual federal spending in the current fiscal year, without accounting for the downside risks of a federal guarantee of mortgage-backed securities.
These are the very same instruments that were key contributors to the 2008 financial crisis. For fiscal year 2014, it means that spending was $70 billion higher than the government reported to the public.
Rather than try to reduce the deficit with tax increases that impede growth and improper accounting that exposes taxpayers to undue risks Congress should control spending by:
1. Moving towards patient-centered, market-based health care.
2. Reforming Social Security’s disability and retirement programs.
3. Controlling the welfare state.
4. Rooting out waste, duplication and inappropriate spending.
5. Capping the growth in spending.
The tidal wave of deficits and debt is rolling in.
Perry Capital files appeal in dismissal of GSE lawsuit
Investors plan to continue fight to recover confiscated profits
Trey Garrison
October 9, 2014 9:13AM
Perry Capital is appealing the decision by retiring U.S. District Judge Royce Lamberth to dismiss one of the lawsuits brought against the Department of Treasury by Perry Capital and Fairholme Funds.
Currently, Fannie Mae and Freddie Mac profits go to the government, and the investors were suing for their perceived share.
Perry Capital, among others, is suing over the Treasury’s policy of confiscating the profits from the GSEs. At issue is the government's decision to sweep the profits of the companies into the U.S. Treasury was illegal.
Lamberth, notably the second most overturned in his district, said the government had the authority under a 2008 law that laid the ground for its seizure of the two companies.
"The district court's decision overlooks important points of law and improperly resolved key questions of fact based on the government's cherry-picked record," said Theodore Olson, an attorney with Gibson, Dunn & Crutcher LLP, who filed the appeal on behalf of Perry Capital.
The government seized Fannie Mae and Freddie Mac at the height of the financial crisis as they teetered on the brink of insolvency. It took a majority stake in each.
The Treasury ended up pumping $187.5 billion into the companies. They have since returned to profitability and have returned $218.7 billion to taxpayers in the form of dividends.
Initially, the companies were required to pay a 10 percent dividend on the government's share, but later the Treasury and their regulator altered the terms to force them to hand over nearly all their profits.
The dismissal of the lawsuit dealt a blow to investors hoping to benefit now that Fannie Mae and Freddie Mac, the two largest sources of U.S. housing finance, are profitable. However, other lawsuits challenging the bailout terms are still pending.
http://www.housingwire.com/articles/31659-perry-capital-files-appeal-in-dismissal-of-gse-lawsuit
wegot our first mil. in vol.
Mortgage Standards Unlikely To Loosen For 3 Years
Published on: Wednesday, October 08, 2014
Written by: Dan FreedAmericans will likely have to wait at least three more years before it becomes any easier to get a mortgage.
That's how long it will take, at a minimum, for Congress to reach agreement over the future of Fannie Mae (FNMA) and Freddie Mac (FMCC) , according to a report published earlier this week by Keefe, Bruyette & Woods (KBW). Fannie and Freddie, which are government sponsored enterprises (GSEs), typically guarantee nearly half of U.S. mortgages outstanding. Since the 2008 financial crisis, the percentage is even higher.
Banks are reluctant to lend because, following the crisis, they were forced to repurchase billions of dollars of bad mortgage loans they sold to Fannie, Freddie and private investors. Banks are afraid the same thing will happen again if they loosen their standards, so it's easier for them to say no. Attempts to fix the situation have stalled in Congress, and few think anything will be done until there's a new president.
"We continue to think it highly unlikely Congress finishes a GSE bill in 2015 or 2016. We think 2017 is the earliest such a bill could be passed and even that prediction is on the optimistic side," the KBW report concludes.
One measure of how difficult it has become to get a mortgage came in August from the Federal Reserve Bank of New York. Its second quarter report on household debt and credit showed new mortgage originations at their lowest level in 14 years even as interest rates declined and new home purchases rose.
Data from the Mortgage Bankers Association tell a story that is only slightly more positive about the availability of credit. The organization's Mortgage Credit Availability Index (see graphic below) hit 116 in September, and is essentially unchanged since the 2008 crisis. It peaked at nearly 900 in 2006.
Credit is so tight that even former Federal Reserve Chairman Ben Bernanke can't refinance his mortgage, even though he earns a reported $200,000 to $400,000 for a speech.
It's not just banks that are behind the difficulty. Bond investors, who banks rely upon to get mortgage risk off their books, also remain gun-shy. Writing in Barron's in April, Pimco CEO Douglas Hodge complained of servicers and trustees that didn't live up to their obligations to protect bondholders' rights, and government settlements that allowed banks to "resolve their liability associated with their own abusive origination and servicing practices without actually paying for it."
Hodge added: "The private mortgage markets will not attract meaningful new capital until institutional investors, such as Pimco on behalf of its clients, are assured that these egregious practices will stop and never happen again."
Hodge and other bondholders want legislation to protect them from the banks and banks want legislation to protect them from the government. Without it neither group is likely to put much capital at risk in the mortgage market.
While bipartisan legislation introduced by Tim Johnson (D., S.D.) and Mike Crapo (R., Idaho.) passed the Senate Banking Committee this year, it is widely seen as dead due to opposition from several key senators. Among those who opposed the bill are Sen. Sherrod Brown (D, Ohio) and Sen. Richard Shelby (R., Ala.). KBW believes Brown and Shelby are likely successors to Johnson, who will not seek re-election. The senators rejected the legislation for different reasons, which suggests creating a new bill will not be easy, not to mention actually turning it into law.
http://www.nuwireinvestor.com/articles/mortgage-standards-unlikely-to-loosen-for-3-years-62166.aspx
Americans are getting more optimistic about the housing market after a recent dip in sentiment, according to new data from Fannie Mae. The jump in optimism, along with positive employment data, spurred hopes for a modest housing recovery in 2015.
Fannie’s September National Housing Survey shows the share of consumers who say now is a good time to buy is up to 68%, a four-point increase from August. The share who say they would prefer to buy a home the next time they move ticked up to 66%, a three-point improvement. And the share of consumers who say the economy is on the right track made a five-point jump to 40%.
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“The September National Housing Survey shows a slight recovery in consumer housing sentiment after a two-month setback, bringing us back to the modestly positive trend we've seen over the last year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “It might be too late to save this year's home sales from posting the first decline in five years. However, the return to an upward trend in housing sentiment, combined with this month's positive news on the jobs front, suggests that a broad-based, albeit measured, housing recovery is on track to resume in 2015. The results of the past few months show that consumer optimism remains cautious and somewhat volatile, and we'll likely continue to see bumps on the housing recovery path reflected in our survey results.”
The majority of consumers – 55% – think rental prices will go up in the next 12 months, while the share who say they would rent on their next move dropped to 28%.
http://www.mpamag.com/real-estate/consumers-more-optimistic-about-housing-19771.aspx
up next means up eventually on cnbc.
It will take the rule of law to prevail. If you consider that a miracle well I understand your angst. Gonna be a while.
Special Situations: Fannie Mae Epstein Call October 2014
?October 7, 2014 ?17 MILE INVESTING, Investment Write-Ups, Special Situations: FNMA Epstein Call October 2014?$FMCC, $FNMA, $FNMAS
Two interesting takeaways from the Epstein call:
1. In order to keep F&F debt off of the USG balance sheet, the USG needed to keep its F&F ownership stake below 80%; as such, the USG needed the common stock to continue trading.
So this goes back to my point that the USG does not want F&F liabilities on its balance sheet, thus the status quo is likely not a feasible option. But if the USG wants to liquidate F&F, then the only proceeds the USG receives is through its senior preferred position. I guess the USG could continue operating F&F as is and just milk the cash for five years before selling them to the private sector in order to pay off the senior preferred. Though again, too much scrutiny for nothing to happen.
2. F&F had the PIK option for senior preferred dividend payments, yet the USG continues to argue that the Sweep was necessary to avoid a “death spiral”.
This is a hugely underreported part of this entire situation. If the Conservator was truly operating the entities to return them to health – whether back to private shareholders or not – then no rational person would eschew the PIK option in favor of the Sweep. The Sweep allows F&F to avoid the death spiral when earnings are negative, but it does not provide F&F with the option of returning to capital health in the event earnings turn positive. Yes F&F might not ever be able to get out from under the dividends on preferred issued under the PIK, but at worst the option existed for F&F to earn their way back to health…and this is more than proven out by the fact that F&F would have nearly earned their way out by now.
I am extremely tempted to add to the FNMAS position down here, as I don’t see how Sweeney does not go through with discovery on this. I realize the USG plays by different rules, but this is truly egregious. You cannot keep private securities trading and then strip them of all potential investment return – even for the USG, logic does not hold here. And as I have outlined, my base case is that F&F are restructured with the junior preferred intact – a favorable ruling would be gravy. I very well could be wrong here, but at least as of now, this is my thought process.
http://seventeenmile.com/2014/10/07/special-situations-fannie-mae-epstein-call-october-2014/
Special Situations: Fannie Mae Epstein Call October 2014
?October 7, 2014 ?17 MILE INVESTING, Investment Write-Ups, Special Situations: FNMA Epstein Call October 2014?$FMCC, $FNMA, $FNMAS
Two interesting takeaways from the Epstein call:
1. In order to keep F&F debt off of the USG balance sheet, the USG needed to keep its F&F ownership stake below 80%; as such, the USG needed the common stock to continue trading.
So this goes back to my point that the USG does not want F&F liabilities on its balance sheet, thus the status quo is likely not a feasible option. But if the USG wants to liquidate F&F, then the only proceeds the USG receives is through its senior preferred position. I guess the USG could continue operating F&F as is and just milk the cash for five years before selling them to the private sector in order to pay off the senior preferred. Though again, too much scrutiny for nothing to happen.
2. F&F had the PIK option for senior preferred dividend payments, yet the USG continues to argue that the Sweep was necessary to avoid a “death spiral”.
This is a hugely underreported part of this entire situation. If the Conservator was truly operating the entities to return them to health – whether back to private shareholders or not – then no rational person would eschew the PIK option in favor of the Sweep. The Sweep allows F&F to avoid the death spiral when earnings are negative, but it does not provide F&F with the option of returning to capital health in the event earnings turn positive. Yes F&F might not ever be able to get out from under the dividends on preferred issued under the PIK, but at worst the option existed for F&F to earn their way back to health…and this is more than proven out by the fact that F&F would have nearly earned their way out by now.
I am extremely tempted to add to the FNMAS position down here, as I don’t see how Sweeney does not go through with discovery on this. I realize the USG plays by different rules, but this is truly egregious. You cannot keep private securities trading and then strip them of all potential investment return – even for the USG, logic does not hold here. And as I have outlined, my base case is that F&F are restructured with the junior preferred intact – a favorable ruling would be gravy. I very well could be wrong here, but at least as of now, this is my thought process.
http://seventeenmile.com/2014/10/07/special-situations-fannie-mae-epstein-call-october-2014/
Hey Detearing or anybody else for that matter. I had an idea today about GTAT. That is the ticker for GT Advanced Technologies. This company just filed for bankruptcy after they lost a contract with AAPL for the sapphire glass that they make. Has anybody done any research on the company to figure out why they filed. I read one article that said that they were only restructuring. This could be an opportunity. They have lost about 90%-95% of share price depending on what time of day it is. Talk about a distressed stock!
Everything You Need To Know About Fannie Mae And Freddie Mac Lawsuits
Fannie Mae (FNMA) and Freddie Mac (FMCC) have been two of the largest players in the US mortgage market, providing guarantees for home loans. In the wake of the 2008 housing bubble, these government-sponsored enterprises took a major hit, eventually requiring a government bailout of nearly $200 billion. The Treasury therefore placed Fannie Mae and Freddie Mac into a conservatorship run by the Federal Housing Finance Agency (FHFA). Consequently, the Treasury owned preferred shares in the two mortgage finance giants, shares that were senior to those owned by other investors...The mortgage finance giants have their fate tied up with courts in the ongoing litigation against the US government. Bidness Etc takes a walk down memory lane to discuss how it happened into the past to discuss how this all happened
Fannie Mae (FNMA) and Freddie Mac (FMCC) have been two of the largest players in the US mortgage market, providing guarantees for home loans. In the wake of the 2008 housing bubble, these government-sponsored enterprises took a major hit, eventually requiring a government bailout of nearly $200 billion. The Treasury therefore placed Fannie Mae and Freddie Mac into a conservatorship run by the Federal Housing Finance Agency (FHFA).
Consequently, the Treasury owned preferred shares in the two mortgage finance giants, shares that were senior to those owned by other investors – like commercial banks. By mid-2012, according to Bloomberg data, the two mortgage companies had paid out only $46 billion in dividends, compared to the $190 billion they had drawn in aid.
The bailout package agreement required Fannie Mae and Freddie Mac to pay 10% quarterly dividends on the 80% stake the government owned. This was changed in 2012 to require the two companies to transfer their entire quarterly profits to the US Treasury Department.
This enraged Fannie Mae and Freddie Mac’s non-Treasury investors, who deemed it an injustice on the government’s part. The investors sued the government for not holding up to its end of the deal: the alleged liquidation of preferred shares and promised dividends. Fannie Mae and Freddie Mac Shares surged over a thousand percent in 2013, as investors expected that they would be given a fair share of the profits.
On Tuesday, September 30, however, Judge Royce Lamberth dismissed four of these lawsuits. The District Court judge, in his rejection of investors’ claims, cited the Housing and Economic Recovery Act, in which Congress gave the Treasury and the FHFA the authority to sweep Fannie Mae and Freddie Mac’s profits.
The cases included those filed by institutional investors: Perry Capital LLC, Arrowood Indemnity Company and Fairholme Funds Inc. Judge Lamberth’s instant dismissal had Fannie Mae and Freddie Mac shares plunge 36.8% and 37.5%, respectively, Wednesday last week.
The long-run speculation was dismantled by the court’s decree, as investors were left with $33 billion of preferred shares that were potentially worthless. Fannie Mae and Freddie Mac’s preferred shares, of various categories, dived over 50% on Wednesday.
The setback saw a lot of selling the next day as well, as both mortgage companies fell more than 10%. The US Department of Justice said earlier that Fannie and Freddie “do not possess an unfettered right to a dividend.”
On Friday, Perry Capital filed for a review of Judge Lamberth’s verdict. The investment company’s attorney, Theodore B. Olson, said: “The district court’s decision overlooks important points of law and improperly resolved key questions of fact. The merits of this case deserve to be heard in court.”
This advancement brought some much-needed relief to the investors of Fannie Mae and Freddie Mac, reflected exaggeratedly, perhaps, in the market. Fannie gained 25% on Friday, while Freddie soared over 22%.
Is there something for the investors to be hopeful about? Professor Richard Epstein from NYU Law believes so: “Fortunately, Judge Lamberth does not represent the only game in town. Concurrently, litigation is also taking place in the Court of Federal Claims before Judge Margaret Sweeney, who has prudently refused to grant the government a summary judgment and has ordered discovery to take place on all the issues that are relevant to any proper resolution of this dispute.”
He said that the recent ruling by the District Court “is just one battle in a long war.” Pershing Square Capital Management, a hedge fund owned by Bill Ackman, is also one of the plaintiffs in the many cases filed against the government over Fannie Mae and Freddie Mac.
There are other law experts, however, who think that investors have only a slight chance of winning. One of the law professors at Wayne State University even went as far as to say that investors stand to lose the appeal and with it, all their current and future claims against the US government.
It is a tough time to be an investor in Fannie Mae or Freddie Mac. Things could go sharply uphill from here, or come crashing down altogether. The upcoming trials will determine the fate of the investors’ returns.
http://business.gotnewswire.com/news/everything-you-need-to-know-about-fannie-mae-and-freddie-mac-lawsuits
I just bought a little more at $1.72
All should listen to the Investors Unite conference when a link to listen is made available. Richard Epstein and Ralph Nadar put my mind somewhat at ease. Lots of good info.
Epstein: is this a massive cover up referring to question that Sweeny must ask herself
Epstein:No proceedures were followed
Epstein: Judge Sweeny has a very different view of the situation compared to Judge Lamberth and an appeal has been submitted. It is not a knockout punch. The litigation costs are not even 1 % of the value of the money.
Legislative (congress)settlement (Crappo etc.)is hopelessly deadlocked
Epstein: change in parties in congress makes no difference
Bloomberg: are you guys buying more: Epstein, I do not hold
fnF. My opinion is objective(that is my take. I am paraphrasing because I do not type fast)
Epstein: third amendment is appalling
Epstein hopes that discovery comes out very soon
Epstein on the conference : The government has no more than a 50% chance of winning.