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Ok. That makes sense. Thanks NJM.
I suspect Corker's bill may have seen several reworks already prior to its circulation. May have been harsher to shareholders in the beginning but now that is confronting the reality of 100 senators and 435 representatives reading it, it may have soften a bit. One thing is for shareholders to lose their money to specific market events. Another story would be to lose that money by the pen of a politician. Very different.
Eventually, they may all consider how many votes are going to be lost as a result of their actions. Even worse, how much campaign funding will disappear. Speaking of a cynical world.
Have you read the draft? Why do you say it is a huge risk? Remember, Millstein said that from all outcomes liquidation was probably the best for Jrs. Perhaps the draft contemplates liquidation where Srs. are paid first and Jrs. next in line. What is being sold, what is being given away. Then, it will all be in the valuation figures.
Dig deeper on the author. He is not an analyst. Simply check comments on amazon from his 08' book about Lehman. Specially, the low rated comments which will bring a better light of where he is coming from. Also, check the draft for treatment of shareholders. I would give more credence to someone who puts his money -and others'- on the line (Berkowitz) than this author. The Corker Warner draft gathers attention because it is the 1st serious attempt at reform.
Very good one. Five stars. Some common sense in the midst of madness.
When Judge Collyer dismissed the Bivens claims on 4/30/12 she wanted to demonstrate that Fannie Mae was not part of the government -mandatory for Bivens-. Among the conclusions she reached was that a) Treasury did not exercised warrants, therefore had no major influence as shareholder and that this render NO permanent control over the company, b) Treasury had no voting privileges from its Sr. preferred investment, therefore had NO permanent control through votes. From this and other facts, like that "the nature of conservatorship is temporary" and that the FHFA placed itself in a private role ("in the shoes of Fannie"), she opined that Fannie Mae was NOT made part of the government. In layman terms, Fannie was a private company and continued to be one after conservatorship.
This intro is just to say that from her opinion the conclusion reached was that Treasury's interest was that of a shareholder (holding warrants and Sr. preferreds) out of which NO permanent control could be determined. (no full intervention, no nationalization, etc.).
As for the role of the Treasury in changing the agreement, the PSPA includes a clause that delegates this authority to the Treasury alone and there is no interference with decisions done by Fannie or Freddie. Please note, changing the agreement affects Fannie Mae and Freddie Mac BUT the agreement is only between Treasury and FHFA -the conservator-. The companies have NO say. The agreement has given Treasury both the authority to set the terms and the role of a shareholder.
GSEs management, BOD and shareholders are frozen in time with c-ship. DeMarco occupies all those roles, technically. Although he has had the good sense not to get too involved and has given the new BOD and the new management A LOT of leeway.
This is important because according to Judge Collyer this reaffirms the notion that Treasury's interests are that of a shareholder.
Lawsuits are about finding a remedy to a loss.
Use your head, then! dear Henry, dear Henry, dear Henry,
Use your head, then! dear Henry, dear Henry, use your head!
I can't say anything about the legality of the c-ship. No thoughts on that. Did you really make that large purchase on 8.08? Makes me feel like I shouldn't be here posting :(
As for
which begs the question did DeMarco entering the 8/2012 amended agreement pose an intended harm to FnF by creating barriers to prevent recapitalization.
Actually, according to the PSPA the Treasury has the authority to state the terms of the agreement. Originally, I had thought that there should be mutual accord but I am pretty sure the Treasury can set any terms they want. Thus, the sweep.
But there has to be a legal hole somewhere.
Although the Treasury can legally impose a sweep from the GSEs, it is asking the other party to agree to terms that are in conflict with its mandate.
Somewhere, there is a hole.
Possibly.
A derivative lawsuit as explained by Bryndon may offer better arguments.
Their paragraphs 5), 6) may not do as there is already court opinion (CAROLINE HERRON, Plaintiff, v. FANNIE MAE, et al. Defendants. 4/30/12) stating Fannie Mae was never made part of the government (not nationalized). That same opinion stated that FHFA -taking the role of shareholder- also had (has) a private role as it stepped into (the shoes) the private role of Fannie Mae. Judge Collyer also opined that Treasury has the interests of a shareholder via its warrants holdings and Sr. preferreds.
The damage caused by "nationalizating" the companies may not fly as that has never happened. At least, in the eyes of one court.
AND the conservatorship has still not ended (work in progress). Meaning both companies' health could still be restored, as per FHFA's stated mission. In this regard, the court opined that the conservatorship had full control of the companies but was temporary, NOT permanent. And don't forget both common shares and Jrs. are still trading in the open market. The shares have not been eliminated, which would have caused permanent damage.
PSPA unlawful? Not sure about this case, Joe.
Have you fully read Collyer's opinion from 4/30/12? In that opinion the role of the conservator is better explained as it takes the place of the BOD, shareholders and management "it steps into the shoes", as explained by the Judge.
I do not share your opinion that plaintiff has made a good case.
Still have to read the full document but thinking along the lines of David's argument... a 4th amendment that allows both companies to retain earnings -any excess to the 10% original dividend- and from which dividends could be paid to Jrs., wouldn't this alone restore full value to them?
And this permission to recapitalize, wouldn't have a positive impact on the commons as well?
Here is the sequence:
4th amendment > allow retain earnings to rebuild capital > new possibility of distributions to Jrs > value of Jrs. gets restored > value of commons is realized.
This would be the simplest way to dismiss the suit. Treasury can claim that restoring value was always in the cards and those who sold at a loss after the conservatorship have only themselves to blame. Remember, Treasury is a shareholder.
Here is more information on the lawsuit:
Plaintiffs in the case include Washington Federal, a Seattle bank, the city of Austin, Texas Police Retirement System and Michael McCredy Baker, who is identified as an individual shareholder.
Why does it invalidate the 8/17 change? This is an agreement between the FHFA and the Treasury where FHFA acts as shareholder -in its private role in the shoes of Fannie Mae and Freddie Mac- and so does the Treasury based on its warrants and Sr. holdings (The Treasury's interests are that of a shareholder). What it tells you is that FHFA entered into a flawed agreement on 8/17 that makes it impossible to fulfill its own mandate as conservator.
This is a must read. Five stars to SA.
Thank you SA!
Here is the link again:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=88796107
"Fannie Mae was a private entity; when FHFA took over as conservator of Fannie Mae, it stepped into Fannie Mae’s private role. In sum, FHFA as conservator of Fannie Mae is not a government actor, and Ms. Herron’s Bivens claim will be dismissed."
Both common shares and Jr. preferred shares are speculative investments. For some, highly speculative investments. For Senator B. Corker they are slightly better than lottery tickets. A somewhat realistic investment thesis has to support your purchases and that is only possible after a deep understanding of the issues.
The difference between preferred shares and common shares -generally speaking- is that the former ones sit higher in the capital structure, therefore have a claim before the commons in case of a liquidation or restructure.
Today's drop is pretty strange. Markets knew about Corker's intentions for at least 2 months. Published in major media his desire of killing shareholders has been no secret.
From 04.09
"Let me put it this way: some really big really large hedge funds have taken positions in these preferred shares and they believe that somehow or another--at least some of them believe that, number one they want it spun off. Some of the arguments that are being put forth by the smaller owners are that, you know, the Federal Government's going to have to deal with them at some point. They can't just snuff 'em out," Corker said.
"There are hedge funds who are up on the Hill who have invested in these [GSE] preferred shares which are like lottery tickets right now. Of course they're trying to sell the White House on doing that and raising $200 billion, if you will, to pay off debt," said Sen. Bob Corker (R., Tenn) in an interview last week.
"These companies going private and them still having the implicit government guarantee is a non-starter. I don't see that having any traction at all right now. It certainly has no traction with me," Corker said in the interview last week.
"We're spending a lot of time looking at the Bipartisan Policy proposal. It does have a government guarantee in it but we think there may be a way to take a kernel of that idea and do some things where eventually the market may figure out that there really just is no need for a government guarantee at all. But we're still noodling on that and we're still working with others," he said.
Millstein also owns Freddie and Fannie preferred shares, an investment he thinks may look even better if the GSEs are liquidated instead of being taken private.
Joe, market tricks are an ancient practice. However, these shares will put a bottom somewhere, just like the market. Then, we may see buyers return. Nothing has really changed from a week or a month ago. Wait. Nothing has changed in many years!
We are still far away from anything definite. Until then, prices will continue to be indefinite.
There are so many moving parts that these opinions are almost irrevelant, including the one from BofA analysts published on zeroH. One can easily say that "it may become politically unpalatable not to do the right thing, which in America is following the rule of law". One can even opine that Corker is committing political suicide by attempting to hurt future potential campaign contributors.
It's all opinions.
And here is one more, fwiw. Once someone raises the Hamilton flag in all its splendor some of these Senators and Reps are going to be suddenly out of words. Don't mess with the founding fathers.
Nobody knows how this will play out. In the meantime, buy more Jrs.
Nobody knows the details of a potential liquidation. It can also be set up so that the waterfall stops right at the gate of our Jrs. So not a done deal at all.
big volume on fmckj
2.18m @ 6.25
1m @ 6.30
just crossed the tape.
Messed up my prior message. I tried to say:
1. PSPA deals primarily with Srs. dividends.
2. Indirectly with Jrs. dividends as a prerequisite to paying them is to have sufficient retained earnings.
Tsy can help build retained earnings if they modify the full sweep. Rereading my prior message I think I made a mistake and that the clause in the PSPA is for allowing recapitalization in certain scenarios, not dividend restoration. I believe this would be a matter of the FHFA only. Even if decided together with the Treasury.
Sorry, it is very late here in Miami. Need to get some sleep.
Treasury does not require approval from Congress for this.
The PSPA grants authority to the Treasury to establish the terms of the agreement unilaterally. If Treasury ever decides to modify the full sweep into some other arrangement they can do so in an instant, just like you said. But only pertaining to the Sr. dividend. The Jr. dividend is a different story. Treasury can act independently on this. What they cannot do is reform the GSEs. That is on the Congress. The didvidend and the sweep are all part of the PSPA.
I believe the agreement does have a clause whereby dividends could be restored if it is in the best interest of the GSEs, say in cases where this move could help them attract capital. What Treasury can also do is create the opportunity for recapitalization by letting some of the profits build retained earnings. A first step. Dividends are paid out of retained earnings, not profits. For some reason I am thinking restoration of Jr. dividends would fall into FHFA's field.
Considering the universe of holders and how widespread across the board regional banks held, it is a massive bet. I can't help but think this is a "dividends" bet.
You are right in that it is very easy to misinterpret things in a forum. I just brought it up because apparently camaro took offense. Why? I don't know. Perhaps she overreacted. It happens.
The members you are addressing are long time participants not just from ihub but from the original yahoo board. I am speaking of years. I guess where you live seniority means nothing? Because it does for us. Although anyone can join anytime to speak their mind and ihub offers this service partially without a charge, it is always a good idea to try to understand the ongoing dynamics before shooting from hips.
Unless you don't mind leaving an isolated life on iggyland.
brandemarcus, don't sweat it.
We will be made heroes, on time. Just like Paulson with his re negative bets, Michael Burry and his big short, Jesse Livermore entering the Great Depression with (inflation adjusted) 1 bill in his pocket and many more. MANY MORE! USA is about animal spirits, wildcatters, entrepreneurial spirit, risk-taking. Some among us maybe even be named in magazines. Today's vultures will be tomorrow's savvy examples to follow. Give it time. It is in the nature of the US beast.
In my view, re-listing will seal the deal.
It will communicate to the public that shareholders will be respected no matter what the final outcome is. This should put a premium on all shares. It would not surprise me to see 40-50c on the dollar should re-listing becomes a reality.
I have another question for you... the appointment of Mel Watt would be an indication of what?
1. He wants to dismantle the GSEs.
2. He wants to fully nationalize them.
3. He wants to keep DeMarco knowing Watts has no chance.
4. ??
This appointment speaks for itself. We may just differ on the reason for it but it sure tells us what he thinks. If we could only figure out the why.
5-28 PM Update on the Corker (R-Tenn) bill.
Reportedly it took only a few hours this morning, when Hill folks got back from their Memorial Day holiday, for House GOP sources to send Senator Bob Corker (R-Tenn) a message that the House wasn't interested in working on any legislation which set up new federal housing responsibilities, no matter what fate Corker proposes for Fannie and Freddie. No comment on Corker's idea of nationalizing F&F's financial obligations and adding a bazillion dollars to the national debt.
We'll know in the coming weeks. But I smell a steal maneuver. Someone lost their shares in the last hour.
Looking at the high volume up it would have been better to buy a truckload instead of "some". This reminds of someone getting a late notice to the stock and shooting it down to jump in as low as possible. Volume up still heavier than to the downside. What a hell.
Looks like computers' battling it out. Humans get involved at their own risk. Trying to place a bottom here. Take a look at the 1 minute chart. Fascinating.
Technical touch @ 2. Since 11.36 heavy upside volume. Will see if it is just a bounce.
The old somersault dive strategy.
Have they blown off the top?
Heavy downside volume.
Since Soros likes to bet against governments he would have bought a gazillion Jrs. a while back knowing there was a potential legal scenario that could favor them.
Do not confuse him with Pat Dorsey.
If commons continue to run next thing we know there will be an official announcement that Jrs. will be honored after net becomes zero and we gap up at 25. These prices make no sense to me.
That last of the last one is either taxpayers -in a disguise form not look like Uncle Sam again or the Federal Reserve. Noone else down there in the darkness.
As for Corker, he actually said the bet on GSEs was "slightly better" than a lotto. I guess he left that door open knowing he could get his booty kicked. Remains to be seen who will be the anti-corker.
For every action, there is an equal and opposite reaction. -Isaac Newton