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Yes, The warrants were collateral. The myth that they were not collateral has been dispelled several times.
And
Yes, the actual amount provided is considerably less than 187Billion as much of it was circular interest at 10% when prevailing fed funds rate would have been in the 1-2% range and other tarp's were closer to 3 or 4%.
Had the loans been priced properly that were forced on the companies that never needed them, and the repayments used to pay reasonable interest rates, they'd be owed several billions each today.
exercising and selling the warrants? not so much.
Actually, if they did that and lost a takings case. Which they will lose if they do this, one fix ... would be require the government to repurchase ... on the open market and return the company the 8 billion shares they took.
Could be incredibly expensive when they lose if they do this but that is their choice.
They can decide to void the warrants and avoid the possibility of this; or they can do this... reap 100Billion in value and then spend 300Billion repurchasing the warrant shares or more.
Keep in mind if they do this. And then the company's have to raise capital they may have to issue more shares at deflated prices than would have been necessary at normalized prices without the extra shares...
This could further be a taking and thus result in more damages and losses.
Could be very expensive.
Hope the government really is trying to protect the taxpayers by not being stupid.
Your lack of understanding as to the reasons for including that provision does not change its presence or intent. When Treasury exercises the warrants, it must pay $0.00001 to Fannie and Freddie for each share. These are the proceeds in question. That comes out to around $72,000 right now; it could be more if there is a junior-to-common conversion before the warrants are exercised. This is part of the contract, it is clear as day.
I also don't know why this section was included, as the $72,000 might as well be zero, but it's there.
Quote:Its very clear... proceeds against preference = collateral. The intent is obvious. Don't try and refute the plain written word.
$72,000 of proceeds does not function as collateral on $193,000,000,000 of liquidation preference.
Its okay, i read its interpreted correctly...
And yet the senior pref dividends have been declared and paid almost every quarter since the inception of the SPSPAs. On page GSE-8 of the document you linked to is the sentence:
Quote:The PSPAs also prohibit the redemption of any outstanding preferred or common stock without the prior consent of the Treasury until the senior preferred stock has been fully redeemed.
If the "oustanding preferred" stock included the seniors, this sentence would make no sense. It would say that the seniors could not be redeemed until the seniors were redeemed. That makes it clear that the "outstanding preferred" stock does not include the seniors.
It does, and its not being followed. Why?
At least you acknowledge the nonsensicality of interpreting "outstanding preferred" stock as inclusive of the seniors.
Also, earlier you said that the $72,000 of proceeds section doesn't make sense and therefore the warrants are collateral, but now you just brush a different nonsensical interpretation under the rug. You can't have it both ways. If something doesn't make sense to you, it's still part of the contract, like it or not.
If its now being discussed whats not in the document is in the document; might as well add some other nonsensical things.
It is not the words that are incorrect but your interpretation of them.
The refutation made is unable to prove the argument;
Warrants are collateral.
Declared Dividends on preferred stock (any preferred stock) is a foul. Now, the beneficiary of the spsa is treasury, the author is the treasury and the maker here is fhfa all for the benefit of treasury and share holders have no rights to fend them off until the conservatorship is over. Yet, when it is... lawsuits may follow when rights are restored.
Disagree ..
False. There is nothing in the first sentence that supports the conclusion in the second sentence. The net cash proceeds are only $72,000 anyway, which pales in comparison to the $193,000,000,000 liquidation preference the seniors currently carry.
Now if you were to argue that the original SPSPAs were structured to make it difficult for FnF to rebuild capital and escape conservatorship, I might agree. However, Judge Sweeney does not have the power to alter or overturn either the conservatorships or the original SPSPAs, and no existing plaintiff has asked any court to do this. It would take a new lawsuit to accomplish one of these things, a lawsuit that has yet to be filed. Why do you think nobody has yet attempted such a lawsuit?
This analysis is False and misguided. Why prohibit a mere 72K to be used for general purposes of a trillion dollar company. After all money is fungible and 72K would be lost in a bucket of 2Billion of cash... So, why prohibit it
1. it wasn't to be 72k or instead expected to be 72B or
2. it was tied to each other... ie. collateral.
Its very clear... proceeds against preference = collateral. The intent is obvious. Don't try and refute the plain written word.
Next
But sure someone might have except since all of their rights have been stolen by the government to sue - direct claims - so, that suit would be dismissed. The key thing here will kick in IF the government does what many banter around... exercise the warrants, sell them and generate $$ then a taking will have occurred and shareholder rights will have been restored. Lawsuits will come out of the woodwork demanding fair value. That value will be the $$ the government just collected, plus whatever else value that was stolen. its simply a bad move to use the warrants. Its fruit of a poison tree and will be nothing but bad news; more lawsuits of a direct nature against the government. And only way they can monetize the warrants will be to release them from captivity; which puts the power back to the shareholders of record... and boom lawsuits.
So, the only way this works is "collateral" and extinguishing them. Sorry.but its what it is.
+++++++++++++++++++++=
The document in question refers to "outstanding preferred stock". From reading through it, it is clear that this refers only to the pre-conservatorship preferred shares (what we have been calling the juniors), not the senior preferred stock.
If the term "outstanding preferred stock" included the seniors, the sentence you quoted ("The terms of the PSPAs prohibit Fannie Mae and Freddie Mac from declaring any dividends on outstanding preferred or common stock until the senior preferred stock has been fully redeemed") would be non-sensical; it would prevent dividends being paid to the seniors unless the seniors were redeemed, in which case they wouldn't qualify for a dividend at all.
Again, incredibly false. Bending the truth to fit the narrative doesn't work.
The plain written word says dividends can't be declared. It does not specify junior it says preferred. it does not say jr nor sr it clearly states just that preferreds.
Its a circular argument that fails.. but so what.
It can not be proven that these written words are wrong. Therefore, they must be right.
False. There is nothing in the first sentence that supports the conclusion in the second sentence. The net cash proceeds are only $72,000 anyway, which pales in comparison to the $193,000,000,000 liquidation preference the seniors currently carry.
Now if you were to argue that the original SPSPAs were structured to make it difficult for FnF to rebuild capital and escape conservatorship, I might agree. However, Judge Sweeney does not have the power to alter or overturn either the conservatorships or the original SPSPAs, and no existing plaintiff has asked any court to do this. It would take a new lawsuit to accomplish one of these things, a lawsuit that has yet to be filed. Why do you think nobody has yet attempted such a lawsuit?
your analysis is False and misguided. Why prohibit a mere 72K to be used for general purposes of a trillion dollar company. After all money is fungible and 72K would be lost in a bucket of 2Billion of cash... So, why prohibit it
1. it wasn't to be 72k or instead expected to be 72B or
2. it was tied to each other... ie. collateral.
Its very clear... proceeds against preference = collateral. The intent is obvious. Don't try and refute the plain written word.
+++++++++++++++++++++=
The document in question refers to "outstanding preferred stock". From reading through it, it is clear that this refers only to the pre-conservatorship preferred shares (what we have been calling the juniors), not the senior preferred stock.
If the term "outstanding preferred stock" included the seniors, the sentence you quoted ("The terms of the PSPAs prohibit Fannie Mae and Freddie Mac from declaring any dividends on outstanding preferred or common stock until the senior preferred stock has been fully redeemed") would be non-sensical; it would prevent dividends being paid to the seniors unless the seniors were redeemed, in which case they wouldn't qualify for a dividend at all.
Again, incredibly false. Bending the truth to fit the narrative doesn't work.
The plain written word says dividends can't be declared. It does not specify junior it says preferred. it does not say jr nor sr it clearly states just that preferreds.
Its a circular argument that fails.. but so what.
It can not be proven that these written words are wrong. Therefore, they must be right.
Here is the link again to the discussion of the proceeds...
https://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_GSE_508.pdf
This is the treasury website...
Upon the government’s exercise of the warrants, the GSEs would be required under the terms of the PSPAs to apply the net cash proceeds to pay-down the liquidation preference of the senior preferred stock.
Thus... its collateral!
Further and this caught my eye..
Restrictions on the use of corporation resources – The terms of the PSPAs prohibit Fannie Mae and Freddie Mac from declaring any dividends on outstanding preferred or common stock until the senior preferred stock has been fully redeemed,
How then did they ever do a "dividend" throughout the period if only could declare dividends if the seniors were fully redeemed? Figure that therefore that is what is problematic.
How then can it be a dividend if ... they couldnot declare them???
how then were they ever paid??
how incredibly odd??
arent the senior pr. stock ... pr stock?
In the SPSA... illustrates the collateral concept of the warrants intended by the arrangement by not allowing the proceeds to be used as general purposes but as repayment of the "obligation" therefore; its clearly the intent that as collateral it was to be used.
With the debt paid off; as most or many people believe and as so stated by those like watt, etc. and considering the overstepping of the process. What most people could consider the debt extinguished based on payments received and thus... the collateral is no longer necessary.
The reasoning is solid ... the warrants are collateral as the proceeds from sale of warrants may only be used to reduce the liquidation preference. Meaning... it was clearly intended as collateral... no loan no collateral. Makes the warrants meaningless.
Keep in mind that scotus has the ability to ;find' whatever it wants. it can re-write laws the way it wants it can legislate from the bench its happened many times in the past and Roberts has been known to bend things to what way he rolls... regardless of what is presented..
So yes scotus can do what it wants.... regardless of what is presented.
ie...
if
If this is true...
https://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_GSE_508.pdf
on page 8...
That proceeds of any warrant money goes to the liquidation pref.. and the prefs is already deemed paid in full.. as because of nullifying the sweep ...
Then any money raised goes to the entities... as an overpayent... thus... the warrants...
ARE
MOOT! and a non issue!
Lots of respect for Tim, but he is totally wrong for not addressing the elephant in the room.
Later a poster showed that treasury considers any proceeds from excercising the warrants to be or have to be applied to the liquidation pref... as per the attachment from the treasury.
Thus,
if the seniors are paid off; ie. have been repaid then if the treas did the warrants any money would have to be returned to the company;s in a circular fashion. Consequently, the warrants, by treasury's words, are a moot point.
Which would then be a raise of capital for the entities since the money would have to be provided to the entities. IF, as everyone knows the seniors are paid off and its pretty clear they have been by the payments to them, even at that ludicrous / usurious 10% rate *when fed funds rate is 1% or 2%... then, its really irrelevant.
So, all we need is the courts to cancel the net swipe / steal... and make them apply the payments to prinicpal and then the warrants, are moot.
Kind of crazy, but they don't need to raise... 150Billion only around 25 Billion. or so... thus instead of 5x dilution of common at a fair value pre-raise they'd only need maybe minimal dilution. thus... the share price is discounted unnecessarily.
But, yeah, Tim should address the warrants, its the largest issue remaining. Shame as his opinions matter, wish he'd see it clearly.
Put fair value like this....
A company earns lets say $10Billion per year consistently.
it has 1 Billion shares outstanding
Thats an EPS of $10 per share.
A multiple of 10x eps = 100 per share.
NOW i realize this isnt quite fannie but all in its really close.
So...
All things being equal this fair value would be $100 per share.
Why would a conversion less than fair value on preferred par value be less?
$25 par preferred would convert to 1/4 share ... $50 at 1/2 share.
Since the preferred were not "convertible" as issued... it would be silly to suggest par preferred of $25 would convert to 8 shares common when the common fair value is depressed to $3 a share. That would be suicide for the share structure and not in line w preservng and conserving the companies.
ie.. the court has already found that doing short sided deals are against the rule of law.
They really should be careful or there will be more lawsuits
Sure preferreds might be converted..
Lets see how that might work.
$25 preferred can convert to 1/4 fractional share of common at common valuation of $100 per share fair value of common.
So
$50 preferred can convert to 1/2 fractional share of common at $100 share fair value of common.
Until the value of common reach this price then probably would be better off not converting but holding off, because at some point preferred's will get par value or more based upon the coupon rate once resumed.
The warrants represent a taking.
Remember as judge has already stated they didnt need the money.
Thus no justification for thaking 80% of the company. Was the "warrants" excess value for that provided?
Hmmm...
150 Billion in
190 Billion out
+
another 120 Billion in warrant value?
All when 0 was needed?
Keep in mind that the money provided cash that is was never used in or consumed in the business operations, but merely stockpiled and then returned - it was never "invested".
Like having 100k in the bank getting a car loan.... paying 10% interest but then never using that money to actually obtaining a car? Why do it?
it was actually quite novel idea... lend money people don't need make them pay 200% back and never pay it off.
Great "deal" for the lender...
What gets me about Tim and his comments. While everything seems accurate and reasonable; he's pretty smart guy. But, what's the hang up with the warrants?
If they never needed the money and it was a total sham, why then do they get to keep the warrants? Really? That's crazy nuts.
Yes, a huge windfall the greedyment is expecting to receive for stealing and doing nothing! Creating no value. But stealing value that belongs to others.
just cancel the things they are fruit from a poison tree. And more simply ill gotten gains
This is laughable.
If they take 80 percent of the value of the company from us then they have to compensate for the taking tp the shareholders.
It would be very short sighted for them to do this.
for me
just for me and my ocd self..
I would agree with a settlement that includes these.
1. canceling warrants - they are fruit of a poison tree
2. returning excess payments at 10% interest
or
2. recalc interest at fed funds (borrowing rate)
3. setting realistic capital standards
4. Moving to NYSE
You know it was never really hard to fix their mess.
They just have to get off their bottoms and do it.
Sure why not another week.
Then why not another year of weeks or two..
This delay delay delay - try and run out the clock strategy is very frustrating and since non of us are getting any younger and there is always another crop of dishonest government workers towing the line... this could go on another 50 years.
Why?
Cause they can
Disgraceful... justice delayed! is justice denied.
i have no idea
what is possible..
just don't expect them to go quiet like.
hoping..
its a strategy afterall.
my honest opinion remains unchanged from a lot of years ago...
At some point guberment has got to settle in order to resolve the lawsuits so that they can raise capital.
They can't take more money out of fandf and they can;t steal more money.
Warrants have to go away and the loans paid off.
A settlement eventually has to occur...
But are they working on it...
probably not...
Government isn't very smart.
i'd expect they'll accept it on monday.
This is too big a deal to let go.
too much money involved (ultimately)
and scotus can't help but get involved.
Although i could be wrong
MC will announce that
The companies have to raise capital.
That they are working on something
that something is being done
that things take time
that they know nothing
that its congress that needs to do something
that ....
i honestly don't expect much from mc...
But i wish they'd get off their respective gluts and get it done.
65 a share would be golden...
35 silver
15 bronze star
its not just a number i want...
i want the entities released, allowed to actually retain capital, have those warrants eviscerated and the debt extinguished.
i want justice... that has been denied the company's and its owners (taxpaying) shareholders.
The only thing keeping this from happening is the greed of government to take what is not theirs for free.
and repurpose it for the alleged good of the masses.
which is something very similar to socialism.
Government Greed of the crime syndicate.
happy new year..
a double this year is okay... but if these things you write occur... it would be fast forward two - three years on your wish list. Which is okay with me.
Its Greedyment (government) that is greedy in this situation.
shareholders are investors and have rule of law on their side.
greedyment has taken all the money, want more and bad.
The request should be denied and things should be forced to move faster. Its more delay and delay.
What a game plan.
Direct claims were dismissed because the shareholders don't have a direct claim that was made.
So, make a direct claim is my point that can be allowed. Which is they took "rights" without compensation.
Change the narrative.
Yes the direct claims that were made were dismissed as not direct. The deriviative or third party claims were allowed to go thru a shareholders of the entities, thus "rights" of the shareholder prevailed.
interesting where lambreath first wrote all rights were usurped by the government; no where have they paid for the privilege of taking those "rights".
That is what the beef is here.
So as shareholders, what about the direct claim that the government through hera took rights belonging to the shareholders without compensation?
Those rights have value because otherwise why take them.
I was not nor have i been compensated for the rights that do not extend with the shares I own whatever they may be.
They were taken, and sort of "leased" or rented temporarily, i need to be compensated during the tenure of those rights having been extracted.
Now, wouldn't that be a direct claim?
Conversion of sps to common is yet another way of taking.
Money was forced on fannie and freddie.
That money has been repaid.
What they need to do is lower the interest rate to the fed funds rate or 3 % or Tarp rates, recalculate the $$ and everything over that returned to the company and the greedyment should go away!
Okay, okay, because Greedyment has an insatiable appetite for money that is not theirs and the ability to spend what is not theirs, yes, they can credit the difference to a note receivable at 10% interest.
oh and the warrants, are yet more theft.
Greedy Sonofguns they are.
Conversion of sps to common...
NO thank you.
Yuck!
Have to eliminate that pesky "liquidation" pref thingy or we win Billions and all of it goes back to the gov't.
problem is any repayment would add to the company' profits and then be added to the liquidation preference / interest sweep.
its a circular thing.
Have to rule the conservatorship was bad the spspa bad and the whole enchilda sucked or its a nothing nothing.
Why would swenney deny the direct claims?
Seems that is part of the warrants and taking 80% of the comapany and now 100% of the equity which would be that of the shareholders.
Which is directly attributable to the shareholders??
Thus its the shareholders that have been directly harmed.
???
does she not understand finance and accounting?
That's the point...
Neither did fannie or freddie..
Just impose it on them.
Tell the directors they'll be x unless they accept and then just do it.
Pick a couple dozen companies and the US will have a surplus. Isn't this the same thing they do in Argentina when they nationalized everything?
During the conservatorship... from 2008 thru today the fhfa / treasurya have failed in preserve conserve safe and solvent.
They have been injurous to the shareholders during this period of time and have continual failure.
They should be held responsible for this.
Every day they have a responsibility to the share holders
who ever they are.
Sorry you and i are considering two different things. I am saying what they should owe for and pay and you are saying what they might.
They should pay for 2008 theft.
Then they should pay for post conservatorship actions
This would be due the shareholders of record
Your analysis lacks restitution for what has occurred. Sorry, there is real money at stack and the government has stolen it and the ability.
They'd owe for the taking - to 2008 owners and for the failing to act in good faith during the conservatorship. They would owe some recompense to the perosn who bought in 2009 and sold in 2011 just like they owe something for the person who bought in 2010 and sold in 2015 or still have shares today.
They stole it they should pay for that priv.
And yes some number could total 700B
It might not but just because its possible doesn't mean its ridiculous.
Will it happen... likely not becuase the courts won't make the gov't pony up and the gov gets away with lots of things....
Just ask the indians.