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Z...if you know where his blog is...go ahead and post it...or if you can post a link to it I will.
It's way too late to write it off as a loss for 2014...you have to hook up with your broker and surrender your shares as a total loss in a defunct company. Not really sure what the exact process is, but I know it can take several weeks or longer to have them declared a total loss.....and of course there is a cost to do this from the broker...... or have sold prior to the end of the year at a loss....and remember...you can only write off $3000 per year as a loss.
Also.....the IRS and SEC both have very specific rules/requirements for what is classified as a "worthless stock". You now have a year to investigate and prepare to see if it is worth the effort. I believe "worthless stock" is deemed sold on Dec. 31 of each year, so that plays into it as well...for both short term and long term gains/losses as they are applied against the like kind. short term gains/losses offset each other as do long term gains/losses.
hope this helps a little
This may be what you are looking for
http://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2012-8-17_SPSPA_FannieMae_Amendment3_508.pdf
Credit Suisse loses bid to dismiss mortgage case
Kevin McCoy, USA TODAY 12:29 p.m. EST December 26, 2014
Credit Suisse has lost an initial legal effort to dismiss a New York lawsuit that accuses the Swiss banking giant of fraud in selling residential mortgage-backed securities before the national recession.
New York Supreme Court Justice Marcy Friedman denied the motion, concluding in a Wednesday ruling that many of the bank's arguments against the lawsuit filed in 2012 by New York Attorney General Eric Schneiderman's office were "without merit."
Schneiderman argued in his initial court complaint that Credit Suisse led investors to believe the bank "had carefully evaluated — and would continue to monitor — the quality of the loans underlying their" residential mortgage-backed securities.
"In fact, defendants systematically failed to adequately evaluate these loans, and kept investors in the dark about the inadequacy of their review procedures," the lawsuit alleged.
Friedman's threshold-level ruling in a case that ultimately could find Credit Suisse liable for billions of dollars in damages allows the matter to go forward as both sides marshal additional evidence and legal arguments.
The bank, Switzerland's second-largest, said it would "appeal this particular decision and continue to defend ourselves in this case," Bloomberg News reported.
Credit Suisse had argued that the New York case should be dismissed because the statute of limitations had expired before the lawsuit was filed. The bank also contended that the state's allegations were preempted by the Federal National Securities Market Improvement Act of 1996 and argued that Schneiderman's office had failed to state a legal cause of action.
Friedman ruled that the lawsuit had been properly filed within a six-year statute of limitations because the underlying claims "seek to impose liability on defendants based on the classic, longstanding common-law tort of investor fraud."
The decision similarly rejected the bank's other claims. Schneiderman filed the action under New York's Martin Act, which gives the attorney general's office "broad regulatory and remedial powers to prevent fraudulent securities practices by investigating and prosecuting claims," Friedman wrote in the 17-page ruling.
USA TODAY
JPMorgan, Justice Dept. reach $13B settlement
JPMorgan Chase, Citigroup and Bank of America have previously agreed to pay multi-billion-dollar settlements to settle similar allegations in other lawsuits filed by New York, other states and the U.S. Department of Justice.
2015 Q1 Dividend schedule
VERO BEACH, Fla., Dec. 22, 2014 (GLOBE NEWSWIRE) -- ARMOUR Residential REIT, Inc. (NYSE: ARR, ARR PrA and ARR PrB) ("ARMOUR" or the "Company") today announced the Q1 2015 expected monthly cash dividend rate for the Company's Common Stock.
Q1 2015 Common Stock Dividend Information
Month Dividend Holder of Record Date Payment Date
January 2015 $0.04 January 15, 2015 January 27, 2015
February 2015 $0.04 February 13, 2015 February 27, 2015
March 2015 $0.04 March 13, 2015 March 27, 2015
American Capital Mortgage Investment Corp. Declares Fourth Quarter Dividend of $0.65 Per Share.
BETHESDA, Md., Dec. 18, 2014 /PRNewswire/ -- American Capital Mortgage Investment Corp. (MTGE) ("MTGE" or the "Company") announced today that its Board of Directors has declared a cash dividend of $0.65 per share for the fourth quarter 2014. The dividend is payable on January 27, 2015 to common shareholders of record as of December 31, 2014, with an ex-dividend date of December 29, 2014.
Here is the full article
BofA Whistleblower to Get Nearly $58 Million--Filing
12/17/2014 | 06:30pm US/Eastern
http://www.4-traders.com/BANK-OF-AMERICA-CORP-11751/news/BofA-Whistleblower-to-Get-Nearly-58-Million-Filing-19558930/?countview=0
By Christina Rexrode
Edward O'Donnell, the former Countrywide Financial Corp. executive who filed a whistleblower lawsuit against his former firm, will collect nearly $58 million for a separate lawsuit against Bank of America Corp.
Mr. O'Donnell is known for his role as a witness in a 2013 trial in which the U.S. successfully accused the bank of churning out mortgages in a Countrywide program known as Hustle. Mr. O'Donnell had also accused the bank in his own 2012 lawsuit of misleading Fannie Mae and Freddie Mac, which bought some of the mortgages, about their quality.
The U.S. Attorney's Office in Manhattan used Mr. O'Donnell's allegations as the basis of its lawsuit against the bank later that year.
Mr. O'Donnell's reward, disclosed in a court filing this week, is related to a separate lawsuit that he filed under seal this June against Countrywide and Bank of America, in district court in Manhattan. At the time, the bank's negotiations with the Justice Department over a broad mortgage-securities settlement were already well under way.
When that settlement, for $16.65 billion, was announced in August, it folded in Mr. O'Donnell's sealed complaint. Of the $16.65 billion, $350 million went toward settling Mr. O'Donnell's complaint.
According to those documents, unsealed this week, Mr. O'Donnell will receive 16% of that settlement, or $56 million. He will also receive an extra $1.6 million. The court documents didn't say how that number had been reached or why it was being given.
The June allegations echo much of Mr. O'Donnell's original Hustle complaint.
"This matter has been fully resolved," a bank spokesman said, and in reference to Mr. O'Donnell's recently unsealed allegations said that the bank "won't comment on unfounded assertions like these."
Mr. O'Donnell worked for Countrywide, and later Bank of America, from 2003 to 2009. Bank of America bought Countrywide in 2008.
Mr. O'Donnell later worked at Fannie Mae--one of the entities that he said was defrauded by the bank. His lawyer, David Wasinger, said he had left Fannie Mae within the past two or three weeks. Mr. Wasinger declined to say why.
Mr. O'Donnell's original Hustle accusations led to the high-profile case against the bank. A jury last year found the bank liable for fraud in that case, and a judge in July ordered the bank to pay a $1.27 billion penalty.
The bank has said it plans to appeal the Hustle ruling.
Mr. Wasinger said there may also be a financial reward for Mr. O'Donnell's role in the Hustle case.
Dr. D, I would surmise "someone" is trying to consolidate for several reasons.
1. management (new ?) wants less shareholders - and more shares held by the company. This would result in less of a chance that current retail shareholders complain and possibly gain the attention of the SEC when the new "business" is announced. The resulting PR blitz would draw in new retail money, with shares on the market offered by the company. wash...rinse...repeat.
2. Less shares in the retail world makes the shell more appealing for a buyer/reverse merger.
3. Management...or potential new management is attempting to spark interest in the shell with share activity. This would peak the interest of new bagholders. This could be the start of the next scam to come out of this company.
4. could possibly be EOY accounting cleanup by the MM's.
5. Potential new management is "buying" shares from the company at bottom feeder prices...then they PR blitz and sell into the momentum...see item 3 as this would be a variant.
6. could be the start of a "real" interest in the shell by a "real" business....though I don't know why. One can buy a clean shell for a reasonable amount with reporting and share structure up to date.
the possibilities are really endless...we know current management is not doing anything with the company as the price of oil has bottomed and we saw nothing in the few years oil was at it's peak...so in my personal opinion...I will watch for the opportunity to offload my shares and recover something if possible.
interesting video about Miami meeting
It figures out to right at 12.3% interest paid on the total bailout amount. I haven't seen Ackmans's numbers, and I would assume his numbers are based on the "original" agreement where FnF were to pay back XXX amount quarterly principle plus 10%, until the debt was satisfied. These amounts reflect the original agreement along with the sweep amounts tossed in.
A Tale of Two Bailouts: AIG, Fannie and Freddie and Beyond
Richard Epstein Contributor
http://www.forbes.com/sites/richardepstein/2014/11/26/a-tale-of-two-bailouts-aig-fannie-and-freddie-and-beyond/2/
It has been some time since my last Forbes column on Fannie and Freddie. After eight weeks in Court, it appears as though the AIG trial, in which former AIG CEO Maurice (“Hank”) Greenberg is mounting a challenge to recover some $40 billion for shareholders from the United States, by attacking all the steps in the multi-billion U.S. bailout, initiated in September 2008, which started at $85 billion, but may have run to as much as $180 billion by May 2009. While separate arguments, there are some instructive elements to contrast the developments in the ongoing AIG dispute with those in connection with the multiple lawsuits brought by the private shareholders (both junior preferreds and common) of Fannie Mae and Freddie Mac against both the Federal Housing Finance Authority (FHFA) and the United States Treasury.
That comparison in turn sets the stage for discussion of two other issues: the recent motion by the Rafter litigation plaintiffs (including Pershing Square Capital Management), as friends of the court and holders of Fannie and Freddie common stock, in opposition of the government’s motion to stay discovery in Fairholme’s takings claim before Judge Margaret Sweeney in the Court of Federal Claims (CFC) and a recent statement by Sen. Tim Johnson (D-SD), the outgoing chairman of the Senate Banking Committee that:
“
“Everyone agrees that conservatorship cannot continue forever, so I hope my colleagues will keep working towards a more certain future for the housing market. However, if Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship.”
All these points are interrelated. As ever, I write about these issues as an advisor to several institutional investors with an interest in Fannie and Freddie. I have no similar involvement with AIG.
AIG v. Fannie and Freddie Any analysis of the relationship between the AIG and the Fannie/Freddie bailouts has to start by noting that AIG was a private company that did lead the double life of a Government-Sponsored-Enterprise. Thus before the onset of the government’s AIG’s September 16, 2008, bailout done just days after the Fannie and Freddie deal, there was no troubled history of past entanglements between AIG and the government remotely parallel to those for Fannie and Freddie whose extensive activities under the Housing and Community Development Act was only imperfectly offset by the implicit government guarantee of the high-risk loans that it made pursuant to that process.
The relatively clean relationship between AIG and the United States meant that the two parties negotiated the complex 2008 bailout terms at arm’s length between the two sides. Unlike the situation with Fannie and Freddie, the government had not forced out the private directors of AIG, who were therefore in a position to make the best deal they could for their shareholders. That deal in fact imposed tough terms on AIG, which included an initial interest rate at 14.5 percent, coupled with the right to acquire 79.9 percent ownership interest in AIG in exchange for an $85 billion bailout loan that it made for the company.
The deal in question was not executed all at once, but in complex stages, which were exhaustively reviewed in the excellent decision of Judge Paul A. Engelmayer in Starr International v. Federal Reserve Bank of New York in his November 2012 decision in the Southern District of New York. I shall not go through all the intermediate steps. But it is critical to note that each of these steps were in accordance with the original plan, and at no point during the course of the AIG bailout did the government attempt to introduce anything analogous to the Third Amendment, that is, to order a full dividend sweep of all of AIG’s assets. Clearly it could not have gotten the AIG board to sign off on that transaction, which was thus never attempted. In addition, many of the key issues in the takings claims were similar to those raised before Judge Engelmayer whose careful opinion will be difficult to distinguish.
One point on which this will be especially true is the question of whether the AIG somehow breached its fiduciary duties to AIG by coercing it into this transaction. Given that the United States acted as a lender dealing with a corporation represented by its own Board of Directors (who have refused to join in the Starr International suit against the United States), it seems hard to think that the United States will be found to have taken property from AIG during the course of these arm’s length negotiations. Similarly, it will be difficult to prove that the United States exceeded its authority under the Federal Reserve Act which allows it to make in in “unusual and exigent circumstances,” to offer discounted lending terms to a distressed “individual, partnership, or corporation,” which seem applicable here. In addition, it looks as though Judge Engelmayer is correct when he concludes that the “incidental powers” conferred on the Federal Reserve allow it to structure the loan transaction to include an equity kicker.
The Rafter Motion in Fannie and Freddie It should be evident that in every way the Fannie Freddie claims are stronger than the AIG claims. Fannie and Freddie did not have their own board, and the Third Amendment wiped out all future dividend flows. Both substantively and procedurally, Fannie and Freddie are in a stronger position. Yet ironically, while AIG is granted two trials, one in New York on breach of fiduciary duty and one in the Court of Federal Claims on takings, to make its case, the government is now contending that the private shareholders of Fannie and Freddie should not be allowed even discovery, let alone a trial to establish their claims on either count.
The situation with Fannie and Freddie is entirely different. The latest skirmish in this ongoing litigation is Judge Margaret Sweeney’s decision to allow the Rafter plaintiffs, including Pershing, to file a motion in opposition to the government’s stay of the Fairholme Funds takings claim also in the CFC. Some of the points made in the Rafter motion highlight the vast difference between the two cases, which makes doubly ironic the indefensible decision of Judge Royce Lamberth to dismiss the claims of the junior preferred shareholders in Fannie and Freddie without either deposition or discovery. Here is how those differences play out.
First, the AIG and Fannie/Freddie bailouts both took place in the agitated times of 2008. But the AIG Board was in place to represent its shareholders. The Fannie and Freddie Boards (which were never quite private companies) had been displaced by FHFA, so that all of Fannie and Freddie’s decisions on the terms of the bailout were for them by then acting director of Fannie and Freddie, Edward DeMarco, who had previously served as a high ranking Treasury official. At this point, the want of procedural independence requires that a searchlight be shined on the transaction to see that it was entirely fair to the junior preferred and common shareholders of Fannie and Freddie. The Rafter plaintiffs hold common not preferred stock, so that their claims are independent of those of the Fairholme plaintiffs.
The gist of their argument is that they are entitled to get discovery on key elements of their claims, no matter what happens in the Fairholme suit, which seems clearly correct. That discovery really matters. The first of these is that the collusion between FHFA and Treasury meant that FHFA was “an agent and arm” of Treasury and thus subject to suit along with Treasury for the taking of private property in the CFC. The second two claims relate to the question of whether Treasury had evidence of the “future profitability” of the companies, and if they did, whether the plaintiffs had “a reasonable investment-backed expectation of their future profitability.”
I regard the third of these issues as one that is so plain that it does not need discovery. Why else does anyone invest in stock except in the expectation of gain a profit? The upside potential cannot be ignored even if there is a strong likelihood, at least as of 2008, that Fannie and Freddie could not be nursed back to health. But the second really matters because it will in all likelihood flatly contradict government claims that Fannie and Freddie were still insolvent nearly four years after the original September 2008 bailout. And the common shareholders, even if they retain only 20 percent of their initial equity, still are in a position to object to the “full dividend sweep” of the Third Amendment, which wipes out all prospects of all future gains forever. Indeed, the only reason the private shares did not go to zero is that everyone thought that the claims against the government could prove strong enough to beat back the Third Amendment
The Rafter claimants make a strong case is that it is unwise for Judge Sweeney to stop the train on discovery, given that they would necessarily be released from their current stand-still agreement with the Treasury that they would not conduct duplicative discovery on these issues so long as Fairholme could go forward. In this connection, it is again critical to stress that all the takings claim against the United States and FHFA are distinct from the equitable claim for breach of fiduciary duty, either under federal or state law, that was in issue in Fairholme’s case before Judge Lamberth. The takings claim based on the Third Amendment is fixed as of August 2012, when the Third Amendment was put into place. The just compensation involved equals to the loss in value attributable to the conscious decision of the government to strip out all dividend and liquidation rights from both the junior preferred and the common stocks, with interest thereon. The claim is therefore ripe as of that date, for it does not depend in any way on the subsequent fortunes of both companies that still remain under the management of FHFA.
At this point, the most dramatic difference between the AIG and the Fannie/Freddie claims is that the AIG bailout did not involve any radical about-face by the government to rejigger the terms of the original deal in ways that allowed it to take all of the potential profits from future operations. It could well have been that the government well understood that any such high-handed operation would be met with stout and effective resistance from AIG’s private management and board, proves once again the political risk from the hybrid status of any GSE.
The Johnson Statements The full nature of the complexity is only increased by the recent public advice that Chairman Johnson of the Senate Banking Committee made to FHFA director Mel Watt. The request that the conservatorship of Fannie and Freddie be brought to a close is rich in political confusion. As a matters now stand, if the Third Amendment is valid, then the Treasury has no immediate financial incentive to give a dime of those profits back to the shareholders. Given its supposedly strong contractual rights, it can just stick its guns on the conclusive power of the Third Amendment. But from a business perspective, that posture is a political disaster for any further reform efforts. The Johnson statement telegraphs the simple point that so long as the Third Amendment stands, there is no way to raise capital from the private markets for residential mortgage lending. The investors that were burned have long memories and they will not commit massive amounts of new capital that can be expropriated by a repeat performance, perhaps with some new bells and whistles, of the August 2012 Third Amendment.
Thinking strategically, it will not serve the government’s long-term interest to get out of conservancy simply by turning everything over to the government. The shareholders of Fannie and Freddie still have formal title (but nothing else to their paper) and the Johnson statement should be best read as an invitation of Mr. Watt to institute settlement talks with shareholder representatives to resolve this crisis fairly and now, lest the ability to raise new private capital be lost for a generation or more.
I think that the correct resolution of those issues could take one of two paths. The government can either treat all the “dividends” paid over in excess of the amounts needed to keep current with the 10 percent dividend on the senior preferred, as a return of capital, and go forward just as if nothing had happened. Or there could be an effort to determine the wipeout of both classes of stock by the Third Amendment in 2012. If both of these claims eventually lose, the leverage for the shareholders will be weak in getting full compensation. But if both when, then they get to decide which measure of damages yields the higher rate of return. If the government holds out an olive branch right now, it could spare the further litigation and uncertainty that bode ill for the capital markets. For in the fate of the current litigation lies not only the financial claims of the private shareholders, but the larger question of whether a private residential financing market will ever become viable again in the United States. Your move, Mr. Watt.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.
Here is the complete article
By
Joe Light
Nov. 21, 2014 6:40 p.m. ET
A Treasury Department spokesman on Friday said the Obama administration wouldn’t consider ending government control of mortgage-finance companies Fannie Mae and Freddie Mac without legislation.
“The administration’s position has not changed,” the spokesman wrote in an email. “Comprehensive housing finance reform legislation is the only way to end the conservatorship responsibly and transition to a new system that brings stability back to the housing market while protecting taxpayers.”
The comment came after Sen. Tim Johnson (D., S.D.) in the opening remarks of a Senate Banking Committee hearing on Wednesday called on a top housing regulator to “engage with the Treasury Department in talks to end the conservatorship” of Fannie and Freddie if Congress doesn’t proceed with legislative reform.
Mr. Johnson had co-sponsored a bipartisan bill that would have overhauled the housing-finance system. That bill stalled in May after garnering limited Democratic support. Many political analysts have said legislative housing reform is unlikely to be a priority for next year. Mr. Johnson is retiring this year.
During the committee hearing, Federal Housing Finance Agency director Melvin Watt, who regulates Fannie and Freddie, said he viewed his agency as a bridge to legislative action. “Conservatorship cannot and should not be a permanent state. The role of Congress is to define what that future state is,” he said.
After the hearing, Mr. Watt seemingly left the door open to the FHFA and Treasury’s ending the conservatorship without Congress. “It’s something that would have to be initiated by Treasury, not by me,” he said. “In the short term I would rule it out, in the long term, I might not rule it out.”
Fannie Mae’s stock closed up 12% that day, while shares of Freddie Mac rose 11%.
The government placed Fannie and Freddie into conservatorship in 2008 after the companies suffered massive losses during the financial crisis.
Write to Joe Light at joe.light@wsj.com
Fannie Mae – AG Nominee Signals A Change In Approach: Bove
by Michael IdeNovember 10, 2014, 1:28 pm
http://www.valuewalk.com/2014/11/fannie-mae-attorney-general/
The nomination of Loretta Lynch as the new US Attorney General could mean the administration doesn’t want to continue prosecuting banks, argues Rafferty Capital Markets VP of equity research Richard Bove
When Mel Watt spoke at the Brookings Institution earlier this year, Rafferty Capital Markets VP of equity research Richard Bove saw the change in direction as a big win for Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) shareholders. And while Watt has been clear about where he considers his obligations to lie, there’s not question that he has taken the FHFA, Fannie Mae and Freddie Mac in a different direction than his predecessor Ed DeMarco, and Bove argues in a report sent out earlier today that the nomination of Loretta Lynch as Attorney General signals a similar sea change in policy.
Fannie Mae, Freddie Mac
“DeMarco’s job was to focus on instituting operating disciplines in the system. He also used his ability to punish the banks as much as he could extracting tens of billions in payments from them,” Bove writes. “[Watt] is now working to help stimulate growth in the housing industry rather than attempting to punish banks. The selection of Loretta Lynch for the post of Attorney General of the United States, if the press is correct, would be a move similar to the one in which Mel Watt was selected.”
Lynch has no history of going after banks
In case there was any doubt, Bove believes that Holder used extra-legal means to pursue political goals and has (at least in Bove’s mind) wrecked the credibility of the Attorney General’s office. He even tries to lay American distrust of the Federal government at Holder’s feet, which is more than a bit of a stretch.
But he points out that Lynch, who served has served as a federal prosecutor first from 1999 – 2001 and from 2010 until now, doesn’t have a history of going after banks or other companies involved in the sub-prime crisis. If President Obama wanted to continue applying pressure to Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) he could have nominated any number of had been involved in prosecuting fraud cases (and other banking misdeeds) in recent years.
Fannie Mae: Bove sees significant in the nomination, even if Lynch isn’t confirmed
Lynch will have to be confirmed by a Republican Senate looking for easy victories to start of the new term, so there’s no guarantee that she will be the next Attorney General (though there’s no obvious reason she shouldn’t be). Regardless of who is ultimately confirmed, Bove reads a lot into the choice itself and believes that it’s another quiet sign of the administration changing its position on how it deals with banks.
Skipper...here are the actual numbers
The way we SHOULD see it
$3905000000 / 1158080657 (commons)= $3.3719 income per share
The way the FED sees it
$3905000000 / 5762000000 (commons 79.9% FED owned)= $0.677 income per share
Hopefully the bottom numbers will evaporate once Sweeney knocks their D**K in the dirt for ripping off the shareholders.
Here are the trades for the last month or so...I would suspect a possible new owner/CEO and new scam brewing.
Price Size Mkt Time
$0.0001 31,250 OTO 11/05
$0.0001 10,000 OTO 11/05
$0.0002 20,000 OTO 11/05
$0.0001 20,000 OTO 11/05
$0.0001 20,000 OTO 11/05
$0.0001 21,500 OTO 11/05
$0.0001 18,750 OTO 11/05
$0.0001 390 OTO 11/05
$0.00 5,872,000 OTO 11/05
$0.0001 6,628,000 OTO 11/05
$0.0001 900,900 OTO 11/05
$0.0001 41,051 OTO 11/05
$0.0001 6,500,000 OTO 11/05
$0.0001 2,375 OTO 10/30
$0.0001 2,375 OTO 10/30
$0.0001 4,000,000 OTO 10/29
$0.0001 5,000 OTO 10/28
$0.0001 10,000 OTO 10/28
$0.0001 10,000 OTO 10/28
$0.0001 1,250 OTO 10/28
$0.0001 1,250 OTO 10/28
$0.0002 50,000 OTO 10/27
$0.0001 739,269 OTO 10/27
$0.0001 956,981 OTO 10/27
$0.0001 10,000 OTO 10/27
$0.0001 180,000 OTO 10/27
$0.0002 10,000 OTO 10/17
$0.0002 10,000 OTO 10/10
$0.0001 25,000 OTO 10/10
$0.0001 500,000 OTO 10/08
American Capital Agency Corp. Declares Monthly Common Stock Dividend for October 2014
http://finance.yahoo.com/news/american-capital-agency-corp-declares-200100414.html
PR Newswire
American Capital Agency Corp. October 16, 2014 4:01 PM
BETHESDA, Md., Oct. 16, 2014 /PRNewswire/ -- American Capital Agency Corp. (AGNC) ("AGNC" or the "Company") announced today that its Board of Directors has declared a cash dividend of $0.22 per common share for October 2014. The dividend is payable on November 7, 2014 to common shareholders of record as of October 31, 2014, with an ex-dividend date of October 29, 2014.
This is the Company's first regular monthly dividend to common shareholders, representing a change in the payment frequency of its common stock dividends from quarterly to monthly. The Company anticipates that the 2014 dividend distributions on its common shares will likely represent ordinary dividend income for shareholders when the final tax characterization of such dividends is determined and reported to shareholders on Form 1099-DIV after the end of the year
TRADING RESUMED
Citigroup Inc.C +2.89% reported its third-quarter profit rose as revenue jumped while also saying it plans to pull back from retail banking in a raft of smaller countries.
Citigroup reported net income of $3.44 billion, up from $3.23 billion a year earlier. When stripping out one-time items and accounting adjustments, the bank’s profit was $1.15 a share. Analysts polled by Thomson Reuters had expected $1.12 a share.
Revenue rose to $19.6 billion, or $19.98 billion on an adjusted basis. Analysts had expected adjusted revenue of $19.05 billion.
The most international U.S. bank, Citigroup said it plans to exit retail banking in Costa Rica, El Salvador, Guatemala, Nicaragua, Panama, Peru, Guam, the Czech Republic, Egypt and Hungary. It confirmed it will be exiting its retail banking in Japan and said it is exiting its consumer finance business in Korea.
Citigroup, which has institutional customers in about 100 countries, has said it wants to home in on areas with “the highest growth potential” for consumer banking, eschewing some smaller cities and slower-growth countries.
The bank suffered a setback earlier this year when the Federal Reserve rejected its dividend and share-buyback plans, citing the difficulty it was having measuring how a severe recession would affect all of its global operations.
http://blogs.wsj.com/moneybeat/2014/10/14/citi-reports-stronger-than-expected-results/?mod=yahoo_hs
Elizabeth Warren: Obama's economic team chose Wall Street over 'families'
http://finance.yahoo.com/news/elizabeth-warren-obamas-economic-team-210400240.html
CNNMoney.com
By Melanie Hicken 41 minutes ago
WASHINGTON, DC - SEPTEMBER 18: Sen. Elizabeth Warren (D-MA) greets supporters during a rally in support of Social Security and Medicare on Capitol Hill September 18, 2014 in Washington, DC. The rally was organized by American United for Change, a liberal advocacy group founded to fight the privitization of Social Security. (Photo by Chip Somodevilla/Getty Images)
.
Senator Elizabeth Warren, always outspoken on the tension between Main Street and Wall Street, took shots Sunday at a system she said is "rigged" against the little guy.
In an interview in Salon, Warren, who has said she doesn't plan to seek the 2016 presidential nomination, said fellow Democrats including President Obama have not done enough to help consumers.
On President Obama: Warren praised Obama for the creation of the Consumer Financial Protection Bureau, a federal agency aimed at enforcing consumer protection laws.
But she told Salon that "there has not been nearly enough change" in the wake of the U.S. financial crisis.
"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."
On lobbyists: Banks spend millions on "armies of lobbyists and lawyers," she told Salon, but there are few people at "the decision-making table" representing the concerns of everyday Americans.
"And when that happens -- not just once, not just twice, but thousands of times a week -- the system just gradually tilts further and further."
On student debt: Warren is a vocal proponent of student loan reform. She criticized public colleges for their high tuition and the for-profit college industry for "preying on" low-income students and military veterans.
While around 10% of students attend for-profit colleges, these schools account for about a quarter of all federal student loan dollars and are responsible for nearly half of defaults, she told Salon.
"The federal government is currently subsidizing a for-profit industry that is ripping off young people. Those young people are graduating -- many of them are never graduating -- and of those that are graduating, many of them have certificates that won't get them jobs, that don't produce the benefits of a state college education."
I look at in a very simplistic manor. The FHFA was deemed the conservator of the GSE's. Per the requirements of a conservatorship, the purpose of appointing the Conservator is to preserve and conserve the Company’s assets and property and to put the Company in a sound and solvent condition.
A conservatorship is intended to stabilize troubled institutions with the objective of maintaining normal business operations and restoring financial safety and soundness. The conservator is responsible for making decisions that are in the best interest of the company...not the shareholders.
By extension, that does apply to the shareholders as well in an offshoot way, and based on the "agreement" of the 3rd amendment, I see no plausible value that has come from it that benefits the GSE's in any way shape or form.
IT does prevent the GSE's from becoming sound and solvent, to the extent they are capable of achieving. It does prevent the GSE's from continuing in there "normal" business practices as well.
The actions of the FHFA "agreeing" to this 3rd amendment sweep proves to me that the conservatorship violated the basic principles and requirements set forth by the FHFA themselves in their role as conservator of the GSE's.
One might mention the word collusion and I would venture that is the most probably action taken by the FHFA and FED in regards to the GSE's. And I do believe that is still against the law.
My opinion is that Lamberth made his ruling to get this out of his court...he doesn't want to deal with it. Based on the basic laws of conservatorship that you can find on the FHFA website, they are blatantly ignoring the required fiduciary duties of a conservatorship, and openly stating they have the right to convert from conservatorship to receivership. The FHFA also posts on their website that they have no legal ability to "wind down" or dismantle or liquidate or dissolve the GSE's and that it is clearly a responsibility of the political machine to make those decisions through the congress/senate voting procedures.
This is from the FHFA website
http://www.treasury.gov/press-center/press-releases/Documents/fhfa_consrv_faq_090708hp1128.pdf
Q: Can the Conservator determine to liquidate the Company?
A: The Conservator cannot make a determination to liquidate the Company, although, short of that, the Conservator has the authority to run the company in whatever way will best achieve the Conservator’s goals (discussed above). However, assuming a statutory ground exists and the Director of FHFA determines that the financial condition of the company requires it, the Director does have the discretion to place any regulated entity, including the Company, into receivership. Receivership is a statutory process for the liquidation of a regulated entity. There are no plans to liquidate the Company.
Q: Can the Company be dissolved?
A: Although the company can be liquidated as explained above, by statute the charter of the Company must be transferred to a new entity and can only be dissolved by an Act of Congress.
Withdraw and Correct the Error of Thy Ways: The Perry Capital Opinion
http://www.forbes.com/sites/richardepstein/2014/10/10/withdraw-and-correct-the-error-of-thy-ways-the-perry-capital-opinion/?partner=yahootix
Richard Epstein Contributor
In my previous two posts on Forbes.com, found here and here, I have attacked for a variety of reasons the recent memorandum opinion of Judge Royce Lamberth in Perry Capital LLC v. Lew, which he issued before discovery and without hearing oral arguments from either. In this post, still writing as a consultant for several institutional investors, I refer to those statutory provisions that Judge Lamberth (the Perry Capital opinion) either ignored or misconstrued. In my judgment, these errors of omission and misinterpretation, when joined with the mistakes I referred to in the earlier posts, are so serious and one-sided, that he should withdraw his decision, in order to reconsider this position.
More specifically, the Perry Capital opinion plays fast and loose with the statutory framework of the 2008 Housing and Economic Recovery Act (HERA) in ways that paint a totally false picture of its treatment of three key points. First the opinion seriously misstates the rights and duties of the Federal Housing Finance Agency (FHFA) as a conservator. Second, it seriously misstates the authority of Treasury under HERA. Third, he refuses to allow any evidence on the possible collusion between FHFA and Treasury in fashioning the Third Amendment.
First, let’s examine FHFA’s rights and duties. In his opinion, Judge Lamberth quotes 12 U.S.C. § 4617(a)(2), which provides “[FHFA] may, at the discretion of the Director, be appointed conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity.” His implication is that both conservators and receivers have all the powers listed in this section. But he fails to quote the provision that deals exclusively with the duties of FHFA as conservator:
“
12 U.S.C. 4617(b)(2) (D) Powers as conservator
The Agency may, as conservator, take such action as may be—
(i) necessary to put the regulated entity in a sound and solvent condition; and
(ii) appropriate to crry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.
Note that this last provision does not refer to any ability of the conservator to “wind up” the operations, which is a power given exclusively to a receiver. Nor does it contemplate in the slightest, as Judge Lamberth suggests in footnote 20 any “fluid progression” that allows FHFA secretly to morph itself from a conservator to a receiver, without going through any formal process to work that change. It is wholly incorrect for him to write “FHFA can lawfully take steps to maintain operational soundness and solvency, conserving the assets of the GSEs, until it decides that the time is right for liquidation. See 12 U.S.C. § 4617(b)(2)(D) (“[p]owers as conservator”).” The cited section, quoted in full above, negates that fanciful suggestion. That conclusion is reinforced by 12 U.S.C. § 4617(b)(2)(E), immediately following, which addresses separately the “additional powers as receiver” to organize a liquidation of assets. The choice of form matters. The FHFA needs to initiate a formal proceeding to make the shift from one role to the other, which it has never attempted.
Second, Treasury’s authority under HERA. Indeed, the stringent limits on FHFA referred to above fit into the parallel limitations that HERA imposes on Treasury. In footnote three the Perry Capital opinion has this to say about the key provisions in HERA:
“
The purpose of HERA’s provision authorizing Treasury to invest in the GSEs was, in part, to “prevent disruptions in the availability of mortgage finance”—disruptions presumably due to the challenges confronting the GSEs in 2008. See 12 U.S.C. § 1455(l)(1)(B); 12 U.S.C. § 1719(g)(1)(B) (“Emergency determination required[.] In connection with any use of this [purchasing] authority, the [Treasury] Secretary must determine that such actions are necessary to—(i) provide stability to the financial markets; (ii) prevent disruptions in the availability of mortgage finance; and (iii) protect the taxpayer.”
The passage is accurate insofar as it goes, but it does not go far enough, because it ignores the sections just before and just after it. Thus Judge Lamberth does not deal with 12 U.S.C. § 1719(g)(1)(A), which makes it clear that any bailout requires the “mutual agreement between the parties,” such that the Secretary cannot unilaterally impose a deal. Similarly he ignores 12 U.S.C. § 1719(g)(1)(C), which lists among the relevant considerations “[t]he corporation’s plan for the orderly resumption of private market funding or capital market access,” and further “[t]he need to maintain the corporation’s status as a private shareholder-owned company. The Third Amendment, which precludes any return to the private market, is flatly inconsistent with these provisions. Nor does he mention that there is not one single reference to a receiver or receivership in this entire section of HERA that deals with Treasury’s powers. Any modification of the initial 2009 deal to impose a receivership is beyond the powers of Treasury. The same fate should await the de facto liquidation under the Third Amendment.
Third, Treasury’s oversight of FHFA. The Perry Capital opinion does quote section 4617, (a)(1)(7) which notes that when acting “When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency.” That provision appears to preclude FHFA from taking directions from Treasury as the plaintiffs alleged. Nonetheless, this section is dismissed in the opinion as irrelevant because of defect in the plaintiff’s pleadings.
However, “records” showing that Treasury “invented the net-worth sweep concept with no input from FHFA” do not come close to a reasonable inference that “FHFA considered itself bound to do whatever Treasury ordered. The plaintiffs cannot transform subjective, conclusory allegations into objective facts.
The Perry Capital opinion appears to concede indirectly that the Treasury came up with this idea on its own but, nonetheless, dismisses the plaintiff’s contention as “conclusory allegations.” It is at this point, that the procedural posture of the claim matters. At no point, did Judge Lamberth allow for any discovery to establish the nature of that connection. That seems wrong. And, at no point does the opinion make reference to the Jeffrey Goldstein memo of December 20, 2010, reported by Gretchen Morgenson of the New York Times, with its bald assertion that “’the administration’s commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.’s in the future.” Nor has anyone proffered any independent work by FHFA preparatory to the Third Amendment that might bear on the supervision issue. Judge Lamberth should have surely allowed for discovery on this key issue, which he refused to do.
I regard these deficiencies as incurable, and Judge Lamberth should rethink this opinion. He already senses the uneasiness of the situation when he writes:
“
It is understandable for the Third Amendment, which sweeps nearly all GSE profits to Treasury, to raise eyebrows, or even engender a feeling of discomfort. But any sense of unease over the defendants’ conduct is not enough to overcome the plain meaning of HERA’s text.
Judge Lamberth’s decision flunks his own test. It is not possible to show fidelity to HERA’s text by ignoring or misreading its most salient provisions. If Judge Lamberth does not reconsider his opinion, the Court of Appeal should instruct him to do so in no uncertain terms. And in the interim, Judge Margaret Sweeney should continue with her discovery on all disputed questions of fact until the full record comes out.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.
Perry Capital Appeals timeline
http://www.valueplays.net/wp-content/uploads/Perry-Appeal-.pdf
Latest numbers reflecting the payback
https://projects.propublica.org/bailout/list
lol...do you ever get the feeling that some posters want more attention on an abstract message board than they do in real life...makes one wonder sometimes.
Fannie & Freddie: No Looting Here
The Wall Street Journal
By
John Carney
Oct. 5, 2014 4:12 p.m. ET
Why would any company agree to surrender all profits to the U.S. government?
That question lies at the heart of the continuing legal dispute between some shareholders in Fannie Mae FNMA +25.17% and Freddie Mac FMCC +22.30% and the government—even after some investor actions suffered a blow last week in the court of U.S. District Judge Royce Lamberth.
The answer explains why the investors’ suits are flawed and hopes the companies’ shares have value are likely to be dashed. In short, the profit-sweep agreement wasn’t an illegal taking. It was a second bailout of the mortgage giants.
Consider that even after being taken over by the government in 2008, the companies ended up on a death march. And that had grave implications for the financial system.
In the original bailout, Treasury agreed to provide each company with up to $100 billion. As losses mounted, that was increased to $200 billion.
In return, Treasury received warrants to purchase common stock along with senior preferred stock. The latter paid annual dividends of 10%. This rose to 12% if the payment couldn’t be made in cash.
Each quarter, the Federal Housing Finance Agency determined whether their liabilities exceeded their assets. If so, the companies would draw funds and the value of the preferred would rise, dollar for dollar. By the end of 2009, draws were $125 billion—requiring annual dividends of $12.7 billion.
Because that was more than they could afford, the companies had to draw funds to pay dividends. This increased future dividends, requiring more draws because the companies posted losses until 2012.
At the end of the second quarter of 2012, the companies were on the hook for $19 billion of dividends annually. Fannie had never earned enough in a single year to pay its $11.7 billion dividend in cash. Only once had Freddie earned enough to pay its dividend.
In August 2012, Fannie’s finance chief said he couldn’t imagine his company would ever make enough money to cover the dividend payments.
That raised the prospect Fannie and Freddie would eventually need to draw down all the government commitment. Doing so, though, would destabilize the companies.
At that point, they would each owe over $20 billion in dividends—an amount they would never be able to pay in perpetuity. So, cash payments would stop, forcing them to pay 12%, digging the dividend hole deeper, faster.
More important, hitting the funding limit would undermine market confidence. With no capital, the firms’ ability to sell securities and finance themselves was dependent on access to Treasury cash.
With each draw moving the companies closer to the limit, investors would inevitably balk at some point. That could have led to their second collapse.
Worse, it would raise doubts about the mortgage securities the companies guarantee. That could again undermine the U.S. housing-finance system.
While some investors argue the companies should have paid a noncash dividend at 12%, that, too, would have undermined market confidence.
Raising the funding cap was a political nonstarter in gridlocked Washington and Treasury lacked the authority to do so unilaterally.
Given that, Treasury and the FHFA amended the bailout agreement to do away with the fixed, 10% dividends, replacing them with sliding payouts that matched the companies’ profits. The result: Fannie and Freddie only draw funds to cover actual losses; those draws don’t raise the dividend. In bad quarters, Treasury might get less than 10% or nothing at all. In good quarters, the net-worth sweep rewards the Treasury for taking this additional risk.
Whether the firms’ later improved financial results merited this response isn’t the issue. It is whether the move was rational for the government and FHFA.
Clearly, it was. That is why investors face an uphill battle in the courts. John Carney
The WSJ's Improbable Defense of Judge Lamberth's Indefensible Decision in Perry Capital
Richard Epstein Contributor
http://www.forbes.com/sites/richardepstein/2014/10/02/godzilla-versus-the-thing-the-wall-street-journals-improbable-defense-of-judge-lamberths-indefensible-decision-in-perry-capital/
My recent post on Forbes.com, written in my capacity as a consultant to several institutional investors, expressed my deep dissatisfaction with the thunderbolt that Judge Royce Lamberth launched (without argument or discovery no less) in Perry Capital LLC v. Lew against the private shareholders of Fannie Mae and Freddie Mac when he sustained the 2012 full dividend sweep under the Third Amendment to the original 2008 Senior Preferred Stock Purchase Agreement. This morning, Judge Lamberth’s decision received a full-throated defense that reads as if it was published in Revolution Magazine, but which in fact appeared on the normally level-headed editorial page of the Wall Street Journal. Ominously entitled, Godzilla Defeats the Thing, the Journal heaps lavish praise on Judge Lamberth for exposing the shareholder “scam” that in its words “combined dubious legal reasoning with junk economics.”
Really? The gist of the Journal’s argument was that both Fannie and Freddie would have been dead in the water without the $188 billion bailout that they received from the United States Treasury. The real question is what follows next. In the eyes of the Journal, once the original bailout was given, the government could have, and should have, have taken over the entire operation lock, stock and barrel. Yet that was exactly what the Government decided not to do at the time when it opted for a conservatorship that let the Treasury take two pieces out of the Fannie and Freddie pie. The first was its senior preferred that carried with it a 10 percent dividend rate, which increased to 12 percent if Fannie and Freddie deferred payments on their obligations. The second was an option to purchase some 79.9 percent of the common stock for a nominal price of $0.00001 per share.
Most notably, the SPSPA did not contain any provision that said, “In the event that this infusion of cash rescues Fannie and Freddie, the United States Treasury reserves the right to modify this agreement so as to claim all the profits that the business generates at any future time.” It does not take an advanced degree in finance to explain why this provision was conspicuously absent from the 2008 deal. Put it in and all of a sudden the two previous clauses are irrelevant to the terms of the deal. 10/12 percent is no longer the dividend rate, and the warrant to purchase the common stock at a nominal price is equally worthless. Why should the government pay even a dollar to get common stock that with a stroke of the pen it could acquire for free? And why should anyone bother to trade in shares which the government has announced in advance will be worthless to them no matter how valuable the company?
The Wall Street Journal, unhappily, was unable to let go of the past when it lauded the service that Judge Lamberth did for the taxpayers in Perry. Unfortunately, like Judge Lamberth, the Journal never bothers to cite a single word of the statutory provision that explains exactly how the Treasury was supposed to represent the United States, which is set out in Section 1219(g) of Banking Code, which tells a rather different story than their newly imagined narrative. I urge all readers to examine the section in full. Its gist is that Treasury is authorized to offer assistance, but nothing in it allows Treasury to force the corporation to accept its offer. The “mutual agreement between the Secretary and the Corporation” is required. The clear intention of the section was to allow for a negotiation between the directors of the covered corporation and Treasury over terms of the deal.
The banking statute then indicates the considerations that Treasury should take into account in making the loan in order to protect the “taxpayer’” interest during the course of the negotiations with any private corporation. Among these are the need to secure the appropriate “preferences and priorities” of the government and “[t]he corporation’s plan for the orderly resumption of private market funding or capital market access.”
It was just this process that was invoked in dealing with the AIG bailout arrangement that is currently being attacked by Starr International. But there is a huge difference between the two cases. As is well explained by Judge Paul A. Engelmayer in his 2012 opinion in Starr International v. Federal Reserve Bank of New York AIG was under the control of its own independent board of directors, which accepted the deal that the current litigation is now attempting to unwind. In that case, as Engelmayer recognized, the government is in the strong position of insisting that the terms of the original deal should be observed—terms which no private firm was prepared to offer AIG at the time. The acute difficulty with Starr’s case is that the government did not amend the case when it exercised its option to purchase 79.9 percent of the common in a deal that resulted in returning AIG to the private market. Indeed that deal left AIG shareholders better off than they would have been without the bailout. The tough terms of the initial deal were a reflection of the difficult financial position.
The situation with Fannie and Freddie is world’s part from AIG. The first point to note is that the Third Amendment was not negotiated by an independent board of directors, as was the case with the AIG bailout. Instead, the control over both companies was taken over by the Federal Housing Finance Agency (FHFA) under the control of Edward Demarco, himself a former high-level official at Treasury. The Third Amendment was not intended to return Fannie and Freddie to the private market. It was designed to insure that they would never be able to return to the market no matter how profitable their operations had become. What fiduciary would ever consent to a deal that left his client penniless no matter what happened? It is painfully clear therefore that the Third Amendment rests on double whopper. First, FHFA sold out its fiduciary duties as conservator to the Fannie and Freddie Shareholders. Second, Treasury disregarded its obligations in ordering the dividend sweep, which if upheld, would render the stocks of the two companies worthless.
In defending the high-level power grab the Journal relies on threadbare legal and economic arguments. On the former, it defends the “’plain meaning’ interpretation of the 2008 statute, which says: “no court may take any action to restrain or affect the exercise of powers or functions” of the company’s conservator.” But as I noted in the previous article, this meaning ignores the well-established judicial exception that this provision does not apply when the government’s action is hopelessly conflicted, as it is in this case of massive self-dealing. Indeed, this conflict of interest exception has to be read into the statute otherwise the ostensible conservatorship is a simple expropriation of all shareholder value by allowing the government to take over control of the company and pay out all dividends and capital to itself on a whim. At this point, no private company is ever safe.
To back up this extraordinary power grab, the Journal cites the work of Larry Wall of the Federal Reserve Bank of Atlanta to the effect that the companies were worthless in 2008 without the government bailout. Wall and I have sparred on this issue before. The incurable weaknesses in his argument are two.
The first is that any analysis of the 2008 situation is irrelevant to the Third Amendment which was entered into nearly four years later when the financial situation had changed, as there is strong evidence that the companies had returned to profitability. Indeed, it is on just this question that Judge Margaret Sweeney in the Court of Federal Claims is allowing discovery in Fairholme’s case against Treasury which, if allowed to go forward, is likely to reveal that Treasury and FHFA both knew that of the change in market conditions when they organized the massive money grab under the Third Amendment.
The second is Wall is wrong to rest the case for the Third Amendment on the ground that the government had given an implicit guarantee of all of Fannie and Freddie’s activities that allowed it a favorable position in the marketplace. Any attack on that policy has to be paired with something that neither Wall nor the Journal mentions, namely, the heavy obligations that Congress had imposed on Fannie and Freddie under the Housing and Community Development Act of 1992, as amended in 2007, which attempted to accomplish the impossible by asking Fannie and Freddie to aid affordable housing while maintaining its strong financial condition in ways that would allow it to earn a reasonable economic return. There is no way to go deeper into the mortgage pool without assuming extra risks of default. It is incorrect, therefore, to talk about the issue of subsidy without pairing it with the heavy costs of the federal mandate. All of these issues, moreover, were in play in 2008, and none of them justify wiping out the preferred and common shareholders of Fannie and Freddie in ways that Treasury did not dare to do in AIG.
In dealing with the current litigation, it is a huge mistake for the Journal to think that what is on trial is the oft-lamentable lending practices of Fannie and Freddie and need to make sure the market does not expect an implicit unpaid for federal guarantee. There is no question that these need to be reformed in the future to avoid the debacles of the past. But the key point to notes is that any such reform will be impossible if the government thinks that it can just repudiate its own agreements entered into at a time of financial stress in 2008, by entering into phony amendments when the crisis is long past in 2012, that render its original deals a mockery.
The point to ponder is this. What private party will ever rely on government assurances or guarantees if the Third Amendment is allowed to stand? Unfortunately, the Journal gets this point exactly backwards as well when it denounces in shameless populist fashion “big-money speculators who hope to make a killing on the upside if the politicians revive Fan and Fred.” The Journal should know that the “rule of law”, which is critical to the proper functioning of free markets, has no meaning if it can be suspended when applied to unsympathetic parties like “big money speculators.”
What the Journal should have said is that it is imperative to reform Fannie and Freddie to prevent a repeat of the debacle. But that reform will not be done with private money, ever, so long as the Third Amendment remain as an ominous reminder that no investment, speculative or not, is safe, so long as the government can engage in the most blatant forms of self-dealing to wipe out private corporate wealth with the stroke of a pen. If Judge Lamberth decision is allowed to stand, it will deal a deadly blow to rational regulatory reform of the residential housing market.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.
Fannie-Freddie Case Shows Messy Nature of Deal-Making in a Panic
By David Zaring and Steven Davidoff Solomon
October 2, 2014 4:00 pmOctober 2, 2014 4:00 pm 1 Comment
http://dealbook.nytimes.com/2014/10/02/fannie-freddie-case-shows-messy-nature-of-deal-making-in-a-panic/?_php=true&_type=blogs&partner=yahoofinance&_r=0
Credit Harry Campbell
This week has been a banner one for those who are still angry over the government’s actions in the financial crisis. The rescues of the American International Group and the mortgage giants Fannie Mae and Freddie Mac all came under a courtroom microscope.
In one Washington court, Maurice R. Greenberg, the former chief executive and major shareholder of A.I.G., is suing the United States government, contending that the tough terms imposed in return for the insurance company’s bailout were unconstitutionally austere.
In another closely watched case in a different Washington court, the shareholders of Fannie Mae and Freddie Mac, led by hedge funds Perry Capital and the Fairholme Fund, lost a similar kind of claim.
Parsing what the United States District Court did in the Fannie and Freddie litigation offers a window into the ways in which the government’s conduct during that crisis might finally be evaluated.
The government’s takeover of A.I.G. really did prove damaging for its shareholders, even as that takeover meant that the banks that did business with the firm would be paid off at 100 cents on the dollar, a rate far better than the one they would have received in bankruptcy. That doesn’t seem fair, though financial crises are not times for exquisite sensitivities to fairness.
Still, we think that the likely result of the A.I.G. lawsuit is that the government may be embarrassed to have the chaos of the financial crisis exposed by Mr. Greenberg’s lawyers at Boies, Schiller & Flexner, but the constitutional takings claim is an uphill one. When the government gives you more than $187 billion, and you accept the offer, it is hard to argue that this is a constitutional taking. This is particularly true when bankruptcy would have certainly been the alternative result.
Fannie and Freddie’s shareholders, if anything, received a deal even worse than A.I.G.’s shareholders did. The government let them survive when it bailed out the housing giants. But in 2012, when it looked like the housing market was recovering, it struck a deal with those now-government-controlled companies – seemingly a deal with itself – that paid all of Fannie and Freddie’s future profits to the Treasury Department without a cent going to shareholders.
There’s no point in owning shares of a company that will devote the rest of its revenue to someone else, and so perhaps it is unsurprising that the funds sued, claiming that the government acted illegally. But just because the government has not been fair does not mean that it has acted illegally.
Judge Royce C. Lamberth’s opinion dismissing the suit is long and complicated and deals with arcane matter like the Administrative Procedure Act, the statute that governs the procedures that federal agencies must go through when taking action, and the anti-injunction provisions in the Housing and Economic Recovery Act, the statute that gave the government the power to put Fannie and Freddie, also known as government sponsored entities, into conservatorship.
There are three main points to the decision. For one, the court held that the government’s seizure of Fannie’s and Freddie’s profits did not violate the Administrative Procedure Act’s prohibition on “arbitrary and capricious” conduct. It also found that the Housing and Economic Recovery Act barred shareholders of Fannie and Freddie from bringing breach of fiduciary duty suits against the boards of the companies and that the government’s seizure of profits was not an unconstitutional “taking.”
The Housing and Economic Recovery Act itself prohibits any court from interfering with the actions of the conservator of Fannie and Freddie. There is an exception in the statute, however, when an agency acts outside its statutory authority. The court, though, held that this exception did not apply to the prohibition on arbitrary and capricious conduct under the Administrative Procedures Act.
In other words, the Housing and Economic Recovery Act prohibited the court from scrutinizing whether the government acted in an “arbitrary and capricious” manner with respect to the government sponsored entities.
The Housing and Economic Recovery Act also prohibits any shareholder claim for breach of fiduciary duties by the Fannie and Freddie boards. In prior cases, courts have adopted an exception if there is a manifest conflict of interest that exists in the attacked board action. In this case, however, the court refused to find that such an exception existed, in effect disagreeing with other courts. Judge Lamberth added that, even assuming that this exception applied, it would not work here. The reason was that the exception applied only if “F.H.F.A. sued itself or sued another government entity on account of F.H.F.A.’s own breach.” Because the suit was against the Treasury Department, and was not brought by the Federal Housing Finance Agency, the claim failed.
Finally, on the takings claim, the court based its approach on the fact that these government sponsored entities were highly regulated. Judge Lamberth concluded this led to a deal: You get access to American consumers, with the security of American financial regulation, both of which gives you a low cost of capital, and in exchange, you must tolerate the broken china that accompanies financial sector bailouts and resolutions.
The court then concluded that because banking is heavily regulated, the regulation includes the right to seize the firm. Applying this reasoning to the government sponsored entities, the court concluded that Fannie and Freddie’s investors “possessed no cognizable property interests in the first place.” This essentially meant that investors in these banks could never have standing for a takings claim, let alone in this case.
We wrote in a law review article that we believe that the federal courts should allow the Fannie and Freddie shareholder claims to proceed on the basis that the Treasury’s actions in the 2012 sweep were arbitrary and capricious at the time under the Administrative Procedures Act.
The Housing and Economic Recovery Act’s prohibition on this review did not apply because there was a conflict of interest here in that the Federal Housing Finance Agency was controlled by the Treasury Department and both controlled the boards of Fannie and Freddie. The remedy sought by their shareholders should be only the value of the Fannie and Freddie shares at that time, essentially a few hundred million dollar and not the billions of dollars that they seek.
This court went another route.
There will be an appeal, and the United States Court of Appeals for the District of Columbia will look at these questions anew. We think that the conflicts analysis and the takings clause are liable to attack on the grounds that they are not logical. After all, the Federal Housing Finance Agency and the Treasury were essentially the same entity in 2012. Saying that investors have no constitutional protection of property in a bank investment seems to us aggressive.
And so we await the outcome of the Fannie and Freddie case, as well as the A.I.G. case.
In truth, the law doesn’t matter so much here as much as how sympathetic you are to the idea that sophisticated investors can be wronged by the government, both in the middle and in the aftermath of a bailout. Many think that the problem with the financial crisis was not that the government treated the banks too harshly, but that it was not harsh enough.
The A.I.G. and Fannie and Freddie lawsuits will appeal to those who believe the opposite.
In both cases, much of the outcome will depend on how these federal judges view the bailout, which is unknown. Again, we think our route is perhaps the best one under the law, and perhaps the appellate judges will agree.
It didn’t have to be this way. The government brought this on itself by taking an approach to the financial crisis that we have elsewhere termed regulation by deal. The government cut deals, but its quick actions didn’t allow for much foresight.
This became apparent in 2012, when Fannie and Freddie became profitable again. The government responded by recutting its deal with the two companies in its favor.
Now, the untidy nature of deal-making is being exposed after the panic when reflection comes in.
It is all a lesson for the government when the next financial crisis occurs.
David Zaring is associate professor of legal studies at the Wharton School at the University of Pennsylvania.
Lotto plays....or just checking them out because of rumors. Made some good money on a few...lost some good money on a few as well.
XKEM isn't a div stock...whats your point? I don't post on the MSFT, IBM, WFC, BAC, BPT, PBT, CSC, SDR, SDT, CHKR,WMC, WHZ, OR HPQ boards...but I own them all. If your perception of investing revolves around what IHUB boards people post on, you really need to get out more.
I don't recall ever saying I would or am living off the ARR div. My goal as stated is to have a 6 figure yearly return from ALL my div stocks...ARR is only one of them. I currently reinvest my divs in various stocks to enhance that return...as well as utilize those same div payments to pay taxes on returns. No need to sell anything. I continue to increase my holdings as I buy more based on the pps of various stocks. I attempt to maintain an average return from my cumulative divs of over 12%, and so far have been able to do that for quite a few years.
As a side note...I do own quite a few "quality growth stocks" as well. We each have various methods we like to follow for investing, and if we are comfortable and satisfied with them we tend to stick with them. I see no problem investing in strictly growth stocks, and I prefer the flexibility of variety and am quite happy with how my mREITS have paid in relation to my DCA over the years.
GLTY
A little refresher for those who have forgotten
http://www.treasury.gov/press-center/press-releases/Documents/fhfa_consrv_faq_090708hp1128.pdf
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****EMBARGOED UNTIL 11AM****
QUESTIONS AND ANSWERS ON CONSERVATORSHIP
Q: What is a conservatorship?
A: A conservatorship is the legal process in which a person or entity is appointed to establish control and oversight of a Company to put it in a sound and solvent condition. In a conservatorship, the powers of the Company’s directors, officers, and shareholders are transferred to the designated Conservator.
Q: What is a Conservator?
A: A Conservator is the person or entity appointed to oversee the affairs of a Company for the purpose of bringing the Company back to financial health.
In this instance, the Federal Housing Finance Agency (“FHFA”) has been appointed by its Director to be the Conservator of the Company in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 (Public Law 110-289) and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501, et seq., as amended) to keep the Company in a safe and solvent financial condition.
Q: How is a Conservator appointed?
A: By statute, the FHFA is appointed Conservator by its Director after the Director determines, in his discretion, that the Company is in need of reorganization or rehabilitation of its affairs.
Q: What are the goals of this conservatorship?
A: The purpose of appointing the Conservator is to preserve and conserve the Company’s assets and property and to put the Company in a sound and solvent condition. The goals of the conservatorship are to help restore confidence in the Company, enhance its capacity to fulfill its mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.
There is no reason for concern regarding the ongoing operations of the Company. The Company’s operation will not be impaired and business will continue without interruption.
Q: When will the conservatorship period end?
A: Upon the Director’s determination that the Conservator’s plan to restore the Company to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship. At present, there is no exact time frame that can be given as to when this conservatorship may end.
Q: What are the powers of the Conservator?
A: The FHFA, as Conservator, may take all actions necessary and appropriate to (1) put the Company in a sound and solvent condition and (2) carry on the Company’s business and preserve and conserve the assets and property of the Company.
Q: What happens upon appointment of a Conservator?
A: Once an “Order Appointing a Conservator” is signed by the Director of FHFA, the Conservator immediately succeeds to the (1) rights, titles, powers, and privileges of the Company, and any stockholder, officer, or director of such the Company with respect to the Company and its assets, and (2) title to all books, records and assets of the Company held by any other custodian or third-party. The Conservator is then charged with the duty to operate the Company.
Q: What does the Conservator do during a conservatorship?
A: The Conservator controls and directs the operations of the Company. The Conservator may (1) take over the assets of and operate the Company with all the powers of the shareholders, the directors, and the officers of the Company and conduct all business of the Company; (2) collect all obligations and money due to the Company; (3) perform all functions of the Company which are consistent with the Conservator’s appointment; (4) preserve and conserve the assets and property of the Company; and (5) contract for assistance in fulfilling any function, activity, action or duty of the Conservator.
Q: How will the Company run during the conservatorship?
A: The Company will continue to run as usual during the conservatorship. The Conservator will delegate authorities to the Company’s management to move forward with the business operations. The Conservator encourages all Company employees to continue to perform their job functions without interruption.
Q: Will the Company continue to pays its obligations during the conservatorship?
A: Yes, the Company’s obligations will be paid in the normal course of business during the Conservatorship. The Treasury Department, through a secured lending credit facility and a Senior Preferred Stock Purchase Agreement, has significantly enhanced the ability of the Company to meet its obligations. The Conservator does not anticipate that there will be any disruption in the Company’s pattern of payments or ongoing business operations.
Q: What happens to the Company’s stock during the conservatorship?
A: During the conservatorship, the Company’s stock will continue to trade. However, by statute, the powers of the stockholders are suspended until the conservatorship is terminated. Stockholders will continue to retain all rights in the stock’s financial worth; as such worth is determined by the market.
Q: Is the Company able to buy and sell investments and complete financial transactions during the conservatorship?
A: Yes, the Company’s operations continue subject to the oversight of the Conservator.
Q: What happens if the Company is liquidated?
A: Under a conservatorship, the Company is not liquidated.
Q: Can the Conservator determine to liquidate the Company?
A: The Conservator cannot make a determination to liquidate the Company, although, short of that, the Conservator has the authority to run the company in whatever way will best achieve the Conservator’s goals (discussed above). However, assuming a statutory ground exists and the Director of FHFA determines that the financial condition of the company requires it, the Director does have the discretion to place any regulated entity, including the Company, into receivership. Receivership is a statutory process for the liquidation of a regulated entity. There are no plans to liquidate the Company.
Q: Can the Company be dissolved?
A: Although the company can be liquidated as explained above, by statute the charter of the Company must be transferred to a new entity and can only be dissolved by an Act of Congress.
a special div would be wonderful...CIM dropped one on us last year and it was really nice. I like to think we will see much better days going forward than hanging even or dropping...I see us moving up in pps as well.
Very good read if it hasn't been posted here yet...quite a few similarities to FnF.
http://finance.yahoo.com/news/g-trial-witnesses-central-cast-012054413.html
A.I.G. Trial Witnesses Will Be Central Cast From 2008 Crisis
The New York Times
By AARON M. KESSLER 1 hour ago
WASHINGTON —?? Six years after the government rescued the American International Group from the brink of collapse, the bailout came under a new microscope on Monday, with the opening of an unusual trial that challenges the legality of the government'??s actions.
At the heart of the case, unfolding here in the United States Court of Federal Claims, is a question that six years ago seemed unthinkable to the American conscience: Did A.I.G. get a raw deal?
Maurice R. Greenberg, the former A.I.G. chief executive who through his company Starr International continues to hold a major stake in the insurance company, argues that the answer is an unequivocal "yes."? Mr. Greenberg, who sued the government on behalf of fellow shareholders, is seeking more than $40 billion in compensation.
In opening arguments on Monday, Mr. Greenberg'??s lawyer and longtime friend, David Boies, argued that A.I.G. was singled out for punishment while Wall Street banks were treated with kid gloves. Mr. Boies called the 14 percent interest rate that A.I.G. was charged "extortion," compared with the 3 to 4 percent the major banks were charged. He also argued that the government lacked the legal authority to assume an 80 percent equity stake in A.I.G., including voting rights.
Mr. Boies is seeking to frame the case as one of protecting against unchecked government power. He said that, even under extraordinary circumstances, government officials had to act within the law, and that otherwise "??agencies would be free to expand their power without limit."
In turn, the government sought to paint Mr. Greenberg and the A.I.G. shareholders as ingrates with a sense of "??entitlement" that knows no bounds. After all, the company ultimately received a $182 billion lifeline from the government, which reaped a $22 billion profit on the deal.
"??It'??s like they'??ve said thanks for the lifeboats, but they'??re just not comfortable enough,"? said a Justice Department lawyer, Kenneth M. Dintzer, who delivered the opening arguments.
A.I.G. had an alternative to the bailout, he noted, and that was bankruptcy.
Mr. Dintzer began his argument by showing a slide that contained a single number —?? 104,383, for the number of companies that declared bankruptcy in 2008 and 2009, the depths of the financial crisis. A.I.G., he said, wants to be compared to its peers? He pointed to the screen.
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JP Morgan Chase CEO Jamie Dimon Testifies At House …
WASHINGTON, DC - JUNE 19: Federal Reserve System Board of Governors General Counsel Scott Alvarez p …
"These are its peers,"? he said. "The goal was not to save A.I.G. The goal was to save the world from A.I.G."?
The trial, no matter its outcome, is expected to pull back a curtain on what was one of the biggest and most secretive of bailouts. Even if Mr. Greenberg'??s effort does not succeed, he may score a victory of sorts just in forcing the financial bailout'??s major authors to defend themselves in open court.
Indeed, the witness lineup for next week reads like a who's who of the financial crisis: former Treasury Secretary Henry M. Paulson Jr. is expected to take the stand next Monday, if all goes as planned. He will be followed by Timothy F. Geithner, the former president of the New York Federal Reserve Bank, and later a Treasury secretary himself. On Oct. 8, Ben S. Bernanke, the former Federal Reserve chairman, is expected to be sworn in.
On Monday, the small courtroom of Judge Thomas C. Wheeler grew so crowded that people were funneled into overflow rooms to watch the proceedings via closed-circuit television. The tables where the plaintiffs and defendants normally sit were turned sideways to accommodate a dozen lawyers crammed around each table, with more in the gallery. Enormous binders with trial exhibits flanked each side â?? more than 100 piled high on bookshelves brought in especially to hold them during the six-week trial.
After opening arguments, testimony began. The first witness called by Mr. Greenberg'??s legal team Monday was Scott Alvarez, the Federal Reserve'??s general counsel.
Mr. Alvarez was on the stand to answer questions about a number of emails, memos and other documents that centered around the crucial time frame in September 2008 when the fate of A.I.G. was being decided by Fed and Treasury officials. But his testimony Monday quickly became mired in seemingly legal minutiae.
Some audible groans, and at times laughter, could be heard in the courtroom as Mr. Alvarez sparred with Mr. Boies over the meaning of "??many"? for nearly five minutes.
At another point, Mr. Alvarez refused to concede that noninvestment grade securities were "less desirable"? than investment-grade.
"Less desirable might be true for some people, it might not be true for others,"? Mr. Alvarez said.
Mr. Boies, of the law firm Boies, Schiller & Flexner, still managed to introduce a number of documents, including Mr. Alvarezâ??s handwritten notes of meetings and conference calls at important moments in September 2008. One note from a Sept. 15, 2008, recounted a call between the Federal Reserve and Treasury Department about what the government needed to do in the wake of the collapse of Lehman Brothers.
"Prevent contagion," it said.
I don't pay much attention to the negative posts, but on occasion, even the negative nellies may post something worth checking out...I do my own DD and have for about 40 years now. I do like to entertain others thoughts and DD as no one can ever know everything. I am quite comfortable with my investments and the returns on them as well. Sure it's possible to get a better return on a stock with a big pps jump, but controlled greed is much more practical and typically much more rewarding in the long run. My goal is to have a 6 figure div return per year in my various div stocks, and I am getting close...another 5 years and I will be there and more. GLTY