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Exactly Stockanalyze - I am hoping that the Chamber of Commerce files an Amicus like they did in the Calcutt case. Calcutt goes to Conference on the 11th and has Collins related separation of powers issues as one of the Questions Presented.
Hi Glenn
It looks like the UST is using FASB 157 valuation metrics for its balance sheet. Not sure why the GSEs are not doing the same for the SEC filings.
https://en.wikipedia.org/wiki/SFAS_157
If UST loses in Collins or Rop it will have to significantly mark down the SPS according to FASB 157 since it is a Level 3 asset. It is probably worth asking FNMA in particular why its valuation of the SPS is different than its investor's - the UST.
Really interesting since a lost in court could force the GSEs to start writing down the SPS until there is a final outcome due to exit or at SCOTUS.
Thanks for the cite Glenn - a couple of interesting points (1) the UST does not think the SPS is worth its PAR value since it has already taken a $ 64 bn haircut and (2) the UST acknowledges that the SPS was intended to be written down to zero:
Here is the cite regarding the intended write down of the SPS:
The capital reserve amount was initially set at
$3.0 billion for calendar year 2013 and, upon nearing its scheduled decline to zero, was reset at $3.0 billion in calendar year
2017. On September 27, 2019, Treasury and FHFA amended the SPSPAs to increase the capital reserve amounts of Fannie
Mae and Freddie Mac to $25.0 billion and $20.0 billion, respectively. In exchange, Treasury’s liquidation preference in each
GSE was scheduled to gradually increase up to the adjusted capital reserve amounts based on the quarterly earnings of each
GSE.
There was no consideration for the change in the accounting and the UST already acknowledges that the Fair Value of the SPS is overstated on the GSE financial statements. Not sure why the SEC filings do not conform with the UST budget financials?
Hey NoName - is that bet in SPS stock par value?
Thanks MrHansson - nothing is owned by institutions and it makes total sense. The GSEs would be 50 to 70 pct owned by institutions and major components of the S&P 500 if they were released.
Yes - she could not get Senate Confirmation.
Here is her manifesto:
https://democracyjournal.org/magazine/a-new-social-contract-for-the-21st-century/
Quote:
Instead of maximizing shareholder value, companies need to rewrite their corporate charters so they value more stakeholders. In other words, let’s reform corporate governance so that the mission of companies is to focus on workers and their communities, as well as shareholders. Senator Elizabeth Warren has proposed an Office of United States Corporations within the Department of Commerce. She would require any corporation with revenue over $1 billion—only a few thousand companies, but a large enough share of overall employment and economic activity—to obtain a federal charter of corporate citizenship. The charter would tell company directors to consider the interests of all relevant stakeholders—shareholders, but also customers, employees, and the communities in which the company operates. This would shift the role of companies away from shareholder-focused entities to organizations with some responsibility to the country and its citizens who provide them with so many benefits. A company that focuses beyond its shareholders to its employers and community is more likely to think of its workers as critical assets and not disposable costs, hold on to employees longer, and perhaps increase wages rather than cut them.
Stockanalyze - great points - this could be first up to void the SPSA and NWS if it gets Cert as the remedy for the Constitutional violation of the Appointments clause. You may remember that the DOJ attorney said it would be ok if a POTUS strung together a series of Acting Directors with no Senate Confirmation. I can see how this lost 2-1 in the 6th Circuit. Judge Thapar was the dissent and he was on the short list to fill the RBG seat that Barrett took - I am hoping that Rop has the same outcome at Seila did when Kavanaugh was in the dissent. It will be interesting to see who provides an Amicus brief in favor of Cert - we will see soon since the UST Brief is due on Monday as noted in your SCOTUSblog link.
You may be right about Rop if it gets Cert. The UST will file its brief against Cert on Monday. I was just mentioning the cases that did not appear to updated enough.
Glad to provide you with the entertainment EternalPatience. Disagree with you regarding the outcome of Collins but we will see.
Could happen but lets see what happens with the SPS in the Collins case at the 5th Circuit first. Glad to see that investors are looking at the CBO framework!
My fear is that they will come up with a Consent Decree with a real long exit plan which will allow them to destroy the market value of the GSEs by implementing Neera Tanden type of programs implemented by the GSEs. The Calhoun/Brookings Utility Model Structure would be a good proposal but not a woke Consent Decree model. Are you confident that the UST will want to maximize its return or maximize is woke focused political capital?
Neera Tanden - pretty scarry stuff. Who would want to buy equity in the GSEs after she is done with them? Here is one of the Center for American Progress Papers - she was the CEO for CAP
https://www.americanprogress.org/article/fannie-mae-and-freddie-mac-can-support-racial-equity-in-homeownership-and-environmental-justice-efforts/
Maybe this is why the JPS are trading lower?
The summary by Kyle Nisbett understates the potential positives in the Lamberth and Collins litigation and oversimplifies Kelly.
Lamberth - Plaintiffs are trying to increase the potential damage claim and may have the ability to double the damages to over $ 3bn. Familymang has mentioned this in the past. The Berkeley Plaintiffs just filed to reconsider a damage claim much larger.
Collins - There are two separation of powers claims - the Removal and Appropriations Constitutional claims. Nisbett only discusses the Removal claim - the 5th Circuit has already ruled that the CFPB violates the Appropriations Clause and potentially will find the same for the FHFA
Kelly - Kelly is far from trial - just trying not to get dismissed on a statute of limitations basis and for other reasons. If it survives a dismissal - the Kelly suit has a powerful fact pattern but will take much longer that 2023 to resolve.
Hi Glenn, What happened Friday?
Great Analysis Ace Trader. I totally agree that JPS are going to get paid PAR plus hopefully at least a couple bucks from Lamberth. The question is when?
I just dont think common is going to be crammed down most likely because the SPS will be declared void by the 5th Circuit. Personally I think Ackman will advocate for PAR for the JPS and then bring a suit to get fully compensated for his common stake - just no cramdown like the CBO Scenarios 2 and 3 - these are based on the SPS remaining in place.
Thanks Stockanalyze - we will see if SCOTUS grants Cert on Rop. If it does - it should be material - especially because the SPS could be voided by the 5th in Collins before Rop is decided. The odds seem to be against Cert for Rop at this point but the recent moves by SCOTUS on Admin Action and Separation of Powers issues may support the logic for Cert.
FHFA Filing regarding ROP Cert Petition due on Monday May 8th
https://www.scotusblog.com/case-files/cases/rop-v-federal-housing-finance-agency/
It will be interesting to see who files Amicus briefs in support of Cert.
That right Ispro!! - first the JPS gets PAR and then common get a full 20% which all know was a premeditated rip off in the first place.
Here is the premeditaton - written on March 8th by the NEC to the UST two months before they stuffed the public with billions of JPS at $ 25 per share:
https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf
Exactly LuLeVan!! - right now DJT has a release and recap plan per his letter to Senator Rand Paul. JB Has No Plan! Contrary to what some JB apologists have said on this Board JB has done nothing to date except have his Administrator take an action which most likely is unconstitutional.
Hi Robert - spent some more time looking at the Calcutt Cert Petition - The Amicus Briefs for Cert in the Calcutt Case is quite impressive - Chamber of Commerce, NCLA and the Separation of Powers Clinic at GMU!
https://www.scotusblog.com/case-files/cases/calcutt-v-federal-deposit-insurance-corp/
To be considered at the May 11th conference. We should know soon if it gets Cert. Looks like Orders will be released on the 15th.
Hi Kthomp,
Thanks for the color about the selling of the JPS - I am assuming you actually know that a large holder is liquidating. I hope that is the case because one would think that there is enough potential positive news to at least support the JPS price.
Regarding the JB Admin - it would seem that anything is possible - who would have imagined the NWS and the SPS Liquidation Pref in 2012 - I know I was totally in disbelief and thought that there was no way a Federal Court would uphold such a egregious USG action.
Regarding motivations - it is not just about the money - if that was the case I would have been gone in 2008 - it is about what is right and what is fair. I bought FNMAT at $ 25 in May of 2008 and I want to be treated fairly and will continue to advocate that every investor is treated fairly. FYI - I have very few common because I have been holding primarily JPS since 2008.
Thanks again for the reply
Hi Kthomp
Voiding the SPS is also bad for the JPS because it is bad precedent which could be used to turn the JPS into a zero coupon type of cash flow structure in a consent decree.
My fear is that FHFA and UST enter into a Utility Model focused Consent Decree and leave the JPS in place with no divs until ultimate exit many years forward. Do you think that is possible.
If UST just has to rely on the warrants then it puts pressure on UST to honor the existing capital structure. Otherwise the SPS could be used to capture cash flows that should be used to pay divs to the JPS.
Crazy concern? It seems like something is up as Glenn has mentioned but JPS keep on trading down? Thoughts?
The Golden Rule is always best especially if you want a fair treatment for your self. JPS and Common should want fair treatment for both.
Wasnt there a post about the Chevron case from Justradin?
Better option is to void the SPS except for the original $ 2 bn - that will fix the hole also - wouldn't it?
Maybe Fairolme DC Circuit Cases relisted?
Hi JOoaOky, The Growth Fund of America (Capital Research) is the only listed beneficial owner in the 2008 FNMA Proxy Statement. Probably the same thing for FMCC. If you could get access to a FNMA Stock analysis sheet by the likes of Fidelity in 2008 it should list all the reporting investment manager shareholders.
Here is the FNMA 2008 14A Proxy Statement:
https://fanniemae.gcs-web.com/static-files/75571f24-d39f-44a6-b0b2-0b0a9709f56e
Exactly!! Wise Advice!!!!
Regarding Calcutt - I dont know all the legal arguments but I think the DOJ tried to use it as precedent in Collins and Bhatti at the District Court level. I am focused on the reference to Collins in the Question Presented.
It seems like it came out of no where and I am suprised it is up for Cert so fast. I think Justice Kavanaugh might have fast tracked both Calcutt and Rop
If Calcutt is up for conference on May 11th we should know soon.
Here is Rop. It was decided against shareholders 2-1 in the 6th Circuit. Issue is whether or not an act of an unconfirmed acting agency Director can be voided if the Director was not properly confirmed. USG to reply by May 8th then for Cert conference.
https://www.scotusblog.com/case-files/cases/rop-v-federal-housing-finance-agency/
The other case is Calcutt which is another separation of powers case relating to the Collins case . It is up for conference on May 11th
https://www.scotusblog.com/case-files/cases/calcutt-v-federal-deposit-insurance-corp/
Thanks again Robert - it is probably now or never for some of the Justices. Will Thomas and Alioto outlast a new JB Admin? Got to believe they will take up Rop - the DOJ lawyer clearly said it was ok just to keep appointing acting Admin heads even though they could not be confirmed by the Senate.
We should probably know about Rop before recess?
Exactly right Robert - a big thanks to all the donors to NCLA and PLF!. What would the Michelle Cochran's do otherwise?
The Rust Valley guy - is that who No Name was referring to?
Exactly Golfbum22
Farmers should Fear FERA! Wait for a crisis in the Farm Credit system and Farmer Mac and then make the Farm Credit system woke!
Last paragraph of CBO Restructuring Paper:
https://www.cbo.gov/publication/56511
In addition, changing the federal government’s relationship with Fannie Mae and Freddie Mac might prompt an assessment of the government’s relationship with other government-sponsored enterprises that support mortgage lending. Those other GSEs include the Federal Home Loan Banks, which make low-cost loans to their member institutions (such as commercial banks, credit unions, and insurance companies), and the Farm Credit System, which provides financial assistance for rural mortgages and other loans guaranteed by the Department of Agriculture.
Mike Who? Mike Tyson?, Mike Kelly? MJ? - maybe Mike no name?
Several States including Pennsylvannia State Treasurer have already sent Letters regarding the LLPA - MQD!! Right on Robert - did they name Robert's Rules after you?
https://www.patreasury.gov/newsroom/archive/2023/05-01-FHFA.html
Why are the George Mason University Patriot colors green and yellow? I thought you may know - maybe they are Jamaican patriots?
Thjanks Guido!! Great to know there are people like Isaiah McKinney who are passionate about freedom and baseball!
Did you see the citation Section 26 of the Magna Carta - Mckinney thinks the Tyler case is really and affirmation of the Magna Carta.
If anyone holding a lay fee of us dies, and the sheriff or a bailiff of ours shows our letters patent of summons for a debt which the dead man owed us, it is to be lawful for the sheriff or our bailiff to attach and record the chattels of the deceased found on the lay fee to the value of the debt, by the view of law-abiding men, so that nothing is to be removed thence, until the clear debt is paid to us; and the residue is to be relinquished to the executors to carry out the testament of the deceased; and if nothing is owed us by him, all the chattels are to go to the deceased, but reserving their rightful shares to his wife and children.
https://magnacartaresearch.org/read/magna_carta_1215/Clause_26
Thanks for the Cite Guido - Robert has been mentioning this possibility for some time. Great call Robert! Here is the SCOTUSblog cite:
https://www.scotusblog.com/2023/05/supreme-court-will-consider-major-case-on-power-of-federal-regulatory-agencies/
Got to believe that the FHFA Consitutional issues will be fully adjudicated by SCOTUS in the next couple of years. It is interesting that KBJ recused herself since she was at the DC Circuit when Lopez was decided. Also it looks like Cert was previously denied but relisted?
Rop is up next for Cert.
Robert Ryan of Parrot Ryan Advisors is also a GMU Grad.
https://www.bizapedia.com/nc/parrott-ryan-advisors-llc.html
Special Advisor to fellow GMU Grad Calabria and Freddie Mac and HUD official in past
https://www.fhfa.gov/AboutUs/Documents/Bob_Ryan_Bio.pdf
He co-authorized a paper with his Partner and Mark Zandi criticizing the capital rule and it looks like advocating for the Utility Model
https://www.tandfonline.com/doi/abs/10.1080/10511482.2020.1850018?journalCode=rhpd20
GO GMU! GO Patriots! Why are GMU Patriots - green and yellow?