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Good find. The Perry case has actually had part of it survive the judicial bar, so hopefully we will see Lamberth's lack of complete deference to the government in action.
But how many have you sold?
I think the Carson quote is a mild positive. Mnuchin has said that any housing finance reform package needs to be holistic and take FHA into account, so at the very least Carson is in the loop.
The other positive is actually saying something about shareholders to the media that isn't negative, unlike Stevens/Corker/Crapo etc. with their incessant hedge fund bashing.
A tangent from this post:
The breach of contract claim succeeding depends on Lamberth ruling in favor of the plaintiffs or a settlement, right? Is the Lamberth clock on hold right now while the appeals process goes on?
I'm just trying to get an idea of a timeframe here. I know it's impossible to completely predict, but given the number of appeals we're dealing with it seems that it could easily take 2 more years if the appeal is denied, Lamberth rules in favor of the plaintiffs on breach of contract, that ruling gets appealed, etc.
In the meantime the capital buffer runs out in 7 months (along with the Jumpstart bill) and Congress could pull the rug out from under us all at any time, though I don't think it's very likely.
While the judicial claims do still seem to be in our favor, the timing is such that an administrative solution could very well precede any other positive developments.
What about the other ~7800? Is the government reviewing those for later release or are they claiming that they're done?
What is your basis for saying this?
In this case, withholding the NWS dividend causes a lot of problems because increasing the liquidation preference can be construed as a draw on the Treasury, exactly what Watt is trying to avoid.
Obama 2015 Budget - Analytical Perspectives
On page 139 (p. 153 of 430 in the .pdf file), second column on the left:
Under Geither/Lew and the Obama administration, the publicly stated goal was to wind down FnF. It was in the last two (Obama) presidential budgets.
Now Mnuchin has said that he does not want the status quo continued for the rest of Trump's term, that FnF need to be released from government control, that there should be some sort of government backstop, and that private capital needs to be in place to protect taxpayers.
The Trump administration may not be explicitly pro-shareholder, but they are in favor of having FnF continue to exist in a reformed capacity rather than wound down completely. That is a very positive change to me.
This is the biggest positive development to me. Killing FnF is seemingly off the table for good.
The counteracting force is the continued lawsuit losses.
You'll see a very different trend if you look at a 6-month chart instead of 2 weeks. Way to cherry pick.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=131518403
This post outlines my reasoning that Watt believes he can legally withhold the NWS payments. The most important word is the "if" in paragraph 2(a), i.e. a NWS payment can only be made if it is declared by the board of directors in its sole discretion.
I read that to mean that if the board chooses not to declare a dividend (even a NWS one), it won't be paid.
I read Section 5.1 as FHFA not being able to pay dividends or any other distributions that are now NWS payments. i.e. no junior pref or common dividends ever.
I don't think that stops Watt from withholding a NWS payment.
Oops, this section is the appropriate one, though (B)(iv) also applies.
This is the crux of the argument. The 3rd amendment seems to allow Watt to withhold payment because he effectively controls the board of directors of Fannie and Freddie. We also have the Hindes/Jacobs case (is that the right one?) that claims the NWS dividends are not legally available for distribution.
The quoted text from HERA below also empowers Watt to withhold dividend payments; they clearly endanger the solvency and safety of the GSEs.
By my reading and interpretation, Watt truly does have legal authority to not pay the NWS.
PSPA 3rd Amendment
Paragraph 2(a) (partial, emphasis added):
May 30 is the next date to watch. I believe the government has to produce all the documents that it has reviewed by then (at least 40-50% of the 11,000, and hopefully much more) that are not covered by the presidential privilege (the only privilege upheld by the appeals court). Or am I understanding this wrong?
April 13 order
I don't see a threat of keeping junior pref dividends off for a long time as having any teeth. That would also keep common dividends off, and it would be much easier to raise a lot of capital through a secondary common offering if you can include a dividend.
http://www.fanniemae.com/resources/file/ir/pdf/stock-info/Series_R_11192007.pdf
Paragraph 3(d), page A-3 (p. 34 of 39 in the pdf)
That's odd, the Senate link is working for me just fine. But it's good to have different sources in case of problems so thanks for posting that link.
https://www.banking.senate.gov/public/index.cfm/2017/5/domestic-and-international-policy-update
This is straight from the source.
How did you read this to mean that tax reform is dead? I only see that it might take longer than Trump wants it to.
It's still a negative for FnF shareholders; possible looming DTA writedowns are one reason Watt gave for potentially withholding NWS dividend payments. Delay on tax reform also means delay on housing reform.........actually I think that's a positive for shareholders.
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fnma-and-fmcc-preferreds-in-search-of-the-elusive-10-bagger/msg289728/#msg289728
This is something I posted over at Corner of Berkshire and Fairfax.
Though in light of rekcusdo's post about shareholders' (mostly lack of) rights under HERA, the sentence in that post
I don't mean to single you out rekcusdo. It's that you give reasoned responses and are also in the 100% common boat. Thank you for the back-and-forth, it is helping me decide how to allocate my money here.
If I understood correctly, the $19B of junior prefs is part of core capital. If $19B of cash were used to call them, that would reduce core capital by $38B.
Still, I can see several reasons to call them as part of a reform package:
1) Effectively ends the lawsuits because the plaintiffs wouldn't have standing to sue (they wouldn't be shareholders anymore)
2) FnF could issue new junior prefs with interest rates more suited to the times. Paying an average of around 5.8% (just an estimate, I didn't take the time to actually average everything) in perpetuity just isn't necessary with interest rates as low as they are.
3) Allows a run through receivership (or other reform involving dissolving FnF) without triggering contractual breach lawsuits; these are the only claims that have survived Perry so far.
4) Politicians can claim a clean slate, no more preferred shares predating the financial crisis hanging around.
5) Makes a major overhaul of the capital structure easier.
Side note to 1: this isn't settling the lawsuits as much as capitulating; the prefs wouldn't go all the way to par if the NWS was just cancelled any everything else stays the same.
Disclaimer: I'm not a lawyer. Just to get that out of the way.
I think the difference is that breaches of contract and implied covenant of good faith and fair dealing that the conclusion mentions directly harm shareholders, while the other claims indirectly harmed shareholders by harming the companies. But I'm sure the difference is more nuanced so I hope someone with a clearer and better understanding can chime in.