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So basically there isn't a single viable lawsuit that is left which is remotely beneficial for commons except the 11 cents damages from Lamberth for FMCC.....
The major cocopuffs doctrine better get filed soon...
Yes the combination of direct takings claims (on behalf of JPS holders), derivative takings claims (on behalf of the GSEs), as well as the direct contract claims (on behalf of JPS holders), are all based off challenging the CSHIP/HERA itself (different than all the other cases challenging the NWS). But none of remedy requests are looking to "unwind" or "undo" any previous transactions, such as reverse the CSHIP or PSPAs, they are just seeking monetary damages/compensation for the takings and/or breach of contracts, either on behalf of JPS shareholders, or the GSEs themselves.
The constitution is like contemporary art.
Open to interpretation.
Hi Skeptic - when you have the Constitution behind you - perception is reality. The principles of the Constitution will eventually force the politicians and regulators to do the right thing. Of course the money will make it all the easier.
You know that perception is reality - why do you and others spend countless hours of your time trying to beat down those who believe in the Constitution, the mission of the GSEs, the worthiness of those who have and had worked at the GSEs and just overall fairness and transparency in capital markets.
Just admit it - you dont like apple pie and a good 4th of July parade - do you?
Goes to show howard has zilch experience in restructurings. Not surprising since he spent his life at FNMA and they haven't had to go through one.
Go figure.
Reminder for skateboard: Watch and Learn
"For the second time this month, I am leaving a comment by Fanniegate Hero on the blog in order to make a point about why I delete (or choose not to accept) certain comments from readers.
A word about the term “restructuring.” The drawback to using it with respect to Fannie and Freddie is that it’s too general, to the detriment of clarity. A typical financial restructuring involves the reorganization of debt, which obviously isn’t the companies’ problem. And even saying they need an “equity restructuring” is still unnecessarily general. Fannie and Freddie’s equity problems are literally unique: they have $193.5 billion in Treasury senior preferred stock that does not count as regulatory capital, that they were forced into taking because of non-cash expenses put on their books between the middle of 2008 and the end of 2011 by FHFA, and that they cannot repay (as Fannie reiterated in its 2022 10K), and Treasury also has a liquidation preference in them of $288.2 billion as of December 31, 2022, which will grow in every future quarter until it is eliminated. Since THAT’s their “equity problem,” why not just call it that? And it’s a problem only Treasury can fix.
One also might argue that Fannie and Freddie junior preferred stock are candidates for “restructuring,” but that’s in a very different category from the senior preferred and the liquidation preference. Those have to be eliminated first, before it makes sense to think about redeeming (or converting) the junior preferred and replacing it with some other form of equity. Moreover, I would argue that changing the amount, type or mix of junior preferred stock is a decision properly made by company management, in conjunction with their financial advisers, and not FHFA."
Glad you remembered how they were put into conservatorship.
The same book where he told President Bush that the first sound they'd hear is their heads hitting the floor? Thanks for bringing up another reason to void the conservatorship.
The board consented. Did you forget paulson's book?
If Bernstein needs confirmation again for another post in the same administration, why didn't Lockhart need confirmation from the Senate when he took over a new agency in 2008? Yes, FHFA is the successor of OFHEO, but no agency head has ever yielded as much power as the head of FHFA. Without Senate confirmation, was Lockhart authorized to put Fannie and Freddie into conservatorship?
Too much emphasis is being put on these "capital plans".
You all know in your gut what these plans will say...
Uses for capital in this upcoming year:
- Retain capital to reach required levels.
- Fund FHFA.
There is absolutely no way a hint of recap and release will be divulged in the plan. The plans will be UPDATED to reflect the recap AFTER the anoucement. It will not precede it.
FOFreddie your “questions would be who is helping the GSEs come up with the required Capital Plans and what is meant by "public disclosure and what is implied by the Jan 1 2025 date as highlighted in bold?”
I don’t have all the answers. My thoughts, if upper management of the companies need assistance coming up with a Capital Plan existing management should be fired and replaced with management that can get the job done… On the other hand IF the burden placed on management is so high by reason of the FHFA required percentage of capital no management in this world could come up with a plan. It has been presented over and over the GSEs are not banks and should not be made to hold bank like capital. I’m not a CFO but I understand the insinuation of to high of a capital requirement.
Public disclosure sounds like the FHFA will require the plan published in the 10K each year.
Regards
Based upon their actions so far...
SCOTUS will find CFPB funding unconstitutional.
Complaints in FnF will be amended to include CFPB decision.
SCOTUS will find FHFA funding unconstitutional.
However, what's done is done. Let bygones be bygones.
- No damages awarded.
- Going forward FHFA will need congressional funding.
Slap on the wrist. Maybe one extra time to appease FnF litigants.
It will be interesting to see how the SCOTUS resolves the problem of the Federal Reserve's funding if they agree with the 5th Circuit Appealate Court in CFPB.
TH brings to light the problem: "There are many federal agencies, including the Federal Reserve and the FDIC, whose operations are not subject to annual appropriations. Will SCOTUS really say these entities are illegally funded (the Fed gets its funding from Treasury, and the FDIC from banks), and if so what will the remedy be? SCOTUS will need to be very careful in how it deals with this Pandora’s Box.
I therefore find it hard, at this point, to speculate about the implications for Fannie and Freddie, and the net worth sweep, of SCOTUS granting cert in the CFPB case. It has too many complications, and conflicts of political agendas."
What do you think?
In isolation with NO RECAP, yes I would too.
In the middle of recap... NO because there is much more to be made.
I would take $20 on the FACE $25 --- tonight
20% of 33B drag can be removed by converting @ 80% value of old JPS to New JPS with less dividend at 4%
Instead of giving 20% capital gain to the treasury, I would convert to new JPS at 4% with 80% value of old JPS.
Can old JPS be converted to new JPS- no cap distribution here w/o approval of FHFA/Treasury
No, that is part of capital distribution. Falls under the same category as stock buybacks.
Need to reach 20-25% of required capital? In other words seniors need to be restructured first.
Delay in rule-Can GSE redeem JPS w/o informing FHFA?
It won't happen.
The whole spectacle is just a pony show to show the public that he is "trying". The biden administration knows it won't work which is why they proposed to redo the student loan payment system by consolidating all of the income based repayments.
The new terms are fairly generous.
Supreme ready to Screw Up one-more-time !
Student loan forgiveness (free-ride handouts) approval by the Supreme will open a Pandora's box. Next up housing loan forgiveness so you don't have to pay your mortgage.
Heck why pay the bill when the weaklings on the Supreme will give the green light to free-load on someone's elses tab.
This will be the test case to opening the flood-gates to free rides across the board.
You're mostly right except for thinking the govt will not exercise their SPS and obtain the entirety of FnF.
If you were the Govt and you were holding two coupons in your hands.
- Coupon #1 to obtain 79.9% of FnF
- Coupon #2 to obtain 99.9% of FnF
You can only use one, which one would you use?
The reason why I can't "invest" into commons is because if I were the govt I would choose coupon #2. Every. Single. Time.
Yes
Strange as it may sound AT FIRST
common holders should want the GOV to want to maximize the value of their WTS ----- as doing so - for 80% of the stock - maximizes the price of our 20% - and if kept to 5B total common shares (no SP dilution) - they get a ton and we get 15-30 a share in FNMA common
common holders should want the JPS to be paid in full ---- as indeed anything less than FULL PAR (unless a deal for say 75% with both sides agreeing) ---- means no money for common
above is caveated with - the above is normal and nothing here has been normal
It's TH's first rodeo... he's been at FnF forever and they've never gone through a restructuring.
TH today: "...; by moving the string completely away from the specific and informative to a vague “word jumble,” it obfuscates, rather than clarifies or challenges, the original points that were made. That’s not what I want on this blog.
A word about the term “restructuring.” The drawback to using it with respect to Fannie and Freddie is that it’s too general, to the detriment of clarity. A typical financial restructuring involves the reorganization of debt, which obviously isn’t the companies’ problem. And even saying they need an “equity restructuring” is still unnecessarily general. Fannie and Freddie’s equity problems are literally unique: they have $193.5 billion in Treasury senior preferred stock that does not count as regulatory capital, that they were forced into taking because of non-cash expenses put on their books between the middle of 2008 and the end of 2011 by FHFA, and that they cannot repay (as Fannie reiterated in its 2022 10K), and Treasury also has a liquidation preference in them of $288.2 billion as of December 31, 2022, which will grow in every future quarter until it is eliminated. Since THAT’s their “equity problem,” why not just call it that? And it’s a problem only Treasury can fix.
One also might argue that Fannie and Freddie junior preferred stock are candidates for “restructuring,” but that’s in a very different category from the senior preferred and the liquidation preference. Those have to be eliminated first, before it makes sense to think about redeeming (or converting) the junior preferred and replacing it with some other form of equity. Moreover, I would argue that changing the amount, type or mix of junior preferred stock is a decision properly made by company management, in conjunction with their financial advisers, and not FHFA."
They can't get over the fact that FnF turn a quarterly profit.. but fail to realize that profitability isn't the sole determinant of distress.
The greatest FnF tragedy has yet to occur... it's not the day the conservatorship happened. It's not the day the NWS was announced when all profits were stolen.
The greatest tragedy is the day FnF exits conservatorship and legacy commons who have been holding for decades finally lose it all.
Oh course they think I'm a bad guy....because I don't tell them what they want to hear, I tell them reality.
ALL bankruptcies are analogous to this particular Conservatorship! Yet some can't seem to grasp that scale has nothing to do capital requirements.
Let Richard Epstein rest in his grave please. He lost the FnF battle and surrendered.
The authors are at the Hoover Institute
So is Richard Epstein
https://www.hoover.org/profiles/richard-epstein
MQD is not ripe now but if an Admin Action happens it could be.
But in order for the second scenario to occur, government officials will have to act in good faith (e.g., unwinding the NWS, establishing a true risk-based capital standard, etc.) because no individual or institution is going to put one penny of new capital into these companies given the way they and their shareholders have been treated.
Converting JPS to new JPS does absolutely nothing to help FnF get out of conservatorship.
On the other hand, converting them to commons will add 33B of capital which puts them one big step closer to exit.
100% for JPS if cashout or 80% if convert to new JPS@4%
Which one will you choose?
All Gary spoke about was JPS JPS JPS... Where is the mention for commons?
That's not good news for commons.
$Read the $Letter to $Gary's $Partners ... ... $We are in $Good $Company
" $Trade of a $Lifetime " ...
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=170868496
If something were to happen, it would probably be this year, 2023. If it doesn't, it'll be another 4 years at 2027 for something to spark.
Biden admin is going to want to win the re-election. They need a big BANG and the time to do it is this year. Next year will be focusing on the campaign trail and that will occupy all of their bandwidth.
Headlines sound pretty good... Biden resolves last piece of great financial crisis and saves housing finance.
I understand what you are saying. But the issue is that they don't need to wait to go forward with recap and release. We have reached the level of cash we need to allow the capital raise that would get us to the 3%. So, in terms of the money, they could do this now. You could argue that the lawsuits would still hold us up - but otherwise Treasury and FHFA could get together and arrange for this to go forward today. But here we sit with no real end in site - not through the courts, the current administration and because of players like the MBA and the Federalist society, not under any future administration either - regardless of party. Very Frustrating.
You may be onto something there.
Perhaps you should buy shares in all of the bailed out companies during the 08/09 crisis and launch a separate lawsuit for all of them?
Might want to point out that the $189 billion commitment fee (warrants and LP) is prohibited by the Charter Act. Congress only authorized Purchases of GSE securities and obligations. No loans.
I guess you missed the entire Lamberth jury trial in October?
Lamberth denied and threw out all of the other damage models. What you see left is what was approved.
Lost Value It is quite simple, with the NWS, the US government took away 100% of the company(ies) value.
Who is this Dr. Mason’s with his Supplemental Report Pre-existing Opinion That There Was At Least $1.6 Billion in Damages… ??? Oh my, at least! Who hired these attorneys?
Quoted share price and value or two very different calculations.
The share price as of today's trading has absolutely nothing to do with the VALUE of Fannie and Freddie. The share price the day before or the day after the taking has absolutely nothing to do with the VALUE of the companies.
Value is a calculation of Property, Plant and Equipment and most important EARNINGS POWER OF THE BUSINESS.
VALUE
Quote: “Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.” – Warren Buffett" End of Quote
The Shareholders have lost both companies to the Treasury. ALL THE CASH THAT CAN BE TAKEN OUT OF THE BUSINESS DURING ITS REMAINING LIFE.
So... we can't even win a takings from 2012 but you expect to unwind this whole thing from 1938?
I recommend shelving your ambitions before the men in black come knocking on your door. This world works in a certain way, you're not going to upend the entire system.
I’m of the opinion thanks to your valuable insight that a takings case will pay more than a drop of common share prices similar to AIG because you have shown the the key to unwinding the whole kit and kaboodle. I have been working diligently on developing a great new takings claim based on the Budget and Accounting Procedures Act of 1950 that created the GAO, and the CFO act of 1990 that created FASAB. Forget about HERA and the FHFA. This is about Treasury violating the above two acts, the charter act and the 5th and 14th amendments, and while Im at it throw in major questions doctrine and separation of powers doctrine. All because Treasury abused their power and created a 200 billion commitment fee with no Congressional authority. They decided to control the entities through the SPSPA, and gave themselves greater than 50% ownership. But oops they forgot to consolidate the entities onto the balance sheet for 15 years. If I am successful, the taxpayers get everything, all equity, all the assets too. We are going all the way back to 1938. I dont think the takings will be limited to an AIG style ruling. But there wont be anything because if I am right then the SPSPA will disappear. Figure out the mess afterwords.
That's because commons OWN FnF and they are responsible for PAYING THEIR WAY OUT of conservatorship.
When you've got no money to give, you start selling parts of yourself to fund it.
79.9% Govt Warrants and 20.1% of legacy commons will BOTH PAY for conservatorship exit by DILUTING ITSELF.
The difference between Govt and legacy commons is that the Govt gets paid via seniors so they don't get diluted like the commons will do.
Why do you think the preferred deserve to "be made whole", and commons left to die?
What is it about a liquidation or dividend preference (limited to the current quarter, that is, non cumulative) that suggests commons should be diluted beyond recognition, and Preferred's be made whole?
The preferred status has "NOT" helped the preferred's so far..commons dividends and Preferreds were treated the same..both dividends were robbed in the NWS.
So, what will happen in the future to change the above paragraph? Legislation? Executive action? The courts? What will happen in the future to change the government from robbing from Preferred's and Common's equally. (Both got dividends stolen 100 percent).
I see nothing on the horizon which will alter this: What happens to the commons, happens to the preferreds...Its been that way for a very long time, "with the exception" that the commons got "special" dividends, because their status prevented Preferred from getting any special dividends. When the company did very well, the board approved special dividends to the commons, but the preferreds got nothing. Why? Because Preferreds chose to forego a special dividend, along with growth, for their liquidation and dividend preference.
If the preferred's wanted special dividends and growth..they need to pay the price, by giving up the dividend preference and buying commons. There is a cost for the preferred status, and THAT cost is too HIGH. WAY WAY WAY too high. Preferred status does NOT prevent government confiscation...it happend before and will continue, until/unless their is legislative, executive, or judicial action to the contrary.
P's have diamond hands.
C's have paper hands and that is why there are 10's of mil vol days.
Genius ! - unlike the illiquid P's - GSE Common have the Liquidity to Enter or Exit
10's of Mil vol days when Privatization or RELEASE is even "mentioned" by Treasury ...
Bill Ackman.
Is ackman wrong?
who said court cases are dead? read 10k
Current owners of FnF:
- 20.1% legacy commons
- 79.9% GOVT warrants
Owners of FnF owe 200B and need to raise another 200B-ish. They got no money so what do they do? Sell their dog and the house.
Govt's SPS will dilute the legacy commons AND their own warrants.
All this talk about dilution? Can anyone explain how commons would be diluted without the Gov's warrants being diluted as well? If my memory serves me, they have warrants on the CURRENT stock not any new issue! Oh....the big offer at .49 will be bought soon, imo. Stocks can't go up without sellers!
FnF are short like 400B capital from being released... so... commons are going to have to sell all of itself to pay for it.
Do you have any SEC links or GSE links to indicate this.....
NO, stop joooking around and diluting reason.
FNMA
You're off by a couple decimal points.
It would be 2-3 cents... not dollars if all dilution is said and done.
3. I've seen comments that of dillution occurs, commons would be worth 2-3 bucks at best. Any math geeks able to confirm that? If you want to call a normal dividend paying FNMA share $50 (as so before crash), wouldn't shares be $10 of that value? (20% after dilution) or is the 2-3 bucks based on today's market cap?
For JPS redemption, the govt would direct FnF to redeem the JPS.
Therefore it would be FnF using its retained capital to retire the preferred. The govt isn't spending a single penny.
As Pref holder. Will gladly take my payout in Common shares. No way the govt will write $33B of checks to cash out Pref holders.
They will pay us in Common shares. Once Inget my C shares, I will sell covered calls and live in a van down by the river
Bruh... it's been 14 years already.
Ok, I will bite. Why are JPS a -33billion capital drain?
Ackman has been wrong before such as his $1B blunder on herbalife.
https://www.investopedia.com/news/billionaire-bill-ackman-dumps-herbalife-ending-5year-war-betting-against-it
Ya know he could be wrong again on FnF commons.
Calabria is coming back.
Major shakeup at FHFA. Sandra gone.
My sources say to watch for change. She will get “promoted” to another dept.
It's immoral and unethical to allow commons to continue trading... there's no future at all.
The old dog needs to be put down. It's so sad.
FnF needs to repurchase all outstanding common shares and put all of the legacy holders out of their misery.
Plz delete dilution lie post, thx
This isn't an investment for you nor are you treating it as one.
You're treating this as if you're predicting what the blind folded lady justice will do... Is the Govt going to enter through the gates of hell?
There is absolutely no one on this board and that includes all of the JPS only holders who disagree with you about what happened here. It is morally, ethically, and legally WRONG.
However, where we JPS differ from those who are common only... We're making a bet on what is most realistically going to happen. It has nothing to do with right and wrong. That ship sailed a long time ago.
Statute means less than the constitution which doesn't mean much here; as government has done whatever it wants.
As for shares of common... Yes, I own shares, only common and enough that if fair value occurs its plenty. The great thing is.... even if we all get wiped out... its not going to change my trajectory. ie. less than 1% of net worth. And i've been in this trade since 2008 and was one of the first to recognize the cookie jar accounting going on - as i rolled the loan loss provisions and it was clear they were making it up. Between that and the deferred taxes. Anyway, I've also clearly stated, the the government has committed a fraud, since they control the companies and have rights to 79.9% of the shares, they should be on the national debt. I was first introduced to fannie and freddie in the 80's and i am well aware of what they do, how they do it, and what their real risks are. Which is why all the lunacy of replacing them has been garbage.. in that they provide liquidity into the markets and level the playing field which allows competition in 30 year mortgage lending. Look at it this way, their lending in 2005-2008 was problematic... but all the other years prior weren't... So people with existing mortgages were performing and amortizing their debt while the newer ones were in trouble; but not all of them; and they were collateralized. The problem was Fannie and Freddie were being required to reserve 100% of the loans, instead of lesser %'s (there was realestate under them anyway) So the government, created false losses... It was so easy to see.
but, i digress... anyway,
And, if its governments desire to crush commons... they'll certainly crush prefs; makes no sense to leave the hedge funds whole and eviscerate the little guys.
If it goes lower, I'll back up the truck.
If you think the preferreds will outperform the commons, remember, the preferreds "have a lot further to go down", than the commons. Commons can go down about 48 cents a share, while preferreds can go down, about, what is it, $2.20 a share?
Probably miraculously find a second mouse hole.
It seems like you've forgotten how the damages were calculated in the Lamberth case.
Damages were the difference between the day the NWS was implemented and the subsequent drop in share price. A single day in damages.
It was not calculated from NWS to 2/2/23...
The takings will follow suit.
The cash from the cramdown will go to UST when the stock is sold. If the UST sells 90 % of a GSE for$90 billion then the potential damages are $ 10 bn. That is the change in market value. It has nothing to do with today's prices and any takings action will not be ripe until the shares are sold by UST. It will be very easy to calculate the change in market value due to a takings because it will be a portion of the cash received.
The UST will not sell any shares for year's so we have no idea what the potential damages will be and probably there will not be one because there will be no cramdown. Right now it seems like we are talking about the bogeyman when we all should just get along and advocate for shareholder interests in general.
The damages for taking would be the loss suffered from the day the takings occurred.
So... if cramdown happens today.... and it drops from 47 cents to 1 cent... you'd get back a grand total of 46 cents...
To vegas ya go...
Exactly Robert - once the UST starts getting cash from IPO proceeds from a cramdown - a new takings cause of action is ripe. This may actually happen post conservatorship because we are talking about the UST selling its shares for payment directly to the UST coffers which assumes that the necessary outside capital raised on behalf of the GSE itself goes on the GSE balance sheet. In any case injunction or not - there will be another whole set of taking issues with real cash transferred ( taken) by the UST.
Then there are practical issues like Underwriters Liability, Special Committees, Fairness Opinions. It really is a pipe dream making a whole lot of assumptions. Lots of risks for the UST and FHFA to screw common shareholders for 10 to 19.5 % of equity.
Kthomp - you really need to think about the mechanics of a cramdown? When does the UST actually get the cash from the sale of stock? Before or after the GSEs get their regulatory capital? If it is after it is likely post Conservatorship - isnt it?
What about Underwriters liability for selling shares that are not legally owned by the UST post facto?
Will there be a Special Committee? Will the Underwriters require a Special Committee?
Will the Special Committee get a legal opinion that opines that the cramdown is legal?
What about a fairness opinion ?
How does Delaware and Virginia minority shareholder rights come into play pre and post conservatorship - especially if the UST sells their shares post Conservatorship?
Doesnt this seem like a whole lot for a bureaucrat who may loose their job in the next Administration?
Yeah, don't want any common cents right now... its uninvestable.
It's a different story after the restructuring though but right now, no.
It seems that many gse pref owners don’t have any common cents and that’s fine.
Pref gurus seem to have been held back at school and haven’t been able to adapt to gse reality.
Fnma
Am a rubber, got it.