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What Pilecki once said: overzealous politicians the main risk.
Yes, but I think the chairman used that word. Maybe I got it wrong.
Witnesses revolt. Third one in 15 minutes.
The argument for those write downs is exactly to protect the banks on their second liens, NOT the taxpayer. So you can't have banks eating that loss. First mortgage (sold to FF) is under water > second lien (on big banks) can't be repaid and must be written off. Thus, banks have limited lending ability which in turn stalls the housing recovery. If you think about it, it is a real blockage.
Obama could conceivably use the giant DTA to offset DeMarco's estimated losses if there is forgiveness, creating a wash out. This is an ideal solution as present and future earnings of the GSEs will remain untouched. Furthermore, it will be good for the housing recovery and therefore for Fannie and Freddie.
I do not think the real motive to not use the DTAs is that Fannie will start to look "too healthy" or that there is some technicality that prevents doing so. In my view, politicos (and the media) are being led astray by DeMarco. So what they express is pretty much noise. I think there are simply too many important pieces that are pending resolution: principal forgiveness, conservatorship, reform, etc. and when an important piece of data makes it to the surface all these moving parts get agitated. The real players see an opportunity to make a move towards their real goal but do not show their hands. Because of this, I do not feel the DTA stoppage is a trigger to sell. And declaring the death of the Jrs. may be premature.
Perhaps he refers to this line of the PSPA?
For the avoidance of doubt, the Commitment shall not be terminable by Purchaser solely by reason of (i) the conservatorship,
receivership or other insolvency proceeding of Seller or (ii) the Seller’s financial condition or any adverse change in Seller’s financial condition.
Ski, this is so right it is funny. These days I am on guard expecting a beating any minute. Speaking of Pavlov...
Good day for the commoners... enjoy it:)
Thank you for the clarification, fourcents. And JSstock as well.
What would you say the charters from Congress represent?
True. But Congress provided them with charters. Who knows what the legal ramifications are when it comes to corporate laws.
Perhaps no news is good news... Do you think that the pr was a leak-style attempt to test the media-waters? To gauge the public/politicos reaction to a possible quick, dirty taxpayers' payback?
But these are quasi-private companies or quasi-federal programs.
precedents on this?
Listening to that interview with Greenberg, he referred to the "unlawful taking" to the 79.9% stake and the firing of management. But I listened to it in a hurry so I may have gotten it wrong. He actually complained for the lack of "just compensation". Problem is, we do not know the details of what took place and how. In AIGs dealing there were apparently ultimatums and threats. I'd like to read his latest book. Now I need to decide whether to get the kindle DX or stick to the ipad. I looked into the 6" kindle but it seems to small to me. Specially for PDFs.
And... some "Regulatory Taking" reading for your Sunday afternoon.
http://en.wikipedia.org/wiki/Regulatory_taking
Thank you, 4cents.
He hasn't done diddle for FnF shareholders
The "net investment" scheme will not save us from the Srs. This is an acquired debt that will not go away. Although the Tsy can make any ammendment they want, it will not look good on their reputation to have them magically go away. In addition, given their seniority and given the future, sustainable earnings power of the GSEs, there may be more than one large private investor salivating for them. In which case, not even modifying them back to 10% will be long term sustainable. Perhaps, at 4% or 5% with an open option to convert into common at a specific price, existing along with the Jrs.
I cannot see a future scheme where earnings will be made -somehow- into "official" net investment policy. Net investment is a practical way for the Treasury to tell the public that outflows match inflows and that all is well with taxpayers getting their money back. But technically, and legally, the Srs. are an acquired debt that -if not redeemed- will continue to exist at a 10% dividend -now full sweep-, eternally.
Obviously, after net investment becomes zero, the mission of the Srs. would be pretty much accomplished and the hundred-year-old tradition has been for the government not to profit from these bailouts. So the question we must ask is what will happen to the Srs. the day after. I seriously doubt that strangling the GSEs will be the order of the day, given some recent developments.
I am afraid you are being somewhat unrealistic -with all due respect- if you expect that there will be some kind of gift thrown upon us. I think any favorable resolution to us will also come with some strings attached. The only way the companies will be free and clear, and therefore the Jrs., is if the securitization function is stripped away from them, they lose their charters and then they are fully privatized into smaller companies. Because, guess what... the stigma will also be gone. They will be made into new, ready to fail, profitable companies.
I think if anything like this were to happen the Jrs. will get their dividends back. On time.
With the common stock you have to be careful.
There is and there will be a lingering feeling of disgust against "shareholders". The public does not and will not rationalize that taxpayers, themselves, are also shareholders of the companies via the warrants. You cannot count on the media to clarify this issue. Even if clarified, the disgust to the "old shareholders" may continue.
There is also the risk of a continued need for a scapegoat, which common shareholders will fill in perfectly. A good way of pacifying any future public outcry would be to recapitalize the companies while preventing common stock to be equally revalued. This can only happen through dilution where the value of each individual share diminishes in spite of the whole universe of shares being much more valuable. Remember, there are a number of ways dilution can take place and all of them make sense. They could ipo the new platform, convert seniors, exercise warrants, even raise outside capital, etc.
Of course, there is always the risk that we are converted into common stock too and thus, fall within the same trap. Although our trap -I think- will always be substantially better.
I personally believe nothing has been set on stone here. But a few pieces are emerging here and there. When you start filling in the blanks there are a few alternatives that may leave the Jrs. alone, if we get that lucky.
Note: if Tsy ever sells their Srs. that money will go to cancel the debt. It will not be a redemption as they will continue to exist and pay 10%. Any effective resolution will either involve the GSEs buying them back therefore paying that debt back (redemption) or modifying the 10% into something viable, say 4%, so that if they continue to exist in the hands of a 3rd party (say, a Buffett) there will also be enough earnings power to distribute to the Jrs. And we will continue to be second in line. All my speculation.
“It’s not clear why” the “Treasury would sell the preferred or why anyone would want to own it,”
Really?
Wouldn't Fannie and Freddie love to buy the Srs back/redeem them only if they could? That would be the perfect use of the DTAs, less debt while still paying back the taxpayer!
ai un buon viaggio e divertiti tanto...
Don't buy yourself a Ferrari yet, if you also happen to stop at Maranello.
Honestly, I am still scratching my head thinking if this is real.
Haven't we been waiting not for weeks or months... but for years to even read of this possibility? Did Fannie just admit that they do have substantial DTAs and that they could book a gigantic profit if they happen to release the valuation allowance? Is this happening? Isn't it this figure even larger than what we speculated?
All sounds too good TBT. I have gotten so used to seeing prices fluctuate between $1 and $2 that I am not sure I may like it to see them spike through $3 or $4 or $5! Imagine an 8/17 bust that starts from $5.
I feel like an abused co-dependent.
Not for us. Something else is going on here. Some issues had some significant trades at prices way higher than any intra-day trade. I think these lines are key:
The release of the valuation allowance would have a material impact on the company’s 2012 financial statements and result in a significant dividend payment to the U.S. Department of the Treasury
If we conclude the valuation allowance should not be released in the fourth quarter of 2012, we will continue to evaluate the need for the valuation allowance in future periods
Four, I see your wishes came true!
17:17 3M $3.30
I am speechless...
reluctanttencents
It's pretty simple. Once they are gone, all eyes are unto us. And this bill reaffirms the Srs one day will be gone.
Good post > 5 *s
They see value, Joe.
That means: they are valuable.
That means: value can be extracted to a) repay taxpayers, b) to work on fiscal deficit issues (see "business functions under the balance budget...")
That is why they are putting a lock in their future revenues and earnings as a result of increased G-fees.
As stated by Millstein last November in the article I posted a while back, the way to privatize the enterprises is by convincing Congress the GSEs can be a source of funds to cure the fiscal deficit.
The bill also anticipates a resolution -one day down the road- of the Sr. preferred stock debt. A major roadblock for the Jrs. to acquire value. With Srs. out of the way it will be all about the Jrs.
Underlying the paragraphs there is the notion that GSEs can be monetized. My interpretation only.
There is more to it.
It says that Congress now sees value in the GSEs.
niente
nada
zipo
Lawsuits were very specific claiming deception by management resulting in a loss to shareholders.
Not what I said.
I said this:
If there is a valid claim from a specific group of shareholders (per period) who were adversely affected by actions of the government in such period, the outcome of that lawsuit will directly affect them. But also has the potential to affect related parties, depending on the nature of the claim and how broad the final judgment is. For example, as part of an hypothetical final judgment a judge could determine that dividends should be reinstated -playing sandbox here, I know there are no grounds for this claim-. With a judgment like this dividends have to be reinstated to ALL preferred shares no matter who, when or what. According to you, such reinstatement will only occur to the holders of those shares during the period in question... which is laughable if you think about it.
Briefly, it depends on each specific lawsuit.
Oh... yes, I have been involved in several class actions lawsuits in which I had to register my shares. Bankruptcy procedures too.
Burr... a straight shooter, it appears. Unfortunately for Hamilton. Yes, it is about the instrument (shares). Not the holders.
I'd say the webmaster reworded the sentence to make it fit in a bulleted layout.
To me, this "Fannie Mae and Freddie Mac Preferred Shares. ICBA is seeking restoration of Fannie Mae and Freddie Mac preferred share value and dividend payments." and this, "GSE preferred shareholders must be made whole" have the same ultimate meaning.
True, nothing in the current 2013 top issues. Could be bad but could be good too. We do not know.
You got it right.
It is the outcome of the lawsuit that matters, not who initiates it. Say, there is a class action regarding the preferreds and the outcome is that holders must be made whole. That would mean that ALL preferred shares should be priced at full value no matter who holds them or since when.
Joe, here is how a webmaster works when publishing on the internet (13 years of experience).
The document "currenttopissues.pdf" is eternal. So you update the information each new year *on* the same page. Simultaneously, you create the archive for what will become an old page. The currenttopissues.pdf from fourcents link was from Feb 2012. Here is the archived version, as priorities for 2012:
http://www.icba.org/advocacy/index.cfm?itemnumber=57559&pf=1
where they still mention the preferreds...
"GSE preferred shareholders must be made whole."
Mystery solved!
On the "currenttopissues.pdf" for Feb 2013 Camdem is not mentioning anything about preferreds. Perhaps because they will be made whole? Could go either way. We don't have the answer.
This guy was at the hearing and was the only non-sense person. The other three did not share his point of view neither most lawmakers. Watch the video, taint, and a lot will become clearer.
Thank you!
The last hearing of the Housing Committee has shed some light and a few things have become clearer.
What the ICBA proposed back in 2012 (old news), 'the replacement of FF with a cooperative of banks', is in inline with what was suggested at the hearing, the 3rd proposal by Tsy and HR 1859. Given the diverse nature of these players, I would give this a very high chance of occurrence due to an across the board agreement.
This replacement does not represent the disappearance of the companies. Only that some of their functions will be performed by a NewCo, thus Fannie and Freddie will no longer exist as they are today. This specific function is that of "securitization" which will be stripped out of them. The strong, very liquid secondary market. Most likely, Fannie and Freddie will go to this well just like anyone else to get their loans securitized at a cost. Remember, FF might be selling stakes of this platform to form the cooperative and the proceeds could be substantial.
The remark by DeMarco was first mentioned back in 2011 (old news) and has been repeated every time there was a new press release that require some clarification. We've been through a lot since then and the preferred shares are doing ok.
Finally, although I don't like seeing no mention of preferred shares in the last ICBA document it may also mean that this is no longer a battle that needs to be fought if Fannie and Freddie survive as private entities after having sold the securitization platform to the members of the cooperative. Camdem might just be seeing the future? All speculation.
Catalyst: AIG
Could this affect us in any way? Good? Bad?
"It said that by taking a 79.9 percent AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution."
http://finance.yahoo.com/news/aig-shareholders-win-class-action-222043053.html