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She wants a utility model per one of her co-authored papers. She advocates labeling GSEs as systematically important which the current FSOC did not determine. Once FSOC, from her perspective, labels the GSEs as systematically important (she wants a different category than banks), she wants existing shareholders transfered to a new “company” where further capital will be retained and raised.
Pros and Cons on this. Pros, we still get SP appreciation with eventual dividends. Cons, the huge SP dream would be harder to attain.
Way too early but the above is from one of her coauthored papers.
Very, very long odds on Thursday. But, maybe they would break-up their opinion ...
Issues: (1) Whether the Federal Housing Finance Agency’s structure violates the separation of powers; and (2) whether the courts must set aside a final agency action that FHFA took when it was unconstitutionally structured and strike down the statutory provisions that make FHFA independent.
Maybe they would rule on #2 along with remedy and address #1 later.
Maybe, just Maybe, the vast majority of the court agrees on #2, but #1 may require more discussion as Thomas & Gorsuch (and maybe Kavanaugh, Alito, and Barret) want the FHFA void ab initio, similar to their CFPB dissent.
Most likely there won't be an opinion on Thursday ...
Anything is possible. I just don’t think the Sherrod Browns and Mad Maxes of the world would want a left over from Trump. I also think Biden will want his guy/gal also after Scotus rules on “at will.” I honestly don’t think it much matters who is in power as long as the PSPA liquid pref is written down to 0 and gov is paid. Everything is academic from that point on.
Then it becomes a question of how fast Biden wants to recapitalize FnF as I think the FHFA single director for cause will be severed from HERA, meaning whoever Biden wants leading FHFA will happen and said director will be an extension of Biden’s will.
The key to the whole thing is the PSPA being deemed paid. Maybe Biden will want a fast recap per the protect taxpayer narrative. Maybe they will want to do most of it via retained earnings because they want to update some of the rules enacted by FHFA to better address affordable housing. I’m speculating on the latter ...
I think FnF will be able retain more earnings at minimum. Mnuchin may go as far as deeming the PSPA mostly to fully paid. If he does that then the question of “if” they exit conservatorship changes to a guaranteed “when” they exit conservatorship. If Mnuchin doesn’t do it then SCOTUS with the 5 hard leaning conservative justices will IMO.
7 business days ...
Holden, I’m not sure what you are referring to. I’m talking about SCOTUS and the PSPA being deemed paid. It would be nice if Mnuchin acts on the PSPA and wrote it down to 0. There may be some in-between act by Mnuchin.
Calabria is on record telling FSOC he doesn’t know how much longer he has on committee. I see many options for commons based on a century of ingrained P/E investor growth and eventual dividend payments. Institutional investors would love to amass large positions once the path becomes essentially irreversible, which liquidation preference going to 0 de facto solidifies the path. Amassing a position with dividends in 4 years for long term institutional portfolios is an investment strategy, slowly building over time.
It’s unfortunate you didn’t know about Collins’ SCOTUS injunction request, and not just challenging the NWS. I think that is very important in understanding future events.
Best of luck to you and yours!
Holden, retained earnings continues. SCOTUS is next on deck. JPS need a conversion. That will most likely depend on Yellen and whoever is the new FHFA director if the FHFA survives SCOTUS. I think FHFA does survive. I also think the PSPA is written down to 0 at SCOTUS.
The JPS contract claims happen after SCOTUS.
Impossible to plan anything beyond SCOTUS.
SCOTUS will probably rule on Collins before APA due to the government’s request. I expect a ruling earlier than later.
I’m not sure Biden and Yellen will be quick on a cap raise, especially for hefty WS investment banks making killings. It just doesn’t seem something Sherrod Brown and Waters are about. That is why a Bang PSPA amendment is the best option.
We’ll see ...
Welcome aboard Brooklyn - Some other “folks” from nyc on here.
Raise the dividend rate when the NWS was suspended only to turn it back on?
Warrants will create more litigation...
Everything has to wait for SCOTUS as that will be determine if the PSPA is paid. If the PSPA is deemed paid, warrants will be terminated.
Have to approach SCOTUS from the $180 billion loaned and $300+ billion repaid. $124 billion net profit paid back to the gov.
If the PSPA is not deemed paid back ... well ... caveat emptor ...
You can be disappointed but probably two more quarters reported for retained earnings until SCOTUS rules.
Mnuchin did tell SCOTUS Collins was of the utmost importance. They may have a ruling sooner than later, maybe even Feb or Mar.
Rob - I agree and we will find out in the next 7 business days ...
The house reps are also back in their districts this week.
Krab - they will allow them to retain more earnings at a minimum. I suspect there will be more.
FOF, which means more delays ... nothing from a release standpoint/3rd Party capital raise will happen until Biden gets his man/woman in the FHFA. Retained earnings has the highest probability.
It is quite obvious per the PSPA contractual language that Treasury can amend or cancel however they want within reason.
DOJ would have to significantly weigh in on a consent order, or some exotic PSPA amendment. A “nod” is all that is needed for PSPA changes as it is explicit in the PSPA contract itself.
The Letter Agreement, which will happen at a minimum, keeps the retained earnings direction in place with SCOTUS on deck. Anything material above the Letter Agreement will be a Bang. I’ve been following since 2008, didn’t take a position until 2 yrs ago. I get the long suffering investor’s perspective.
I’m in this until SCOTUS and then will decide from there.
Big Bang where JPS reaps all rewards died when Trump lost.
“Something” will be done this week. Anywhere from a letter agreement increasing the retention amount while raising the liquidation pref to a Big Bang writing the liquidation pref to 0, writing off the warrants, and a consent decree.
I think the big bang is all but cancelled. Mnuchin doesn’t like the idea of rushing an exit of the conservatorship.
I do think the remaining options are on the table.
I think the letter agreement raising the retention amount as a fall back position is ready to go this week and already done. I think a 4th amendment has a decent probability, but what it will contain is anyone’s guess. NWS being permanently cancelled but having the rest stay to a scenario where the liquidation pref be written down significantly.
Final week ...
JPS big bang is not going to happen! It’s going to be a long haul to retain capital.
Rob, I think JPS spread continues to fall and any restructuring is a long way off and commons will do just fine with SCOTUS on the horizon and the imminent Treasury action.
JPS Big Bang investment thesis that required a Trump second term is about to get destroyed. When do we think the public comment period will be held on the CRP?
It would be fitting for it to be SM1300
Isn't the proposed Cap Rule going to be made available for public comment?
Can't wait for those comments ...
Isn’t the proposed cap rule going to be published for comments? Can’t wait for that to happen.
Congress gone after tomorrow ... Trump concedes ... ducks lined up ... too bad JPS gap fell incredibly over the past couple months ...
The Dems and Republicans tried to do this before and failed. This wasn't a partisan issue. Relax, more retained earnings are coming.
As for a big bang - sorry, just retained earnings ...
I also loved how JPS tape was painted to make them feel better that the spread between commons and jps wasn't so bad. Look at the volume end of day on JPS. Went up 3% on no volume to make them feel better.
Wedbush JPS trade is disintegrating ... glorious!
JPS to Commons spread decreasing!!!
Sorry, JPS, ouch! And when the amendment comes out, guess who is going to appreciate more on just the Bang? Commons, as they always do!!!
I'm touching nerves ...
Potty, simply not true ... JPS has lost more % wise of around 20% more than commons. They were at 4.5 times or almost 5 times. Now they are down to 3.something and change.
It will continue to bleed that way and the worst part about it is if a PSPA bang happens - and no big bang - JPS will never recover. The time to sell the JPS trade was when Trump lost at the highest spread between JPS and Commons.
Retaining more capital is coming ... Just a question of how it is done.
Good luck, JPS, your trade is dying ...
JPS are going to get crushed as there will be no quick capital raise. The spread on the JPS to Commons trade will continue to shrink and JPS will really be in no man's land.
Capital structure be damned if only a PSPA amendment where basically only more and more capital is retained. Not a needle to be threaded, it became a gapping hole with Trump losing and Mnuchin's public statements about retaining more capital.
All that needs to be done is have FnF be party to any future PSPA amendment signoff.
Good Luck JPS, your trade is dying ...
They are already allowed for 45B. The DOJ reviewing the "paper work" implies more than a letter of agreement that most likely didn't require DOJ signoff as the liquidation pref went up as much as the allowable $45B in retained earnings.
Pass judgement in days ...
Because JPS is getting crushed and their hope for an amazing conversion is dying in front of their eyes. Glorious!
The DOJ will/has signed off that there are no major legal ramifications.
Once the PSPA amendment comes out. When do we get public comments on the Capital Restoration Plan? Because most likely we will and I can't wait to see the "capital stack must be strictly adhered to" JPS crowd.
That is going to be tons of fun to read ...
How many of these aliases are JPS aliases?
Forrest - everything will continue to proceed. The amendments were being reviewed by the DOJ as the final step.
Sit back, relax, and await the announcement. The question is to what degree of amendment we get.
Golf - if reports are to be believed, which I do believe the PSPA amendment is/was with the DOJ, all it takes is a nod.
Frankly, I'm surprised by all this negativity. It will happen, it is just a question of degree. I think the liquidation pref will be written down to a small amount at minimum and the NWS will be cancelled.
I also believe some type of signoff from FnF on any updates on the agreement going forward will be needed to essentially confirm a responsible exit from conservatorship happens when FnF have retained enough capital to go to the market for further capital raises.
Logoff for 13 days and you will be pleasantly surprised.
The PSPA amendment is on the DOJ's desk for legal review. It's probably already packaged and ready to go. There will be an amendment.
A ton of work has been done to not, at minimum, allow them to retain more capital. It will happen. The question is to what degree.
Any other commentary is inaccurate. All of the sudden Trump will leave Biden with a windfall of FnF profits? The 1.5 year effort to get ready for a PSPA amendment was done all for not? Unless you live in a cave and have not turned on the TV, nothing will be left for Biden.
Only days more ...
Awaiting the DOJ nod ... Feeling pretty good about the Bang that is about to happen ...
Nat Guard coming in to pit this cht down. Enough! 6pm curfew.
Conservative Justices should feel more empowered to act - the whole gov is now Dem controlled. Send them a cautionary tale to curtail any socialist tendencies!
Biden/Obama payback (I don't really care who's in power) ...
Rat - Round and Round ... goes around and comes around and goes around again!!!
FNMA = ~$12 million traded
FNMAS = ~$25 million traded for JPS
assuming sm is steve mnuchin ... could be standard message ... or anything ... probably start it off at sm1000 and goes from there ... means we would be the 228th announcement of the Treasury under Mnuchin.
Who knows really ...
Barrario - 1228 will be ours!
JPS aren't going to get the hyper-fast capital raise they thought they were going to get. I can't for the life of me think a full restructuring, capital raise plan, etc., could be done in 3 months.
The cap raise plan will most likely be drafter and sent for public commentary. Several gates will need to be cleared and it takes time ...
The Big Bang is a myth ...