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You asked for the two articles I cited and any related text. This piece is in the "related" category. It clearly reinforces my point on momentum seeming to line up behind government keeping the warrants and "sharing" in the success of revitalized GSEs. Howard's comments on release seem, to me, to read like a page from the earlier Fairholme Offer. And, of course, the article specifically slams big Wall Street and big banks while lauding Berkowitz, Ackman and Hindes as deserving in the settlement end game. However, non-hedge-fund nvestors get no sway whatsoever in this article.
Is this all just serendipitous? Could be, I suppose. Then again, maybe not.
If I can locate the two initial pieces, I will post them. However, there has been so much print coverage of late that this may be difficult.
Do you have any thoughts on why government retaining warrants warrants seems to have moved into the acceptable outcome dialog? This was not as much of the conversation about Fannie Mae and Freddie Mac until lately.
Spot on. I am worried by what I sense more than what I see. Somebody says "Prove it" well, I can't, but I have been here before and I know when there is a power game being played that I am too inconsequential to either play in or insider enough to alter.
None of that concern is a reason to reduce or sell a position in what I still believe will be a huge gainer with patience.
But when article after article suddenly arises after not much news for quite awhile that suddenly accepts government keeping the warrants and says the preferred shares get retired at par... neither of which was previously part of the popular dialog... I have to ask what it is that changed, and WHY?
JMHO.
Here is one related article from 3 days ago. I believe the two specifically I recalled were from Twitter posts on timothyhoward717 blogsite last week. If I can can find them, I will post again.
http://www.philly.com/philly/blogs/inq-phillydeals/409810485.html
During Obama's cabinet nominee hearings, some were condensed but on MSNBC but most were on C-Span. Looks like the Tillerson hearing is on C-Span 3 tomorrow @ 9:15AM and the Sessions hearing is on same channel Wednesday @ 9:30AM.
I have Comcast which does not carry C-Span 3 as far as I know.
I am actually thinking that Mnuchin will hold his own, pretty well. The biggest attack will likely come from Elzabeth Warren who Trump dubbed "Pocahontas". That will likely be ugly. However, he will fare better by pedigree, coming from an investment bank like GS than, say, how Jamie Dimon from the commercial bank side might have fared under the same spotlight.
A big plus is that Mnuchin is not flamboyant, even with his cinematic adventures considered, and has been an active patron of cultural media endeavors. I would describe him as almost more professorial than flamboyant (intended as a compliment), and think he would compare favorably to more dynamic/caustic financial moguls like an Ackman or Icahn.
He will get grilled, but he will get confirmed unless some bombshell emerges from the vetting process. I think the latter would be highly unlikely. I actually think he is a good choice from a very balanced perspective.
JMHO.
I try very hard not to be guilty of what I detest in others. That would be falling victim to stupid conspiracy theories. So I am not showing anything but concern for some of the connect-the dots hints we are getting doled out in snippets since the election.
Haven't sold any shares and have no immediate plans to do so.
But there is a lot of text in recently issued articles that seem to indicate movement in the direction of Berko's earlier plan to privatize. There have been TWO recently that basically said "Mnuchin should just put some non-bank hedge funds in a room and let them come up with a way to recapitalize and privatize Fannie and Freddie."
What does that remind me of?
http://online.wsj.com/public/resources/documents/FairholmeOffer.pdf
I have been through too many distressed plays where big money guys come in at the end, put up recap financing, and boogie with all the loot, wiping out commons or doling them a pittance while the new money takes the $$$ and runs. In this case, that absconding would be with MY money.
There is value to resisting the temptation to celebrate a victory before it actually becomes one. There is huge money at play in Fanniegate. Huge money with heavy Wall Street players and politicos is enough to create a measure of apprehension for any experienced investor that ever lost in a World Com, Tyco, Kodak, GM, Enron, Exide, Gateway... ad nauseum... collapse. It is easy to get "gamed" by big guys with big attorneys.
Stay vigilant and watch your backs, everyone. There is huge upside here for everyone. But there is huger potential for a team of Fellow Travelers if they can reduce the field of finishers in the money to just a few buddies that divvy the spoils into fewer, larger pieces. When people continue to denigrate investors as just being stupid "lemmings" it reveals a latent disdain for average investors just following the big players for a clue on grabbing a winner.
JMHO.
Where do you find the charge "fraud" in this complaint?
No, Fairholme's lead attorney is on his client's side. Fairholme owns no common shares. The PWC settlement proves that not all Fanniegate legal actions result in rewards shared by all shareholders. Did you get anything from that settlement? I know, I didn't.
C'mon, Rick. Treasury and FHFA are both represented by DOJ. The DOJ reports to the Attorney General. This scenario is WAY out of bounds.
JMHO.
If you go to gse links, scroll down to the two Edwards cases filed against PWC, then Deloitte. The initial complaint in both case lists the full roster of players in each.
It strikes me that Fairholme's attorneys exhibited an unusually high level of interest in these cases in Amicus briefs, etc., as is the case with many other pending non-auditor-based litigations involving conservatorship of Fannie Mae & Freddie Mac. I have concerns that such actions are maybe being undertaken to stall any reasonable settlement that could benefit all shareholders. That would would include me.
I want this settled, not drug out in some insane, legal "War of the Worlds" Orwellian science fiction epic. I want Fannie and Freddie released, restored, relisted and recapitalized. If that means back to 2007 status, fine. If that means with added private sector competition, fine. If that means with higher reserve requirements, fine.
But if it means liquidating preferred shares at par, doling out remnants to common shareholders in the "wind down" business that dies over 30 years and gives new "investors" putting up new capital for 100% of the future marbles... then I am not okay.
I smell a rat. And having Fairholme's lead attorney potentially recruiting a new Fellow Traveler in the Attorney General Designate scares the living hell out of me.
JMHO.
1. Doing a sloppy job as auditor is NOT fraud. I doubt even sloppiness was evident; these are two fine houses with excellent global reputations.
2. The company, not their auditors, has a public duty to put forth accurate numbers.
3. FHFA was never in charge of accounting at GSEs. Day-to-day activities were company responsibilities.
4. Almost every public institution had real estate and other assets involving exotic financial instruments marked down to market during the crisis.
There are NO charges alleging criminal fraud pending against any party that played any role in the GSEs during the conservatorship phase, or even the Amendment 3 phase that began in 2012, of which I am aware. You keep reintroducing the term "fraud" so please educate us on where those charges have been filed and against whom they were filed.
The only public SEC filing the auditors have anything to do with is the annual report... Report 10-K. They do not audit 10-Q's, prospectuses or any other documents filed with the SEC.
The auditors do not provide the numbers for the 10-K. That is the responsibility of the company's Finance Department under the direction of their CFO.
"... why did the PWC case get settled?"
I'm sure your comrade and lead PWC plaintiff, Wayne Olson, has already provided full details to all The Fellow Travelers on the team.
You raise an excellent point about "some" level of government support being appropriate as a backstop of sorts to prop up the housing market. Much of the concern about the GSEs and whether to privatize or not seems to involve the guarantee on MBS. But why couldn't it be crafted in a different form where the government "subsidy" (call it what you will) comes in the form of an advantaged interest rate provided by the Fed.
If the goal is affordable housing and preservation of the 30-year mortgage vehicle, why not support that with Fed mortgage capital at some advantaged rate at the discount window. This would be a lot less controversial than a government guarantee, partly because the risks get offset by lowered borrowing costs but also because default-driven risks remain the responsibility of the GSEs. They are only providing a cushion in interest costs to allow Fannie & Freddie to both recapitalize and build up reserves for any future systemic failures.
The Fed is not a governmental agency, so this also removes the risks of debt transferral to Uncle's tab under debt ceiling constraints. And the Fed's primary mantra of managing inflation's impact on monetary issues would only be enhanced by supporting low rates in what historically has been one of America's largest and safest investment areas... the real estate market.
Your message has ignited a new opportunity to explore.
Thanks.
No,I absolutely do NOT think "the outgoing admin(istration) was worried about special prosecutors and congressional hearings" and that concern led to stonewalling of documents being released. Here's why.
1. The part of the Bradford claim that deals with 2008 and the alleged fraud committed to seize the GSEs took place during the Bush administration, not on Obama's watch. All the players(or "actors" if you wish) were changed out before the discovery and document impasse commenced in 2012 as suits began to be filed. So, any blame, there, would be on Bush's watch and of little concern today.
2. Until the surprise Trump victory, nobody in the Obama administration ever thought Clinton would lose and most Dem pundits were, in fact, predicting a party majority in the upcoming Senate. There was no threat under that scenario. And after the election's surprise results, there has been no substantive change to the government's stance on documents.
I can only believe so many documents are sought by plaintiffs because their cases are weak. And I can only believe government stonewalled releasing 11,000 documents to stymie the lawsuits. They could have compromised. They didn't. And so, years later, we just keep asking: "Any verdict, today?"
I am actually hoping for the same shareholder outcome as you are. The government did plenty that I strongly disagree with like Amendment 3 that I have railed against for years on this board. I am not an apologist for the government's purity in Fanniegate. But neither can I support illogical or fabricated conspiracy theories that stop just short of blaming FHFA for the death of Jonbenet Ramsey.
JMHO.
The Collins case introduced this issue to the Fanniegate discussion in at least a minor way. I'm just now sure how precedential it may be based on differences between the CFPB and FHFA and differences between the statutes that created the two governmental entities.
I have not studied Judge Kavanaugh's opinion in any detail, so I can only offer a visceral reaction to your question that would be my opinion, only.
I think it would be extreme to cite a Constitutional defect in FHFA's organizational structure as an automatic invalidation of any and every decision made since the agency's inception. Unless cause could be shown that a single director structure altered an outcome detrimental to plaintiffs, I see the PHH decison as more influential on the issue of whether the POTUS has legal empowerment to discharge FHFA Director Melvin Watt, if he so chooses.
That's all just opinion on my part.
First and foremost, don't confuse my objection to outrageous claims that some elaborate conspiracy was created by government to fraudulently seize the GSEs with the conclusion that I also, somehow, believe the government is innocent of any wrongdoing. There is plenty of blame to go around the settlement table, if we can ever get the parties to sit down and resolve their differences.
I have detested the document "thing" since virtually day one. We have plaintiffs on one side and government lawyers on the other side, glowering at one another with their best "stanky face" on and refusing to budge in a war of wills that has dragged on for over FOUR YEARS. Meanwhile, of the 11,000-some documents in limbo, there is no way in hell that all of them are needed/relevant or that all of them are strategically protected to preserve our national interests. So let that be the starting point. THE WHOLE THING IS STUPID from either perspective. Both sides positions are lame and moronic.
This isn't about needing 11,000 documents. And it isn't about protecting 11,000 documents. It's about which Alpha Male wins.
I can't buy the theory that "the delays were so "the actors could make an exit after Obama term is up" because the expectation has always been that Clinton would replace Obama. That would have been a"business as usual" outcome for FHFA, UST and the government players. The delays began long before November 8th and what, to many, was a surprise outcome and turn of events.
JMHO.
Yes. How could I have been so blind to the facts? There was no financial crisis. Banks were all sound and likely to continue functioning as normal, loaning out mortgage money as always. Bear, Stearns and Salomon Bros. were on solid financial footing. The car makers were enjoying record sales and hiring workers like crazy. Insurers like AIG were in tiptop condition. The bond market remained hot as the global buyers of fixed income debt instruments like MBS were lining up to buy Fannie and Freddie's coming offload of bonds. There were no concerns about GSE credit ratings or ability to ay vs. default on MBS they sold previously. And no problem coming up with sound mortgages with which to generate future MBS offers and sale revenue from bonds. There were no problems in the real estate market. Almost no homes were under water and housing prices were on the rise. Those foreclosures and mortgage defaults were actually running at historical norms of 1.2%, not almost 4%. And with employment figures running so high, there were no warning clouds to dampen the envisioned future of any part of the mortgage financing, housing or banking industries.
Yup. The government engineered an elaborate scheme to conceal its nefarious motives to take the GSEs away from shareholders. It's just like when NASA faked the moon landing. It was all just staged histrionics to facilitate government's evil plan. TARP was probably all part of the plot, as well. And the $ trillions in Quantitative Easing I & II, let alone Fed actions driving the interest rate to near ZERO %. These actions had nothing to do with any real concern for any real crisis. And they had nothing to do with resuscitating FnF's numbers in 2009 and beyond. They were just a secret, hidden element in the government's Fanniegate fraud.
Yes, I see things more clearly now.
LOL.
Sure. But the thread with Glen Bradford was over possible new filings that are not docketed.
I hadn't thought about the document delays,though. That's a great point regarding existing cases. Thanks for contributing to the conversation.
Unless he recently added a position, no. Fairholme is only preferred shares.
That is my latest understanding.
http://portfolios.morningstar.com/fund/holdings?t=FAIRX
There is a legacy connection between Mnuchin and Berkowitz that I can't compute in any probability scenario. I am just being honest there. There is a risk that Berko may use "the old school tie" leverage to influence Mnuchin to retain the warrants.
That being said, there is NO logical reason why government would choose to keep or exercise any of the warrants. That's as explicit as I can get. If that's not helpful, I'm sorry, but it's the best I can do.
I believe the warrants are and should and will be DEAD MEAT.
JMHO.
Yeah, sure. That actually was my point, anyway. Once the statute of limitations expires, the government is forever off the hook. Maybe I should have said it differently. Maybe I should recapitalize, er... I mean restructure my post. LOL.
Yesterday was priceless. Good job standing your ground!
Yes, that's correct except for one minor detail. They can be guilty but never charged once the statute of limitations expires.
If they are smart, 0%. The last thing Trump and Mnuchin need is a grand entrance to the inside-the-beltway domain to be greeted by another flurry of lawsuits that will only distract from a bigger and broader agenda.
79.9% of a lousy $15 B per year being bled out of the GSEs is peanuts compared to the eventual showdown between the CBO and WH budget office and the risk that much of $5 T in GSE debt could get added to Uncle's tab, and the pressure of another debt ceiling crisis of epic dimensions as our Sovereign Debt rating drops through the floor.
It all depends on who has Mnuchin's ear. If it's Berko, he'll be getting force fed a whole load of shit about "keep the warrants to pay for the wall; a group of us will put up the $$$ to recapitalize FnF and we'll take over the fully privatized Twins. And with the warrants, you can kill any shareholder resistance because you own 80% of the votes and your "golden share" power of veto." This appears to be where The Fellow Travelers" are heading.
JMHO.
If the government keeps the warrants as former CFO Timothy Howard seems to recommend, the divvy pool will drop from $2/share to $.40/share after dilution. Then if new common offerings form the basis for recapitalization, they drop even further.
So when people are talking about backroom negotiations after Inauguration Day between Trumpsters and non-bank financial whales to chart how a privatized Fannie & Freddie can be accomplished, watch your back.
JMHO.
So who are you charging with criminal activity? Nancy Pelosi? Hank Paulson? George W. Bush? Who should go to jail? In which of the pending nearly 2 dozen lawsuits are they named as defendants?
Impossible. FHFA does not bear responsibility for the numbers presented and signed off on by the boards of either Fannie Mae or Freddie Mac. The veracity of those numbers reposes solely with the accounting and finance staffs at Fannie & Freddie.
Similarly, the auditors do not create the numbers. They can only confirm that the reports were compiled in accordance with generally accepted accounting standards or issue a qualified opinion.
Any adverse verdicts for accounting fraud would only support court delivery of claims to be paid by the GSEs to claimants in a class action suit... as happened during the earlier accounting scandal and change-out of the BOD.
So, if you are a stockholder and are hoping for an accounting fraud payment for damages, please know that you will wind up paying yourself out of corporate income for your windfall, and your S/P will fall in accordance with the financial "hit" recorded to pay out that settlement. Some victory. The government pays ZERO for serving as conservator.
JMHO.
Jeddiemack, I agree with you 1000%!
Even the fake timhoward recognized after the election that all the polarized taunting and intractability only created an impediment to a fair, reasonable and comprehensive settlement that would benefit all stakeholders. He actually exhorted navy to try and rein in the extreme elements on this message board.
The $$$ runs out in December. It is beyond time to sit down at the table and finally agree to agree on something or accept a mediation. Goes for government, too, which I honestly believe is now in the cards at long last.
JMHO.
It runs much deeper than that. The same person is a lead plaintiff in the Edwards vs. Deloitte litigation which remains active in the courts. Another plaintiff that also has legal plaintiff standing in the same two cases just penned a lengthy article in Seeking Alpha that seeks to validate the government retaining and exercising warrants in a recapitalization that woulddilute my common share value by nearly 80%.
Two people are highly active in commentary on Fanniegate matters. One writes regular articles for Seeking Alpha. The other devotes what seems to be endless hours promoting similar views while awaiting a ruling in the related Deloitte action. Judge for yourself:
https://twitter.com/hill_matt
Due diligence discipline demands that smart investors chase down risks to their investment position. Too bad the earlier investors in Fannie Mae & Freddie Mac did NOT do that prior to both stocks imploding during the financial crisis, leaving them to seek scapegoats for their own inactions and failures.
"If it walks like a duck"... Thsi one is not strutting towards the high ground, if you get my drift.
I am no different than many investors here. I want this legal stonewall broken down and matters settled so life can go on. Layer upon layer of interlinked litigation only makes the resolution process that much harder for any definitive outcome to be reached. Who wants to be here, 8 years from now, asking: "Any verdict today?" Not me.
JMHO.
Any plaintiff in not just one, but TWO suits against or related to the government's actions or vulnerabilities in Fanniegate can expect to be questioned on motives for delivering a mass quantity of self-serving rhetoric in the internet "space" that serves the financial purposes of such legal actions.
I certainly have no objection to anyone defending their actions to seek a settlement in any or all matters before a court of proper jurisdiction. However, when those actions appear to seek another agenda, especially when such actions maybe even include the joining of other complainants in similar or related actions in some coordinated action that could create adverse outcomes for myself or other investors, it is fully appropriate for me to express reservations about the propriety therein.
It's very simple. I have a LOT of $$$ skin in this game. I don't want my Fannie stolen any more than any other shareholder does.
JMHO.
Common/Preferred shareholders need to decide their interest or passivity towards their eventual fate after years of waiting.
Will their future be a solid, long term profitable position in Fannie & Freddie equities that grow and pay dividends for years to come. Or. Will it be a big, fat goose-egg while the litigant cabal takes all the goods for litigants only, spinning the Twins and their shareholders into oblivion, taking the housing market with it. Or. Will it be an end run where common equity gets the table scraps in a wind down, preferred equity gets bought off at par and has no stake in the future. Or. Will the ancillary part of the latter outcome also include a whole new class of non-bank-based investors buying a new class of equity that takes control of the housing market in an altogether new form of of real estate Monopoly, replete with get out of jail free cards?
Cockroaches absolutely hate it when someone turns on the kitchen light in the middle of their midnight feast.
JMHO.
The Fellow Travelers "Dream Team" wants to reassure everyone that no conspiracy has ever existed among litigants. There is no underground railroad or information super-highway helping each litigant scratch each other's backs. There is nothing wrong with enjoying gains from multiple suits that only some shareholders get; that is only improper if it applies to dividends some get but others don't, which is highly illegal if done by the UST.There is no truth to false claims from internet pundits that the same lawyers are infiltrating multiple independent litigations to serve their own agenda. And there is no truth to any campaign existing to influence the privatization of the GSEs to benefit one group of stakeholders more than any other.
Excuse me while I throw up.
JMHO.
The Fellow Travelers all want to see dilution. Why? There are dozens of ways that recap can occur funded by redirection of swept proceeds to capital reserves and the issuance of new preferred share issues. There is no need to pay down existing preferreds to the tune of a $19 B delay in attaining fair recap thresholds.
There is a huge end run in progress to prevent risk sharing and maintain the original monopoly enjoyed by the GSEs. And, at the same time, keep up the war on the so-called TBTF banks. I think the motives of The Fellow Travelers only bubble below the surface of public and Congressional purview, reposing in the dim and murky realms of the blogosphere and Twitter that are only known to the cognoscenti.
Will your Fannie be stolen for a second time?
Be careful who you trust. Not all is as it seems.
Disclosure: I am long FNMA, FMCC and FNMAS. I have no short position in any stock. My holdings in combined GSE equities represent about 20% of my net worth.
JMHO.
Ah, yes, another advocacy article that promotes government retaining warrants and huge dilution for common shareholders. Seems to have become a running thread throughout the fabric of litigating Fanniegate.
Don't think the politicos ignore all these articles.
Watch your backs, shareholders. Big Money is in the house!
JMHO.
How does the Deloitte lawsuit benefit Fannie Mae? For that matter, how did the PWC lawsuit benefit Freddie Mac? How did/does either lawsuit benefit anyone but the named plaintiffs in either action?
Yes, both GSEs need capital. But what gets awarded to plaintiffs does not go for recap. It goes to the plaintiffs. But then you and all the fellow travelers already knew that.
The sequential deliverance of shareholder equity in any equitable way involves an inevitable hierarchy of events to transpire that conform with the rule of law, the rule of reason and the rule of ethical and moral behavior.
But "The Fellow Traveler's Team" sees everything differently. Right?
JMHO.
Ridiculous and totally incorrect. A recapitalization is a restructuring. But that was NOT what Mnuchin made reference to which was a restructuring. Not all restructurings are recaps.
Is all pizza food? Yes. But is all food pizza? No.
Expected commentary from a Fanniegate inner circle club member. The court actions are all an integrated and interlocking circus, lining the government up as the host for a vampire feast paid for by taxpayers for some, and the patsy to be carved up and harvested by others with designs on the mortgage finance business.
At least that is one working theory at the moment.
https://twitter.com/hill_matt
No drink at the Wynn necessary for the team. They have other "goodies" lined up in their sights.
Right?
JMHO.
No, that is fundamentally incorrect. Many restructurings take place that have absolutely NOTHING to do with any form of recapitalization. Hewlett-Packard recently restructured by splitting into two entities. It had nothing to do with recapitalizing, per se.
Sears Holdings yesterday announced a restructuring by closing 140 Kmart and Sear under-performing retail locations. It had nothing to do with a financial recap. Just a need to stem the financial loss hemorrhaging.
Mnuchin never inferred any kind of recapitalization of Fannie Mae in his remarks to date that I have ever seen. Please feel free to correct me if you have evidence, otherwise. But, for the record, "restructuring" does not mean "recapitalizing" in business.
Posse?
"Grab 'em by the posse. You can do anything you want and they let you do it."
Now THAT'S Presidential Privilege. Fannie Mae has now become part of the modern political lexicon.
LOL.
I'll not disrespect your opinion, but what I said was that further draws from UST by the GSEs to correct a technical insolvency will be viewed with extreme political prejudice as yet another government bailout of Fannie & Freddie. I believe there would be enormous consequences for any such reaction. You evidently see it as some non-event.
We disagree.