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great that you are at least stay on top of things. Thank you..Why are we doing so well today?? Volume up 470% vs 50 day average volume despite sweep . Any thoughts?
Hope that your prediction will be right! Clark ,this one is for you....and all the others that are and haved hung in there with this one....
lol.....except on Friday it was not accumulation but rather distribution (institutional selling) , likely related to Mnuchin comments toning things down.Agree though, Anticipate continued uptrend (slower accumulation) as the pendulum swings toward a bipartisan consensus toward "reform" and eventually a release (2018? ...) . Putting the NWS on hold on 9/30 would be a big step in the eventual release direction. We will see. I agree with Clark ,and given the time frames, courts not likely to be a factor. It is interesting though to see how strongly the FHFA and Tr keep defending themselves! perhaps a leverage factor in the final resolve?
he may be right ( to some extent) ;the selloff at the end of the day was associated with high volume (intraday) suggesting large players and not your average day traders . ? related to Mnuchin comments at end of day?
nice article!
true, but big difference is volume was up 213% whereas 2 weeks ago there was no volume increase. Suggests the elephants are now interested ( as on 10/9/16 and 7/19/17)!!! A big difference Clark to think about.
Great job! This article is a well written accurate summation of the events. The key here is the issue of the "revolving TBTF banks and government revolving door and politician support (i.e. Wells Fargo/Corker relationship as an example) , with the goal of eliminating the GSE's and giving the "lucrative " business to the Big Banks. Obama , I would interpret played this desire carefully as to not rock the boat with the Big Banks ( perhaps in exchange for a more cozy "retirement") and at the same time obtain the needed funds for his agendas ( i.e. Obamacare as an example) , leaving it to Hillary to do the dirty work and finish the job Paulson and team set out to do. But whoa along comes President Trump. So the question begs ...How does he stand? Given they can't continue to leave things indefinitely in limbo for another 4 years, he must either sell out to the Big Banks ,back Corker and Warner, and support the MBA proposal and revolving door lobbyists , for an ultimate and probable personal rewarding move for his he and his family or choose to help his middle and lower class constituents , small banks, future home buyers, and likely the taxpayers while supporting a reform, recap and release. As Ackman and others (i.e. Moelis plan) have pointed out , there a considerable revenue potential for the government in the latter approach
LOL....."slipped through the cracks of the natural selection process" ....I like that! Perhaps it even redefines natural selection! Maybe what we have perceived as the "fittest" from a mind /thinking standpoint is now the opposite. Only thing that is making sense here with the GSE story. As it sure isn't about logic. As they say , follow the money. and now better said would be to follow the lining of politicians and lobbyists pockets!
lol....Clark is right about the market and it momentum pertaining to Fnma. If someone is buying 1m ,then their must be a seller. If sellers are scarce the pps should go up and not stay neutral ( or go down 2 cents) . I think Clark input keeps things in check in this regard, whether one views it as pessimistic or realistic ( personally I see more of the latter Clark's comments). I am also long .
yes even Tim Howard thought The Perry decision would be favorable. I, for one appreciate your comments. Knowing that you are long as you mentioned in the past, what are your thoughts and where do you think this is going?
and/or the volume. need a volume increase daily of 5-10 times ( greater than 10-15 m) to start getting serious about pps changes. Otherwise just a traders game
You may be right.And probably are.
Yes ....Seems simple enough with now the document release to support it. If it does not happen, then the big question will be "why it didn't?"
Possibly. If the President wants to cut off the funds to Obamacare ( or decrease them) ,the simplest way would be to stop the NWS ( if the sweep is truly used for that purpose). If so, the the ACA (Obamacare) will run into the predicted financial trouble and any additional bailout funds would need to go before Congress for approval (which at this time would be an unlikely event). So,yes If this back door money is truly going to the healthcare subsidy slush fund and this is what is going on, then stopping it through a now justifiable reversal of the sweep ( i.e. document releases last week), would force a bi partisan replacement plan to develop. Trump now has a great reason to reverse the sweep ( if the funds are truly used for that purpose)
and th ditch of whatever is convenient for their own purpose
After seeing the news clip, it remains hard to support Corker and Warner in their only arguments of winding down the GSE's based on them being "a taxpayer risk" and/or a failed business model. Where as the opposite is actually true where not reversing the NWS increases taxpayer risk and the model was not only NOT a failure but saved the day (banks) in 2008/9. At this point Corker and Warner don't have much to stand on. And in fact Corker likely already knew this information when he recommended shorting the stock in the past. And clearly Greenspan did when he recommended shorting the stocks to his friends at Eaton Park in 2008. The corruption and deception is so thick here it is almost unbelievable.
This is a poll taken by IMF (Inside Mortgage Finance) (see GSE Links 7/13/17)...... Should any GSE reform bill from Congress be based on the concept of preserving Fannie Mae and Mac and their existing operations?
Yes.
59%
No.
18%
GSE reform won’t happen in my life time.
23%
If the 23%are excluded, then becomes 76.6% of people in favor of reformed recapitalized and likely release of the GSE's. Comments?
I agree. In reality if the GSE's did not exist back in 2008/9, ,the financial fallout would likely be unimaginably catastrophic .Just think on this . The plan to have the GSE's be the stabilizer back then was really very ingenious. It was the reasons provided and lack of transparency in how and why it was done that was dishonest and corrupt. And for that hopefully that wrong will be righted. In reality, the US and the world ,owe a huge debt to F&F for being in the financial position to stabilize the crisis. God forbid Congress does something stupid and breaks them into smaller regional companies as this safety valve would be lost. In fact ,on thinking more about this, the GSE's are a financial bedrock and without them everyone would be at risk and especially the taxpayers. Even in good times it is hard to imagine them not being here to stabilize things and help the economy run smoothly (i.e.. would the banks pass their stress test without them billions of dollars of mortgages on their books)
lol....Corker walked out at the very end of his allotted time and was actually smiling at his assistant behind him to his left, who reciprocated and smiled back. he did not appear upset but did leave immediately following. I would not read anything positive into this whats ever.
thank you for mentioning this.Not to distract from ROLG recent article, which appears to be well reasoned from a legal standpoint. By all rational and legal thought the Lambeth decision was very questionable and the results of its subsequent appeal that followed .........well likely not legally but politically based ( perhaps related to Ginsburg obligations).The point being, more often than not the law can be manipulated and "spun" to to make a decision that sounds legally based but is otherwise following some else's agenda, be it politically and / or financially driven . The Perry decision is an example of this. Many very knowledgeable people frankly predicted (ROLG, Epstein, Howard, etc.) that the appeal would NOT be affirmed. Yet it was. Thus although articles such as ROLG's on surface are positive for shareholders, they also must strongly be evaluated in the context of the big picture surrounding the GSE's ( see Obit's diagram and comments on this).
You may be right but then again the President may not want to keep Obamacare afloat with the same intensity as Obama did when he could not muster up the traditional funding from Congress and appears to have used the GSE profits to accomplish that goal. It may be more prudent now for Mr. Trump not to continue to fund it and let it go under as it should have during the Obama presidency. This would be a great stimulus to everyone to be more realistic in getting the Ryancare bill passed. I would think this would only propel the current Administration NOT to fund Obamacare,and especially with monies generated from the GSE.....which now will need to be accounted for.
Perhaps, but need also to consider the cost to the treasury if the GSEs need a draw in the future since they will soon have no capital. Also although 10 Billion sounds like a lot, this is only a drop in the overall yearly gov't budget of greater than 3 Trillion.(roughly less than 1%). Also with the circulating news suggesting the previous administration was potentially using the money illegally to help pay off health care companies supporting Obamacare,I would think if the Treasury takes the money, where it is used will be watched closely and potentially highly criticized . So the money could easily become a "hot potato".It may be more prudent , given the Infowars news, to just park the money in the GSEs,to protect against a future Treasury draw until they decide what to do with F&F, than to risk scrutiny on what the treasury would do with it if they kept the draw. We shall see soon! Remember that the amount of tis draw is at best only 1% of the overall budget. Personally, I think the safest plan would be to leave the money with the GSEs for now until a solution is finalized for the GSEs.
Thanks Navy, Just a learning question? If pps above upper Bollie band and RSI greater than 78 ,does that signal sell? What criteria did you use to sell Your Freddie shares at $4?
interesting post. The video clip with Buffett was very short and interestingly timed. What I drew from it was :
1. We need the 30 year mortgage and this needs to be gov't sponsored and regulated ( sounds like a GSE utility model proposal? ). This is favorable.
2. It was difficult in the previous GSE model to serve 2 masters ( Wall street and institutional stockholders and the gov't ( as defined in the past tense). And this is somewhat true, although ,in the past those two masters had similar goals and agendas.
3. The examiner (CNBC) ,then put Buffett on the spot , by asking a very leading and negative question,"but you don't think we need Fannie and Freddie to do it". At that point he was not sure what to say, or how it should be done and agreed with her that the GSE were not necessarily needed.
It did not sound as Buffett had any type of answer for a solution ,and he most definitely indicated the 30 year mortgage was and will be essential, especially for middle class homeowners. Also he is referencing past business models , both of gov't and Wall st in his comments.. The gov't now has changed . And has become a hybrid populist model ,with a third "master" arising....Main Street. Something that is quite new for the US. The GSE's are now also reformed and different from their Wall St. pro-activities in 2008. So really, the take from this ,The GSE's are a reformed structure in place that at best needs to be tweaked a bit, but definitely crazy to replace, when appropriate safeguards and regulations are in place ( read Rosner, Tim Howard, Mnuchins suggestions etc.) At this point the recap/release scenario, strongly favors a solution utilizing the GSE's . Which is a development that won't happen today or tomorrow but rather over the next weeks to months. The shareholders will be part of this.
...cont. ...... and hopefully along the lines as Ackman suggested at the SOHO conference (see his slide show). At least at this point ,they are looking at this , whereas Obama was ok with looking the other way, and collecting the dividends while kicking the can down the road.
lol.......but from a realistic standpoint....true!.. Judging from Navy's post ,the motion to dismiss may not even be heard and decided upon for another year! If not dismissed and plaintiffs are still around to play it out ,then who knows how long a trial will take. Reminds me of the plight of the raison farmers that was talked about a year or two ago and the length of time involved to reach a decision (12 I am thinking).....Your comments also, are essentially true for all the court cases currently going on (Perry en banc or Scotus (if they go forward), Delaware , Sweeney, ect.). There is no fast track through the courts unless there is a settlement ,which of coarse is another can of worms with the ball now in the Gov't court...... Really the shortest pathway for reform (85% done in some people's opinions),recap, re-enlist and release of the GSE's will be through a cooperative plan between Mnuchin , the WH team, Watt, and Congress (? bi partisan ). What this plan is or could look like is probably ,to some extent already known though discussions of Mnuchin with Watt, Hensarling,WH, etc. and will need to blend with the planned tax reform and even the budget and economical considerations of the budget deficit, Obamacare reform, border control ,military buildup,etc. However the quasi deadlines for this are somewhat defined with 2018 capital zero, the imaginary or not DTA issue and tax reform, the 2 year conclusion of Congress's add on to Obama budget. At this point ,though, that information is being held close and not available and all that we have to go on is that Mnuchin,Sessions, Mulvaney will do the right thing.
....only 81/2 months after discovery is complete, which could be whenever as there may be more depositions as a result of reviewing more hidden documents, before the motion to dismiss is considered.
Some additional comments and thoughts on Collins from ROLG:
"ruleoflawguy
FEBRUARY 23, 2017 AT 9:22 PM
one final point about collins’ unconstitutional delegation of executive authority argument. if the court were to agree on the merits, and if (a big if) the court believed that it could not remedy by making the fhfa director removable at will by potus because HERA does not contain a severability clause (which courts usually look to before they “cure” statutes), then the NWS and the warrants arguably could be voided.
so collins is your replacement for the dormant washington federal case.
rolg"
...... just asking, as I clearly don't have the background to know, do you still think this case/point of law , is still dead in the water , take care , L
Reckusdo.... I am far from having a legal background , but here are some additional thoughts from "the Rule of the Law Guy" and Tim Howard ,from his blog with regards to the Collins case:
ruleoflawguy
FEBRUARY 23, 2017 AT 8:43 PM
tim
i just wanted to make you aware (and your vast coterie of blog admirers) that there is an interesting case in federal district court, southern district of texas, brought by a plaintiff named collins.
collins is making all of the arguments made by perry, but also the additional argument that HERA is unconstitutional because by establishing the fhfa director as a single agency director not removable at will by potus, HERA made an unconstitutional delegation of executive authority.
the dc circuit court found this in the PHH case, for which en banc review by the entire dc circuit court has been granted. so the merits panel decision holding the cfpb director could not exercise his authority unless he could be removed at will by potus is vacated, pending decision by the full appeals court.
now, the dc circuit court did not void dodd frank as unconstitutional, but merely rewrote the statute to make it constiutional, in effect, by making the cfpb director removable at will by potus. the court believed it was authorized to do this because there is a severability clause in the statute.
however, there is no severability clause in HERA.
this argument is contained in IV of the memorandum of law for collins’ motion for summary judgment: https://www.dropbox.com/s/9819mib0tkjgnt9/collins%202%3A9%3A17%20motion%20for%20summary%20judgment.pdf?dl=0
now, this is a robin which does not make a spring, but this may divert one’s attention from the miasma that is the perry decision.
rolg
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jtimothyhoward
FEBRUARY 23, 2017 AT 9:05 PM
One of the commenters did mention the Collins case, but did not describe it or highlight its relevance as clearly as you have. I appreciate your doing that. And, yes, it is another burst of sunshine to help remove the gloom of Tuesday’s ruling.
For me, though, the main import of the DC Court of Appeals opinion wasn’t so much to change the odds of the eventual outcome (although it did that at least to some degree) as to push everything out further in time. Mnuchin reinforced this in his comments on Fox Business this morning. Following his appointment as Treasury Secretary-designate, and his comments about dealing with the Fannie and Freddie issue “reasonably fast,” I was hoping he might be able to pull off a quick strike that would set the companies’ opponents back on their heels. That’s now not going to happen. If we do get to the right outcome, which I still think we will, it will be through more of a “grind it out” slog, with a good deal of kicking and screaming along the way from those who don’t get what they want.
Yes, But bickering may now stops Sessions and Mnuchin take over as the defendants . This may speed things longhand the delays stopped.
Grok definition, to understand thoroughly and intuitively. A combination of DD and 6th sense. Nice post.
ditto. Appreciate your posts. Yours and Obit's keep this board on a honest track. Thank you
2008, but still a nice find Frank
Words from Tim Howard at Howard on Mortgage Finance
Mnuchin probably now realizes that when he made his pledge to “get [Fannie and Freddie] out of the government…reasonably fast” he grabbed a tiger by the tail. As I believe he knows, the right solution to the unsustainable status quo of a “non-conserving conservatorship” for the companies is to make a few simple reforms to them (along the lines I’ve suggested in “Fixing What Works” and elsewhere) and then to release and recapitalize them. But there is intense political opposition to that from the large banks and their allies in Congress. A decision by the DC Court of Appeals remanding the Perry Capital case to the lower court would have given him a compelling reason to negotiate a quick settlement of the suits that included a proposal for how to restructure and recapitalize them. Now he has neither the “forcing event” nor the consequent excuse for urgency.
Yet he has made a public commitment to tackling this problem, and he knows what the right thing to do is. I don’t think he’ll endorse something like Corker-Warner as a safe way out–as much as the banks might wish him to–because I think he knows it won’t work, and that he would be blamed for its failure. And he still has to deal with the plaintiffs in the lawsuits.
After having given a good deal of thought to yesterday’s appellate ruling, I’ve come to the reluctant (reluctant because it does not reflect well on our judicial system) conclusion that Judge Ginsburg switched sides on this issue for political rather than judicial reasons. I have three reasons for thinking that. The first is the weakness of the legal argument made by the majority (Millett and Ginsburg) compared with the argument made by Judge Brown. Second is the fact that, based on my reading of the April 2016 transcript, Ginsburg started on the right side of the argument but by yesterday ended up on the wrong side. The third reason–which I only learned of yesterday–is the connection Ginsburg apparently has with individuals and institutions that historically have passionately opposed Fannie and Freddie. (A tip-off to the access people with this point of view had to the judges was that even the one who ruled in favor of the companies, Janice Rogers Brown, cited the made-up AEI figures for Fannie and Freddie’s alleged holdings of subprime mortgages in her historical summary; she didn’t find that non-fact herself– it found her.) As other commenters on this site have said, yesterday’s majority decision read like it started with a conclusion, then used the best (although still not very good) legal arguments available to justify it.
With the DC District Court of Appeals ruling, the focus now shifts to Judge Sweeney’s Court of Federal Claims, where the same net worth sweep that Judges Millett and Ginsburg opined was legal under their interpretation of the law is being contested as a regulatory taking. Judge Sweeney already has concluded in this case that the facts matter, and the facts do not support the government. And we still have the case in Delaware, that maintains the net worth sweep is illegal under Delaware State law, as well as a likely appeal of the DC Court of Appeals decision to the Supreme Court.
So Mnuchin can’t ignore the lawsuits in whatever he decides to do on mortgage reform. I also don’t see why he would feel any need NOT to benefit existing shareholders with what he does. The reason the big banks haven’t succeeded with legislative mortgage reform in eight years is that they insist on staying as far away as possible from anything that looks like Fannie and Freddie. But Fannie and Freddie have, by far, most effective and efficient secondary market credit guaranty model. Mnuchin knows that, and if you’re going to do something LIKE Fannie and Freddie, it’s folly not to start with the two companies that already exist.
That’s the dilemma Mnuchin now finds himself dealing with. He knows where he wants to go, but he has powerful forces telling him he shouldn’t try to go there, and now he’s got the legal winds in his face rather than at his back. It will be very interesting to see how he responds to these circumstances.
https://howardonmortgagefinance.com/2017/01/30/a-one-year-retrospective/comment-page-2/#comment-2613
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thank you Obit, The review of the 26 proposals in 2013 was interesting. I may be wrong on this but as I remember there are 2 bills currently in the early stages which favor keeping the GSE's (as opposed to wind downed liquidate) and recommend a form of recap, and there are no current proposals or plans to wind down? If correct this is a definite change in the thinking of Congress from 2 years ago and coupled with the current administrative team, may certainly set the stage for recap. Any thoughts on this?
Then again the change, no doubt creates a positive element of uncertainty....enough so to go to the effort of changing it .
Good find and a very good point. I believe this to be a better reason than speculating otherwise on a NWS reversal. Although you would think likely that the GSE's talked to Mnuchin or the current administration through Watt before changing the text? ...Who knows!! I feel your explanation makes more sense as to why the change ..(:
Sogo....those are concerns of mine as well in this very complex situation . Your narrative does sincerely point out the political concerns of milking the cash cow for now and wait until the money runs out then decide what to do with them . Something Congress has been so far incapable of. Or to stop the sweep and let them build capital. Overall we are talking about 25-30 billion in revenue over the next year or 2 vs over 13 trillion dollar gov't debt. It would seem the revenues of the GSE's ,although substantial ,especially to us, are actually just a drop in the Gov't bucket given the big picture of Govt' spending. And on a simplistic basis, (i.e. ignoring that a Perry decision hopefully to come in the next few months and the information in hidden documents soon to be released), it would seem the best solution would be to get the companies recapitalized as soon as possible and not wait until they run dry of capital and place the economy at risk (either real or perceived). You are right in noting , that the next 4-5 weeks will be the litmus test for this as the Treasury has until the end of March to decide to milk the cow or begin the recap process. My guess is, likely we will hear from the Perry decision before this. If they affirm, likely in the long run won't change much but will drop the stock price until a government decision is made.If it is remand (most likely) then likely things won't change much . If it reverses , then Mnuchin and Trump have their work cut out for them and likely will not appeal. The stock should rise to 5-8 range.The trump card (excuse the pun) , is when the documents will be made public and what is in them, and how that information can be used by the current administration. Also keep in mind the interesting changes in the table (fannie) and wording (freddie) of their financial statements and the comments of Tim Howard in this regard. :)
well aware of the story and the real Tim Howard . Read his blog as well. For the record , i am not a big fan of the original TH717 site ,but this is NOT the original. Are you even aware of the origin of the name TH717 and what it stands for? It was not meant to be "Tim Howard"