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Yes, clean the swamp.
Spreadsheet released covering PACER results for all 94 Federal court districts, totaling 4,289 sealed indictments
Posted By: MrFusion
Date: Monday, 27-Nov-2017 01:05:32
Spreadsheet containing numbers for all districts:
https://drive.google.com/file/d/1xuzG10HeSIk7dY-kY4p9zD4oX-80oLcw/view?usp=sharing
Tweet announcing the findings:
SEALED INDICTMENTS OVER 4000 Pacer_2017.11.22 – Google Drive https://drive.google.com/drive/u/0/mobile/folders/1cC702ou3zm4VJICOI30EwaVCbbvYDQ5p?usp=sharing …— Tam @t193931 12:31 AM – Nov 27, 2017
Hatch retirement paves way for makeover atop banking panel,January 02 2018
WASHINGTON — The announcement Tuesday by Sen. Orrin Hatch that he will retire at the end of the year could have a ripple effect throughout the Senate, including the leadership of the Banking Committee.
It was not a surprise that Hatch, an 83-year-old Utah Republican who chairs the Senate Finance Committee, decided to leave after more than 40 years in the Senate. But his departure will leave an opening to oversee one of the Senate's most coveted panels.
Senate Banking Committee Chairman Mike Crapo, R-Idaho, is third in seniority among Republicans on the Finance Committee. He may want to trade up to what is viewed as a more prominent chairmanship, leaving an opening atop the banking panel. That could in turn affect the committee's agenda on everything from reforming the government-sponsored enterprises to regulatory reform.“Whenever a coveted position like chair of Senate Finance opens, there will be many contenders,” said James Ballentine, executive vice president of congressional relations and political affairs for the American Bankers Association. “Chairman Crapo, who has done a great job of leading the Senate Banking Committee, has enough seniority to be strongly considered to lead Finance.”
If Crapo gives up the Banking Committee gavel next year and the GOP holds the Senate in midterm elections, Sen. Pat Toomey, R-Pa., would stand in line potentially to become chairman of the banking panel. Sens. Richard Shelby, R-Ala., and Bob Corker, R-Tenn., have both served on the banking panel longer than Toomey, but Shelby — a past chairman — is termed out and Corker announced earlier this year that he also plans to step down from the Senate.
It is not completely clear what Toomey would prioritize. Like Crapo, the Pennsylvania senator supports regulatory relief. Recently, Toomey has helped lead the charge in classifying Obama-era regulatory initiatives as eligible for congressional rollback through the Congressional Review Act.
Toomey has supported rolling back parts of the Dodd-Frank Act in the past, including eliminating Title II, which established the “orderly liquidation authority” allowing regulators to unwind a failed megabank in a manner meant to avoid a systemic collapse. Toomey has introduced legislation that would replace the current resolution with a specialized bankruptcy process to handle the failure of a large bank.
But the biggest impact of a possible GOP changing of the guard on the Banking Committee would perhaps be on housing finance reform.
Crapo has been one of the most active lawmakers in trying to advance housing finance proposals, having led discussions in 2013 and 2014. Those efforts are expected to pick up in earnest in the first half of 2018.
If he intends to put his hat in the ring for chairmanship of the Finance Committee next year, that could further motivate him and other members to try to move quickly on reforming Fannie Mae and Freddie Mac. Other key GOP players in housing finance reform discussions include Corker and House Financial Services Committee Chairman Jeb Hensarling, R-Tex., who are both stepping down from Congress next year.
It will ultimately be up to Republican senators to decide who takes the gavel of the Finance Committee, and the question would be moot if Democrats seized control of the Senate in midterm elections and in turn assumed the committee chairmanships.
And if the GOP held control, Crapo could face competition to chair the Finance Committee, including from Sen. Chuck Grassley, R-Iowa. He is a past chairman and still has two years of eligibility under Republican term limits. However, Grassley also currently serves as chairman of the Senate Judiciary Committee, another highly regarded panel.
Howard Hughes Corp. (HHC) Says Pershing Square to Sell 2.5M Shares in Offering
The Howard Hughes Corporation (NYSE: HHC) announced that Pershing Square Holdings, Ltd. and Pershing Square, L.P., intend to offer for sale in an underwritten public secondary offering an aggregate of 2,500,000 shares of the Company’s common stock. The Selling Stockholders will receive all of the net proceeds from this offering. No shares are being sold by management or the Company.
JPMorgan, BofA Merrill Lynch and Jefferies are acting as underwriters for the offering.
https://www.streetinsider.com/...%28HHC%29...Pershing+Square...Sell.../13643988.ht Howard Hughes Corp. (HHC) Says Pershing Square to Sell 2.5M Shares in Offering.
HHC $132.84x2.5 M shares=$332.1 M
Fannie Mae: Why I Sold The Preferred And Own The Common
Dec.14.16 | About: Fannie Mae (FNMA)
Charlie Harrison
Charlie Harrison
Long only, value, special situations
(519 followers)
Summary
Fannie preferred and common shares have risen with the nomination of Steven Mnuchin as Secretary of the Treasury and his enunciation that the privatization of Fannie as a Trump administration.
Subsequent blogosphere discussion has centered on how that privatization would look and whether it’s better to own preferred or common shares.
This article will set out my sense of how the litigation settlement process could work and the justification for owning FNMA common over the preferred.
The Federal National Mortgage Company (OTCQB:FNMA) has been mired in conservatorship since 2008 and litigation since 2012, when the terms of a Senior Preferred Stock Purchase Agreement (SPSPA) between the U.S. Treasury and the Federal Housing Finance Agency (FHFA), Fannie's conservator, were changed under the now infamous Net Worth Sweep (NWS) with preferred and common shareholders filing suit.
The details of the conservatorship, litigation background and the SPSPA have been extensively covered in Seeking Alpha, including my own articles, the most relevant one to this article is the one on the SPSPA, amendments and resulting documents here. The articles and tweets in the blogosphere seem to focus on valuation issues such as historic and likely future guarantee fees, the need, amount and process for Fannie to rebuild reserves drained by Treasury, whether the warrants for 79.9% of Fannie's common will be exercised or voided and how quickly the Trump administration can or will to move to privatize Fannie. While many important points have been made, a critical component has been missed: Fannie is the subject of 20+ suits. While the Trump administration can certainly take unilateral action, it will not be able to claim a clean win until the Fannie suits are substantially resolved.
This article will focus on what I think is the most likely scenario for the litigation settlement path. By way of background, in a prior life I was general counsel for a small publicly traded master limited partnership which was the successor to a reorganized railroad. As such, I negotiated or managed, what was for that company's size, mission critical litigation settlements.
Looking at the landscape for the potential settlement of the Fannie suits, an immediate point leaps out: If the Trump administration settles the suits reasonably soon after inauguration, any payment or government embarrassment can be blamed on prior administrations. Conversely, Trump's administration will own any litigation it does not settle. So it makes no sense for Trump to not settle any litigation his counsel tells him will eventually be lost. Moreover, of the three priorities Mnuchin recently enunciated: tax reform, Dodd-Frank reform and privatizing Fannie, only privatizing Fannie can be done by the executive branch without involving Congress and the legislative process. Thus, settling the Fannie suits as part of privatization is a potentially quick low hanging fruit to claim an early relatively easy accomplishment. For that reason, I see the main settlements happening in 2017.
Before talking about settlement, let's review the relevant points of the litigation. Over twenty suits have been filed. Although there are some outliers, for our purposes, the litigation falls into two broad categories.
The first is the consolidation of litigation in the federal circuit for the District of Columbia. For convenience, let's call it the "Perry Litigation" after Perry Capital, a lead plaintiff. Those suits were dismissed in September 2015, then appealed to the federal appellate court. After oral argument in April 2016, and subsequent briefing, they await what most expect to be an imminent decision. I've written about why I think the dismissal should be reversed here. After listening to the oral arguments, I agree with the commentators who speculate a 2-1 decision in favor of the plaintiffs. The basic claims here are that both FHFA and Treasury acted outside their authority, that both FHFA and Treasury violated the Administrative Procedures Act (NYSE:APA) in failing to maintain the appropriate administrative record in entering into the NWS and various other state law claims.
The second line of consolidated cases is before the Federal Court of Claims. For shorthand, this is the "Fairholme Litigation" after Bruce Berkowitz's Fairholme Funds. These cases essentially assert that the NWS is a taking of property for which the shareholders are entitled to compensation under the Fifth Amendment. I've written here about the issue that the person entitled to the recovery is the owner of the stock at the time of the taking, not the purchasers after the fact. More interesting, for our purposes, is the discovery issue.
In response to Treasury's and FHFA's motion to dismiss, Judge Sweeney in the Federal Court of Claims permitted what was termed "jurisdictional discovery" into the background of the SPSPA and the NWS. While Treasury and FHFA turned over 48,000+ documents, they claimed various privileges against disclosure on another 11,000+ documents. Judge Sweeney emphatically recently ruled on a selection of 56 of those documents that none of the asserted privileges applied in a ruling which was a not-too-subtle slap to FHFA and Treasury, then emphasized her displeasure by ordering FHFA and Treasury to file a memorandum explaining why they should not be ordered to pay Fairholme's costs and attorney's fees. This is judge-speak for "your arguments are frivolous and wasted my time."
This brings up a critical point: Treasury and FHFA fought very hard and asserted what the judge feels are frivolous arguments to delay turning over these documents. What, then, is in those documents that the Department of Justice was willing to alienate the judge using argument it knew would fail?
Let's back up a step to consider this. In litigation, it is not what you know, but what you can prove. A number of commentators have asserted that FHFA took over Fannie as a conservator not because Fannie was insolvent, but because FHFA and Treasury wanted to use Fannie as a backdoor bailout of the too-big-to-fail banks (TBTF) by requiring Fannie to purchase $50B per month of TBTF mortgage backed securities (MBS) at par, then marked them to market once on Fannie's books. This created book loses which required draws from Treasury which had to be repaid at 10% interest at a time of historic lower interest rates and when the government was bailing out Goldman, Morgan and Citigroup at interest rates not more than 2.2%. Also, the government never required warrants of Goldman, Morgan and Citigroup in exchange for their bailouts. The excellent Forensic Look at the Fannie Mae Bail Out explains in detail that Fannie never needed the Treasury bail out.
If this is true, why does no suit argue that the SPSPA was a fraud and the senior preferred stock and warrants should be voided and the entire indebtedness forgiven without applying the 10% NWS dividends? Every suit which is not alleging a taking, only asks that the NWS be voided and the payments to Treasury be considered a repayment of the Treasury draws. Several complaints, such as Washington Federal and Collins discuss the events surrounding the SPSPA as outlined above, but neither ask that the SPSPA be voided. Why not allege the SPSPA was a fraud? Answer: proof. Asking the NWS be voided only requires that the SPSPA documents be admitted, then argue that as a matter of law, the NWS should be void under the various legal theories in the complaints. Proving the SPSPA was a fraud to bail out the TBTF at the cost of Fannie's shareholders is simply too difficult to prove. Good luck getting directors to admit they violated their duty of loyalty, senior executives to commit professional suicide by challenging Treasury and FHFA and senior government officials to put their pensions at risk by admitting they helped perpetrate a fraud on public shareholders. In the absence of proof of the SPSPA fraud, a much better legal strategy is to make the easy and low-hanging-fruit NWS claim.
Here we move into speculation. Informed, I hope, but speculation none the less: FHFA, Treasury and the Department of Justice would not have asserted frivolous legal arguments unless the allegedly privileged documents were much more damaging than the documents plaintiffs already had. Plaintiffs can already show that Treasury was directing FHFA, that Treasury knew Fannie would be returning to book profitability shortly before entering into the NWS and that FHFA at least violated the APA. The only thing of the kind of magnitude to justify this degree of effort is that the withheld documents reflect the SPSPA as fraud on Fannie shareholders to bailout the TBTF banks.
With this landscape in mind, let's return to the settlement negotiation table.
Some would argue that Trump need not negotiate; he can take unilateral actions which would eviscerate the suits. True, but the appearances for a man with a reputation for toughness to maintain are unappealing: Trump can order Justice to no longer defend the suits and withdraw any active pleadings contesting the complaints, but this leaves the suits still winding through the courts resulting in default judgments. Default judgments, however, imply negligence or incompetence. Trump could also order Treasury to credit all NWS dividends to the draws and to forego all future dividends. This would have the effect of rendering the litigation moot, but without global settlements, has the appearance of giving something for nothing. Unilateral action without a settlement is unappealing.
Back again to the negotiating table. Consider first how this plays out on the Trump side. Trump will be told about the privilege issue documents, that this has only been a delaying action, what those documents contain and that the government will eventually lose and have to disclose. Let's again assume they contain very damaging evidence of the SPSPA as a fraud on the Fannie shareholders. If Trump settles now a suit his counsel tell him the Government will eventually lose, he can blame the prior administrations and claim to support the rule of law and the capital markets. Recall too that John Paulson, whose fund holds Fannie common is a part of Trump's transition team; that Bill Ackman of Pershing Square Capital already claims to have had his first meeting with Trump, presumably on this issue. That Carl Icahn and Bruce Berkowitz also hold shares. Trump has a "yuge" opportunity to do the right thing by shareholders, make friends with people well able to financially support his second run for president and pick up an easy quick win, all at the cost of casting dirt on prior administrations which have not treated him graciously. What's not to like?
There is the optics argument that the press will scream about a give away to greedy hedge fund speculators and Trump's billionaire buddies. But Trump has shown nothing but contempt for the press and can personalize the settlement with photo ops with the small shareholders and union pension funds which were raped by the SPSPA and handsomely compensated by his settlement. I don't think the optics issue will dissuade Trump.
There is also the public deficit argument that any payment to the plaintiffs comes out of the federal budget which will only increase the deficit under Trump's administration. As a matter of fiscal and monetary policy, I refer the reader to the excellent work of Cullen Roche on Modern Monetary Theory and not discuss the federal deficit argument further except to say that in light of the Obama record on deficits, I don't think deficits will trouble Trump.
Now let's look at settlement from the Perry plaintiff's perspective. By the time the Trump administration can prepare for a negotiation, the DC appellate court will have rendered its opinion for the plaintiffs and Justice will have appealed to the US Supreme Court. Bear in mind the Supreme Court only hears approximately 4% of the cases presented to it. Thus, the plaintiffs have a stronger hand on the NWS being voided and dividends being counted as repayment of the draw amounts.
But as plaintiff, you never settle until you get all the discovery documents. Here, plaintiffs will argue they are entitled to the withheld documents, that the court process will give it to them and that if the Trump administration will not furnish them it can only be because it damages the government case much more than the documents already disclosed. The plaintiffs will understand that while time hurts their IRRs, time also hurts Trump: if he defends even only part of the litigation in court, he owns the adverse result. Not appealing for Trump given his advantages in an early settlement.
Trump, however, has a reputation as a frequent litigator who is no doubt familiar with the settlement process and advised by the best lawyers the government can buy. He can be expected to take an initial tough position. His opening position would most likely be to tell the plaintiffs to accept the NWS voiding settlement, book your "yuge" gains and release the government from all other claims arising out of the conservatorship.
Turn now to the plaintiffs. Thought experiment: Are Bruce Berkowitz, Carl Icahn, Bill Ackman and John Paulson merely motivated by money or are they driven by it. Here's why it's important.
The plaintiffs will see that the NWS voiding as a won game. By settling now, they can book those gains. Trump can be expected to press for a release for all claims arising out of the conservatorship as part of the settlement. So if the plaintiffs settle now, they most likely have to give up any SPSPA fraud claims. Behavioral Finance and Prospect Theory (plus the experience of any investor looking at a handsome gain in a position) tells us that we become risk adverse when protecting a gain. If the plaintiffs focus only the NWS voiding gain, they will settle.
But while I have no personal experience with any of the plaintiff - investors, my experience with investment bankers and private equity players on a much smaller scale is that is that they are, deeply, deeply driven by money, not as money, but as the ultimate score keeper. This has to apply much more to men on the top of the industry. If so, they will not focus the NWS voiding gains, but on the gains from proving the SPSPA fraud.
So what would the upside be from proving the SPSPA fraud? Go back to the Forensic Look at the Fannie Mae Bail Out. Its authors assert that Fannie never needed a penny of bail out money. Also look at Tim Howard, the former Fannie CFO, post on December 9, 2016. He asserts that in 2008, Fannie had a $3.1T book with only a $47B reserve. Today, Fannie's book is still approximately $3.1T, but the credit quality is better. If Fannie never needed the bail out in 2008, and today it has a better book, then a $47B reserve is still appropriate. If the entire SPSPA is a fraud to bail out the TBTF banks and Fannie never needed any bail out money, then the entire SPSPA is unwound. Fannie's 2Q 2016 press release reflects total draws of $117.1B and dividends of $151.4B. If I'm representing the plaintiffs I'm arguing the draws are not only forgiven but paid to Fannie as damages, the dividends returned, plus the senior preferred stock and warrants are voided. Total the numbers, divide by 1.2B shares and like a private equity guy think "special dividend" to the common after paying a roughly 5-6% dividend to the $20B in non-cumulative preferred and setting aside $47B in reserves. The numbers are eye popping. Recall, too, this is in addition to Fannie's valuation as an operating entity.
My money, is that the plaintiffs who own the commons will focus on the once-in-a-century upside of proving the SPSPA fraud. If the plaintiffs anchor on the SPSPA fraud potential gains at the negotiating table, they will perceive not achieving those gains as a loss. Recall that Behavioral Finance and Prospect Theory also tell us that we become risk seeking to avoid a loss. If so, they will confront Trump and demand the withheld documents as a pre-condition to settlement.
So, in the great game at the negotiating table, the worse reasonable case for the plaintiffs is that Trump is willing to concede the NWS voiding but not the SPSPA fraud. The plaintiffs in turn argue for full disclosure of the withheld documents and in their absence assert the documents must bear on the SPSPA fraud and demand settlement assuming that fraud. Who wins?
My money, again, is on the investors getting the better position. Trump is not playing with his own money, can disclose the horrible things the prior administrations have done and claim to be draining the swamp and upholding the rule of law by settling. He also reaps the intangible benefits of billionaire friends for the future. Recall, too, that time works against Trump in that his Justice Department must continue to submit pleadings defending these actions. At some point, certainly before a year after the inauguration, he owns the litigation. If I'm counsel for the plaintiff, I advise them that the adverse affect of time on their IRRs is much more than offset by the potential increase over the NWS voiding value.
Go back to the eye popping SPSPA fraud upside number. Remember that this is a litigation settlement. In settlement, plaintiffs trade potential upside value for an immediate certain result, avoiding the uncertainty of litigation. The plaintiffs can only expect a percentage of that number, but a potentially very healthy percentage assuming the Perry appeal ruling favors the plaintiffs and depending on the extent the undisclosed documents support the SPSPA fraud argument. Another obvious split-the-baby-in-half point would be for the government to only forgive, instead of refund, the draws and repay the dividends, plus void the senior preferred and warrants. While a little less eye popping, the resulting number is still well worth negotiating for.
Releasing Fannie from conservatorship requires more than just settling the lawsuits, but those matters are almost administrative, with the exception of setting the guarantee fee. More important for immediate valuation is the litigation settlement paradigm.
Disclosure: When I first invested in Fannie before the Lambert dismissal, I was 100% in the preferred (FNMFM) with the usual distressed investing thought that the preferred are always safer than the common. At that time they were priced in the $18 range with a $50 liquidation value. After further thought, I sold them all and bought 100% Fannie common because the preferred had only a 50/18 = 2.78 upside multiple while the common seemed to have a much higher upside. While I didn't calculate a hard value for the common, I could not envision a scenario in which the common did not have much more than a 278% upside.
Given Tim Howard's post on Fannie's historic $47B capital reserve and the fact that Fannie was cash flow positive during the entire crisis, I don't see any realistic re-capitalization which dilutes the common. Consider, too, the double positive whammy of returning FNMA to exchange trading, when index funds will need to purchase FNMA to maintain their index and the potential effect of tax cuts. In light of the potential SPSPA fraud settlement, I'll take a one-time hit to the valuation of the deferred tax asset as a price for long term increased operating profits.
I remain 100% Fannie common.
That said, as investors, we often look for the evidence which confirms our opinions and positions. I'm a retail investor with no interest in creating a social media presence or selling an investment newsletter. I write Seeking Alpha articles looking for the well reasoned disconfirming evidence. Thoughtful disconfirming perspectives are always appreciated.
Fannie Mae: Why I Sold The Preferred And Own The Common ...
https://seekingalpha.com › Investing Ideas › Long Ideas › Financial
Dec 14, 2016 - Recall too that John Paulson, whose fund holds Fannie common is a part of Trump's transition team; that Bill Ackman of Pershing Square Capital already claims to have had his first meeting with Trump, presumably on this issue. That Carl Icahn and Bruce Berkowitz also hold shares. Trump has a "yuge" ...
How big of a company is Fannie Mae? - YouTube
Video for youtube What is the market value of Fannie Mae? Economy Trivia Published on Dec 16, 2017? 5:08
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EXCLUSIVE: @SenBobCorker makes up to $7 million a year from his real estate holdings — and he suddenly switched his vote to “yes” on the tax bill when GOP lawmakers added a provision giving him a special tax cut on that income
http://www.gselinks.com/
http://www.gselinks.com/
Preserving the GSEs is key to preserving affordability - American Banker
http://www.gselinks.2017 FSOC Annual Report - treasury.gov
GSEs are discussed on pages 15 and 40 of the report.
Chart 4.5.7, on page 39, shows agency and non-agency RMBS Issuance.
In the definitions section on page 148, Treasury recognizes the GSEs are privately owned entities.
to tell, to replace: not too tell,not too replace. An infinitive is a verbal consisting of the word to plus a verb. Sorry to remind you.
You're a good writer.
John Paulson holds Fannie common. Dec 14, 2016 - Recall too that John Paulson, whose fund holds Fannie common is a part of Trump's transition team; that Bill Ackman of Pershing Square Capital already claims to have had his first meeting with Trump, presumably on this issue. That Carl Icahn also hold shares. Trump has a "yuge" ...
https://seekingalpha.com ›
cnbc.com/ twitter.com/cnbcnow/status/..
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JUST IN: Trump designates OMB director Mulvaney as acting director of the Consumer Financial Protection Bureau after director Richard Cordray resigned earlier today. http://cnbc.com
https://www.heartland.org/.../john-berlau-competitive-enterprise-institute-risking-taxp...
COMPETITIVE ENTERPRISE INSTITUTE: RISKING TAXPAYERS’ MONEY AT FREDDIE MAC
NOVEMBER 23, 2017
By Jesse Hathaway, John Berlau
Competitive Enterprise Institute senior fellow John Berlau talks about a new report explaining how Fannie Mae and Freddie Mac, home mortgage backers underwritten by the federal government and taxpayers, could suck up $100 billion of taxpayers’ money, in the event of an economic recession.
According to the government’s own data, Berlau says, Fannie Mae and Freddie Mac would need up to $100 billion in new bailout money from taxpayers, if interest rates changed or economic volatility hit the country’s markets.
Additionally, Berlau says the Obama administration imposed a permanent, unfair policy in which the federal government seizes all profits from Fannie and Freddie, hurting both taxpayers and the companies’ private shareholders.
Many average Americans own stock in Fannie and Freddie through pension funds and individual brokerage accounts, according to Berlau. The government's current profit-seizing policy hurts American investors, and sets a dangerous precedent of seizing private property for public use without compensation.
Congress needs to take steps to return the housing market to private lenders and borrowers, Berlau says, and should also set up a commission to make sure Fannie and Freddie shareholders are compensated.
Bill Ackman’s 3Q17 Letter: ADP, Chipotle, Fannie and Freddie, Herbalife Short, Mondelez
Posted on November 23, 2017 by InvestorAlmanac in Smart Money
Fannie Mae (FNMA) / Freddie Mac (FMCC)
Have been a number of favorable developments in the political and regulatory landscape regarding the GSEs and housing finance reform
RNC resolution made public on 9/13/17 that seeks to protect taxpayers by restoring safety and soundness to the GSEs, calls for Fannie and Freddie to be “permitted to rebuild equity capital,” and recognizes that Treasury can generate an estimated $100bn in additional cash profits by monetizing its warrants for 79.9% of each company’s common stock
A 9/13/17 letter from 6 Democratic Senators to the Treasury Secretary and FHFA Director requesting that the GSEs be permitted to build capital to prevent a future draw on Treasury’s line of credit
Testimony from FHFA Director to the House Financial Services Committee on 10/3/17 in which Director Watt outlined the extensive reforms that have taken place at the GSEs during their 9+ year conservatorship, stated that required minimum capital levels for Fannie and Freddie should be in the range of 2-3% and hinted at some form of initial capital retention in the coming months
Comments from Steve Mnuchin in mid-October that housing finance reform would be the next priority after tax reform, and that Fannie and Freddie would not be in conservatorship by the end of his initial 4-year term
Senator Corker, who has been one of the leading voices in Congress on housing finance reform for the last several years, will not seek re-election in 2018 and we believe that he would like to see this issue resolved before his retirement
He suggested that he will soon put forth new bipartisan legislation regarding housing finance reform, for which they should have the support of Secretary Mnuchin after the tax reform initiative concludes
In the meantime, intrinsic earnings power of both entities continues to increase, driven by growth and improved credit quality in their core single-family guarantee businesses
Current share prices do not reflect the significant momentum that continues to build for a bipartisan resolution of their status that would be highly profitable for the government and other shareholders, protect the taxpayer against future bailouts, and ensure that the dream of home ownership remains widely achievable for generations to come
ACKMAN’S POSITIVE LOOK OVER FANNIE MAE NOVEMBER 18, 2017 NY TIMES BESTSELLING AUTHOR LAWRENCE MCDONALD
In cooperation with ACG Analytics in Washington, we advise institutional investors globally on the GSEs (Government Sponsored Entities) with a focus on Fannie Mae $FNMA.
In recent weeks, the Senate Banking Committee has been working on a regulatory relief bill, while Chairman Mike Crapo is optimistic that a deal on housing finance reform could be next on the agenda (2018). African Americans make up 13% of U.S. Population, but received around 3% of 2014-15 conforming loans (HUD data) – the system is broken and fueling inequality.
Down from the Pre-Financial Crisis Highs
AIG $AIG -96.4%
Fannie $FNMA -96.3%*
Royal Bank Scotland $RBS -95.2%
Citi $C -87.2%
Deutsche Bank $DB -84.6%
Bank of Amer $BAC -51.6%
Morgan Stanley $MS -47.1%
*Over the years we’ve witnessed extreme risk and volatility in these Fannie Mae $FNMA shares – 2017 was no exception. Bloomberg data above.
Below is a recap of Pershing Square’s view of the current investment landscape (risks and opportunities) facing the GSEs.
These “positive developments” are listed in Bill Ackman’s Q3 Letter to investors:
(1) a Republican National Committee resolution made public on September 13, 2017, that seeks to protect taxpayers by restoring safety and soundness to the GSEs, calls for Fannie and Freddie to be “permitted to rebuild equity capital,” and recognizes that Treasury can generate “an estimated $100 billion in additional cash profits by monetizing its warrants for 79.9% of each company’s common stock;”
(2) a September 13, 2017, letter from six Democratic Senators to the Treasury Secretary and FHFA Director “requesting that the GSEs be permitted to build capital” to prevent a future draw on Treasury’s line of credit;
(3) testimony from FHFA Director Mel Watt to the House Financial Services Committee on October 3, 2017, in which Director Watt outlined the extensive reforms that have taken place at the GSEs during their nine-plus year conservatorship, stated that required minimum capital levels for Fannie and Freddie should be “in the range of 2 to 3 percent,” and hinted at some form of initial capital retention in the coming months; and
(4) comments from Treasury Secretary Steve Mnuchin in mid-October that housing finance reform would be the next priority after tax reform, and that Fannie and Freddie would not be in conservatorship by the end of his initial four-year term. All of the above are broadly consistent with the key principles which we have been advocating since the inception of our investment in late 2013.
Senator Corker announced in late September that he will not seek re-election in 2018, and will leave the Senate upon expiry of his current term at the end of next year. Senator Corker has been one of the leading voices in Congress on housing finance reform for the last several years, and we believe that he would like to see this issue resolved before his retirement. He and his colleague Senator Warner have suggested that they will soon put forth new bipartisan legislation regarding housing finance reform, for which they should have the support of Secretary Mnuchin after the tax reform initiative concludes. In the meantime, the intrinsic earnings power of both entities continues to increase, driven by growth and improved credit quality in their core single-family guarantee businesses.
Fannie Mae $FNMA Equity, 38% Off this Year’s High
Bill Ackman’s Pershing Square Capital Management owns 44.7 million shares of FNMA, per the Bloomberg terminal. The LIFO cost basis is listed at $3.37 acquired over the last two years. This week, shares closed below their 200-day moving average. In the past five years, Fannie Mae crossed below this level 26 times and fell an average 1.7 percent in the next five days. It declined 17 times for an average loss of 3.9 percent, and advanced eight times for an average gain of 2.9 percent.
Nearly ten years after the financial crisis, Fannie and Freddie are still in “conservatorship.” This is the question that has many investors globally scratching their heads. Fannie and Freddie are still sweeping $25B a year to the U.S. Treasury, nearly $300B total (since heading the financial crisis). Few Americans realize, how to spend funds is at the President’s complete discretion. Boy did the Obama administration love this gravy train.
“Fannie Freddie will NOT be left in conservatorship”
US Treasury Secretary Steven Mnuchin, Bloomberg
Dodd-Frank has banks retaining capital at 20-year highs while Fannie and Freddie are retaining zero capital on $5T loan portfolio? The risks to the U.S. taxpayers here is COLOSSAL. There’s NO capital retention.
GSEs: “Fannie-Freddie Might Need $100B in the next Crisis”, FHFA Says
Policymakers also face a deadline of sorts. Fannie and Freddie are set to run out of capital early next year and would have to draw on Treasury if they suffered quarterly losses, a move that could spook the mortgage market. Lawmakers are hoping to cut a deal before that happens.
Thanks!
www.gselinks for utube Financial Reg.: The Apotheosis of the Admin. State? - YouTube
Prof. Richard Epstein discusses the GSE takings case
Housing finance reform next on to-do list for Trump and Congress
Ian MckenASHINGTON — The White House and congressional GOP leaders are eyeing a tight window between tax reform passage and the 2018 midterms to pass housing finance reform.
And with key policymakers readying their exit, the effort could be the most concerted push yet.
Whether a deal on the government-sponsored enterprises can be reached — a prospect that, unlike tax reform, requires Democratic help — is unclear. There have been several efforts in the more than nine years since Fannie and Freddie were taken into conservatorship, and the last serious one collapsed in 2014.
From left: Sens. Mike Crapo, Jeb Hensarling and Bob Corker.
Senate Banking Committee Chairman Mike Crapo (left) is hopeful he can pass a housing finance reform before House Financial Services Committee Chairman Jeb Hensarling (center) and Sen. Bob Corker, R-Tenn., retire next year.
Bloomberg News
But some industry observers are more optimistic that a deal can be made next year. They point to a number of factors, including that several prominent players are soon moving on — and may want a deal before they go. That includes House Financial Services Committee Chairman Jeb Hensarling, R-Tex., and Sen. Bob Corker, R-Tenn., both of whom retire at the end of next year.
“It does line up a lot of important folks who may well want to finish strong on something they care a good bit about,” said Jim Parrott, owner of Falling Creek Advisors and a former housing adviser to President Barack Obama. “Add to that the increasing realization among progressives that the status quo is going to give way dramatically in 2019 with the departure of [Federal Housing Finance Agency Director] Mel Watt, and you would appear to have the stars aligning for the strongest run at reform we’ve seen to date.”
Policymakers also face a deadline of sorts. Fannie and Freddie are set to run out of capital next year and would have to draw on Treasury if they suffered quarterly losses, a move that could spook the mortgage market. Lawmakers are hoping to cut a deal before that happens.
Though the Senate Banking Committee right now is trying to push through a regulatory relief bill, Chairman Mike Crapo is optimistic that a deal on housing finance reform could be in the offing.
“My hope is that we will have the legislative language long before the end of the year,” Crapo said in an interview last week.
He said the tax reform push is not slowing down a deal as he negotiates with Sen. Sherrod Brown, D-Ohio, on the issue. But finding time to debate it in the full chamber could be difficult.
“At the committee level, we don’t have to delay working on any of the banking issues while we do tax reform, but in terms of floor time it is going to be difficult between now and the end of the year,” Crapo added.
Crapo successfully cut a deal with nine Democrats and nine Republicans on the regulatory relief legislation, which was unveiled earlier this week — and that agreement could provide a road map for housing finance reform.
Several senators involved in the reg relief deal were key players in the last attempt at reforming the GSEs, including Sen. Mark Warner, D-Va.
“There remain several members and staff in both chambers and both parties who are committed to housing finance reform, so we expect that such reform will remain a priority for both Congress and the administration,” said Eric Kaplan, director of the housing finance program at the Milken Institute.
While Crapo hopes to have a deal this year, the administration has said the issue can’t be realistically tackled until next year, when it hopes to have tax reform finished.
“Given where we are on taxes, I think realistically this is now a 2018 issue,” Treasury Secretary Steven Mnuchin said earlier this year. He added, however, that reforming Fannie and Freddie “is something that since the day I got in office I said I was determined to do.”
The hope for some stakeholders is that housing finance reform debate could be less politically charged than other policy issues such as health care and taxes, but the upcoming mid-term elections could present an unofficial deadline.
“You likely have an abbreviated legislative window next year,” said Michael Calhoun, president of the Center for Responsible Lending. “There is a narrow window for legislative action next year given the abbreviated session and just given the complexity and number of stakeholders” involved.
One of the hangups in 2014 was that many Democrats weren’t satisfied with the affordable housing component of the Johnson-Crapo plan, which passed out of committee but languished as then-Senate Majority Leader Harry Reid, D-Nev., never brought the bill up for a vote.
This time around, discussions are unfolding differently, which could be crucial to bringing along needed Democrats, Calhoun said.
“What you are seeing now is the discussions are starting with ‘Well, let’s make sure that the structure of this plan furthers sustainable and affordable access and that needs to be a key component and not an add-on feature,’ ” Calhoun said.
It seems likely that Crapo will pursue a revamped version of the last plan, which would have eliminated Fannie and Freddie and replaced them with private entities backed by a government guarantee against catastrophic loss. That idea was pushed in 2013 by Corker and Warner, both of whom are still on the committee.
And the Trump administration, at least so far, has sounded philosophically aligned with such an approach. Craig Phillips, a top adviser to Mnuchin, told credit union executives in September that “we think the right approach is to consider an explicit, paid-for, full-faith and -credit guarantee for federally sponsored mortgage-backed securities with added protections on the front of that guarantee to make it really usable when you are in very exigent circumstances.”
Phillips called the 30-year fixed-rate mortgage “very important.”
Less clear is how Hensarling fits in. He has pushed a free-market approach with far less government support. The plan put forward by the Texas Republican in 2013 would have reduced the Federal Housing Administration’s share of the housing market and dissolved Fannie and Freddie, with private lenders filling the void. There was no explicit government guarantee beyond that of FHA.With Hensarling’s exit approaching, some said he might be open to compromise.
Yet others aren’t convinced. Glen Corso, president and chief executive of the Community Mortgage Lenders of America, said it’s all speculative until there is some kind of deal on paper.
“We have yet to see that the House and Senate are on the same page with respect to a list of issues with respect to GSE reform. Unless there is that sort of broad agreement, it’s hard to see [housing finance] reform getting done,” Corso said.
Ian McKendry
Ian McKendry is the Congress reporter for American Banker.
Housing finance reform next on to-do list for Trump and Congress
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November 17, 2017 .. Financial Services & E-Commerce: Financial Reg.: The Apotheosis of the Admin. State? ... Richard Epstein.
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Court Filings at left hand side
Fairholme v. U.S.
11/15/2017 - Letter from the Solicitor General
11/09/2017 - Order
GSE reform in 2018? Mortgage finance positions of power in Washington up for grabs - HousingWire Nov.15, 2017
"Treasury’s Chris Campbell at a conference said UST plans to work with Congress..." via @joelight - Twitter. Nov. 15, 2017
Treasury’s Chris Campbell at a conference said UST plans to work with Congress on housing finance legislation, that they want to keep 30 yr mortgage and that Congress should consider explicit, paid for, GSE MBS guarantee (among other things)
Ackman Q3 Letter: Corker Resignation Is Bullish For Fannie - Valuewalk. By Jacob Wolinsky on November 15, 2017 5:35 pm in Value Investing
Watch live as Treasury Secretary Steven Mnuchin takes questions at #WSJCEOCouncil http://on.wsj.com/2hAFVDf
Mnuchin: "We do want to preserve the 30-year mortgage.. and we don't want to put taxpayers at risk."
The Wall street Journal , Nov. 13, 2017
@Fanniegate101
1 hour ago
"Conservative economists have said the GSEs are fundamentally market distorters and they should be done away with. Would you go that far?" Mnuchin: NO. I wouldn't. #FannieGate $FNMA #WSJCEOCouncil
Mnuchin: "We do want to preserve the 30-year mortgage.. and we don't want to put taxpayers at risk
Sustainable Housing Finance
Mark Calabria: Trump administration "committed" to ending ...
https://www.housingwire.com/articles/41714-mark-calabria-trump-administration-co...
2 hours ago - Under the terms of the government's conservatorship agreements with the GSEs, both ... To that end, Calabria said the Trump administration is committed to not handing ... such as homelessness and domestic violence and began at HousingWire as an Editorial Assistant. Recent Articles by Kelsey Ramírez ..
Pence’s chief economist renews commitment for GSE reform
Mark Calabria: Trump administration "committed" to ending conservatorship
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Yes. common shares.
Google Fnma CNN Institutional Investors
FNMA - Federal National Mortgage Association ... - CNN Money
money.cnn.com/quote/shareholders/shareholders.html?symb=FNMA...institutional
Federal National Mortgage Association (OTCQB:FNMA) There is significant interest inFNMA by institutional investors. The 10.13% of outstanding shares they control represents a greater percentage of ownership than at any other company in the Finance/Rental/Leasing industry.
Ackman still holds 10%,P S Capital Management 9.98%.
Owners of Federal National Mortgage Association
Pershing Square Capital Managemen... 9.98% 115,569,796 shares
Mutual Funds Holding Federal National Mortgage Association
Pershing Square Holdings Ltd. 3.86% 44,741,273 shares
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markets.money.cnn.com/research/quote/shareholders.asp?symb=FNM...institutional
There is significant interest inFNMA by institutional investors. The 10.13% of outstanding ... Top 10 Mutual Funds Holding Federal National Mortgage Association ...
Ackman added Mutual funds : pershing Square Holdings ltd 3.86%.
Owners of Federal National Mortgage Association
Pershing Square Capital Managemen... 9.98% 115,569,796 shares
Mutual Funds Holding Federal National Mortgage Association
Pershing Square Holdings Ltd. 3.86% 44,741,273 shares
CNN Institutional Investors
Ackman added Mutual funds : pershing Square Holdings ltd 3.86%.
Owners of Federal National Mortgage Association
Pershing Square Capital Managemen... 9.98% 115,569,796 shares
Mutual Funds Holding Federal National Mortgage Association
Pershing Square Holdings Ltd. 3.86% 44,741,273 shares
CNN Institutional Investors
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Case 1:13-cv-00465-MMS Document 391 Filed 10/17/17
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., et al.,
Plaintiffs, No. 13-465 C Judge Sweeney
v.
THE UNITED STATES,
Defendant.
JOINT STATUS REPORT
As directed by this Court’s order of October 4, 2017, the Parties hereby jointly state that
they do not believe that any redactions to the Court’s sealed opinion and order of that date are
necessary. Accordingly, the Parties agree that the October 4, 2017 opinion and order should appear
on the public docket in full.
Date: October 17, 2017
New filing in the Fairholme case.
Peter Chapman writes, "Our government and Fairholme advised Judge Sweeney today that her opinion granting Fairholme's second motion to compel requires no redactions."