Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hi Donot - Freddie Mac was established in 1970 - who was President in 1970? What party did he belong to?
My thoughts are that if the COFC suits before Sweeney survive, they would be best served by a Judge that understands that the foundation for the Unjust Enrichment started with the GWB Administration. The Mike Kelly facts and equitable considerations are extraordinarily compelling. He really got screwed for doing the right thing. Sweeney should have let the Direct Claims survive and it would have been harder for the DC Circuit to overrule her - she is on her way out - Judge Davis has a whole legal career before her and perhaps has larger aspirations.
Again - we will see and it all of this is a long shot.
Yes - really long odds but that does not negate the fact that the public shareholders were stuffed with billions of JPS while the GWB Administration pursued a Nationalization Strategy as the Kelly Suit alleges. Just doesnt seem right that the UST stood by while the public was used to raise equity while there was a stealth Nationalization strategy being executed by the GWB Admin as Kelly alleges.
The UST obviously is being unjustly enriched. Long shot but it is possible that Wazee and the outstanding COFC claims before Sweeny could be assigned to Judge Davis who is a DJT appointee. Also - it does not seem like the 5th Circuit operates in a vacuum - they seem to understand the overall equities of the situation.
We will see - only time will tell.
Right now we have
Wazee for Unjust Enrichment
Kelly is challenging the Conservatorship itself. I think Bryndon Fisher is also?
If an Admin Action is attempted - a new suit could be brought alleging that the FHFA is acting beyond congressional authority under HERA under the MQD which is being considered by SCOTUS.
Ackman and others could sue for Unjust Enrichment in the future if the UST tries to monetize its stake and potentially on MQD issues depending on how SCOTUS rules on the Student Loan cases.
Not sure if common shareholders could sue on minority right protections under Delaware and Virgina law after exit from Conservatorship.
Good Points Familymang - Obviously the plaintiffs would agree to whatever the 5th, 6th or 8th Circuits ruled. My guess is that the 5th would not award a judgement that just favored the JPS - I think I remember Judge Jones questioning Thompson on the scope of the relief sought on the Remand oral hearing before it was sent down to Judge Ellison.
Hopefully we will know soon if the DOJ does not move to stay the Collins appeal before the 5th.
The question is whether common shareholders would have the incentive to start future litigation if the UST ever tries to monetize its stake and right now it looks like the UST believe its stake is worth $ 224 bn and common equities stake is worth $ 1 bn - isnt that correct?
It would seem that this just reinforces the reason that Mike Kelly deserves a day in Court - he does everything the USG asked him to do and he looses $ 1bn in his JPS investments
and all his banks while the UST is set to make another $ 224 bn after being overpaid on the funds advanced with 10 % interest. This is after the GWB sets out a Nationalization strategy in March of 2008 and stuffs the 2008 JPS investors with billions of dollars of newly issued securities after they leaked the Nationalization memo to Barron's without any public disclosure.
Thanks Familymang
You are right - I should have pointed out that Footnote No. 7 valued the UST warrants were valued at $ 4 bn and that the SPS was valued at $ 220 bn. This would imply that the Common equity is valued at $ 1 bn assuming the SPS stays in place. Your cite relates to the 2023 Budget but I think it is the same except that the warrants were valued a little higher?
There was no consideration given for the SPS with the possible exception of the original $ 1 bn each to my knowledge? Is that right ? It was just a contract between the GSEs under the control of the FHFA and the UST?
If the SPS is set aside in Collins, Rop or Bhatti - wouldnt that return most of the $ 220 bn of the SPS to the common equity of the GSEs?
UST Treasury values GSEs stake at $ 224 bn in 2024 Budget. See page 169
https://www.govinfo.gov/content/pkg/BUDGET-2024-BUD/pdf/BUDGET-2024-BUD.pdf
Basically the same value as in the 2023 Budget but twice the value in the 2022 Budget -see previous post for previous valuations.
2024 $ 224 bn
2023 $ 221 bn
2022 $ 112 bn
GSE Common Entitlement - $ 224 X 20 pct = $ 44.8 bn Lots of incentive to continue to litigate.
Judge Duncan who is one of the Judges on the 5th Circuit was invited to speak at Stanford Law School - he was never able to give the speech he was invited to deliver. Here is an interesting article:
https://roddreher.substack.com/p/exclusive-us-judge-kyle-duncan-interview
Doesn't all of this just highlight the interest rate risk in the US financial system and for the balance sheet of the USG? What will be the impact if UST rates go from approximately 4% to 8% which is very foreseeable.
The most prudent action that the UST can take is to get the GSEs out of Conservatorship and sell new equity at current required ROI levels. Waiting will just compound the potential stress on the USG and States when interest rates revert back to the mid range of historical levels.
Agreed dont confuse the two. The policy of the GWB NEC and UST was to nationalize the GSEs as early as March 2008 - it was undisclosed but was publicly implemented with the leak of the Nationalization Memo to Barrons on March 8, 2008 which further destabilized the MBS market a week before the failure of Bear Stearns. See the Nationalization Memo below:
https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf
We dont know the real causes of this collapse but unless there was a direct action to nationalize SVB and Signature the two situations are not comparable.
See the Kelly Complaint regarding the fact pattern regarding the GWB policy to Nationalize the GSEs. The complaint ties it to actions as early as 2007 which coincides with the arrival of a new Chair of the NEC who joined Hank as part of the GWB Admin.
See the Amended Complaint of Michael Kelly
https://www.glenbradford.com/2023/03/fnma-fanniegate-1271/
SVB Depositors made whole - Mike Kelly lost $ 1billion of JPS shares and lost all of his banks due to the GWB Nationalization of the GSEs carried out by Keith Hennesey who was Chair of the NEC and Hank Paulson at Treasury.
https://www.glenbradford.com/2023/03/fnma-fanniegate-1271/
Hi Familymang - wouldnt the remedies sought in Collins and/or Rop and possibly Bhatti set aside the SPS Liquidation preference?
Thanks LuLeVan - wouldnt this have to be already being considered at the GSEs under the Capital Budgeting Regs. The GSEs need to submit a 5 year plan to the FHFA by May 20th so they must be in the process or have already completed a 5 year capital budget by now?
How about Pershing Square or another common shareholder? If the UST stake is worth $ 80 bn - the common stake is worth $ 20 bn - if the UST stake is worth $160 bn - the common stake is worth $ 40 bn. Seems like a good enough incentive to bring a suit. Pershing Square did it once - if $20 to $ 40 bn is on the table there is a lot of incentive to bring a suit.
We will likely see how the GSE stake is valued and if any revenues are expected from the sale of the GSEs in the new Budget. We should be expecting that the GSEs are working on their Capital Plans right now to submit to the FHFA by May 20th. Maybe there are no sales but this plan is required under the Capital Budgeting Reg adopted last year.
Here is the cite from last years POTUS Budget:
Wednesday, March 30, 2022 9:46:16 AM
Post#
716014
of 750466
UST Values its GSE Debt at $221 bn in 2023 Budget. Warrants valued at $5 bn at the end of 2021. See page 143 and Footnote No. 7
https://www.whitehouse.gov/wp-content/uploads/2022/03/budget_fy2023.pdf
For the Fiscal Year 2022 - UST Treasury valued its GSE Debt at $ 109 bn and valued Warrants at $13 bn at the end of 2020. See Page 62 and Footnote No. 7
https://www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf
Change in one year was $112 bn increase in Debt and $ 8 bn decrease in warrant value.
How did the value of the UST Debt Stake increase by $112 bn? Why did debt go up and warrants go down in value. Looks like they are using market price of GSE public stock to value warrants.
Dont think Receivership is on the table. UST Stake is currently valued at $ 224bn in the White House Budget. 20.1 pct of 224 = $49.5 bn. If the GSE equity is just worth the implied value of $ 5 bn = GSE public equity is worth $ 1.25 bn. $ 224 bn more for UST and just $ 1.25 bn for GSE equity or $49.5bn?
Thanks for the comments Robert. The MQD issue is at the core of the Collins fallout. What is the dividing line for the scope of authority of the FHFA Director under the Special Conservatorship and the authority of Congress
Thanks for the reply FFF
Do we expect to see any revenue from stock sales in the new Budget?
Thanks Clarencebeaks21 I did not understand if you were referring to the District Ct action or the 5th Circuit actions. It seems like Judge Ellison pitched a softball to the 5th on appeal. Basically just dismissed everything without considering the merits.
Judge Schitz in Bhatti was better in his opinion but went out of his way to have a reasoned but biased opinion. Called Senator Paul just a politician without mentioning him by name. Also cited the Wizard of Oz as a basis for his opinion. District Court Judges can be quite political.
Yes - as you mentioned previously.
Wow - thank you very much! You DO take care of the site! I dont this litigation has even started so no En Banc - that would have taken an appeal to the DC Circuit and then a further appeal like what Familymang has suggested will happen with Wazee.
Not sure if it will be dismissed because of the Fairholme denial of Cert but this is a direct challenge to the Conservatorship. Wash Fed withdrew so dont know how that case was precedence.
Hi Glen, Are you going to post the Kelly filings from Yesterday?. I think there is a draft complaint and an extension.
Thanks Familymang - it is my understanding that it is challenging the Conservatorship itself - is that correct?
I guess there is a statute of limitations issue and whether the DC Circuit Cert denial cases stand as precedent for dismissal.
As you probably can surmise, I think Kelly is the right plaintiff and one that can resonate with many politicians. It is really hard to not see how he was screwed by doing the right thing for the right reasons.
You may be right - just posing a theory. The system will eventually work - we just need to keep on raising the injustices and share information regarding transparency on real facts - that is my opinion at least.
I think they are really smart and work really hard. Just think it was the wrong strategy and the wrong plaintiff to start. If Michael Kelly had sued in 2013 I dont think we would have been here. Problem was that the Wash Federal Case was stayed and his case is a piggy back case to the Wash Fed case.
Fair enough - we will see. I believe in justice for the shareholders.
Read about Michael Kelly and then decide. New brief should have been filed.
The shareholders refrain oy vey iz mir Justice will happen and those who cast false prophesy will be cast aside.
Disagree Skeptic
Probably Started in 2007
Leaked Nationalization Memo in March 2008
Intentionally undermined Congress bailout and funding discussions in March 2008
Stuffed retail and community banks with billions of JPS in April/May 2008
Forced HERA downed the Congressmen who supported the GSEs in July 2008
Forced FNMA and FMCC in Conservatorship in September 2008. FMCC probably never had a rational reason to be in Conservatorship.
The NWS was just Round 2
Some are rooting for a cramdown and New Round 3.
Yes - that seems like it may be the case. My hunch is that SCOTUS made such a bad decision that Constitutional walls will even close in on the potential GSE haters at SCOTUS. If they truly believe in the separation of powers there is enough money on the table for Plaintiff lawyers to keep make it more and more difficult to hate the GSEs and love the Constitution. Also there is too much money for a POTUS to ignore.
Kelly Filed a proposed Amended Complaint yesterday. Does anyone have a copy?
FFF - The JPS Plaintiff lawyers are not dumb - they are some of the smartest most qualified lawyers in the world. Their clients including Richard Perry are super smart also. The question is why didnt they challenge HERA and why didnt they bring up the Nationalization efforts by the GWB Admin? It really does not make sense since they probably knew the Barrons Nationalization memo was intentionally leaked? Maybe because they made a lot of money shorting finanical sector stocks - forcing the GSEs and other banks into default to collect on the CDS contracts and if they challenged the Conservatorship and HERA there would be a chance that legal discovery would have uncovered facts they did not want to be uncovered. My guess is that the BO guys knew what happened and came up with the NWS as sort of poetic justice.
None of JPS plaintiffs and their lawyers are dumb people - they are really really smart so the question has to be why they would go down a legal strategy that has ended up being very problematic?
Here is who was Chair of the NEC during the leak of the Nationalization Memo in March of 2008. In May of 2008 I bought FNMAT at $ 25. The GSEs raised billions of dollars from investors between March of 2008 and the imposition of the Conservatorship.
https://www.presidency.ucsb.edu/documents/statement-the-resignation-allan-b-hubbard-and-the-appointment-keith-hennessey-director-the
The Conservatorship was done as part of a previous plan to Nationalize the GSEs as early as March 2008. This was done during the GWB Admin. One of the Members of the FCIC Commission was the Chair of the NEC when this plan was intentionally leaked to the press
https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf
Well stated JOoa0ky!
Thanks Skeptic - why do you think the GWB Admin wanted to nationalize the GSEs?
Did you know that the Chair of the NEC during the nationalization efforts was also on the FCIC Committee?
http://fcic.law.stanford.edu/about/biographies/keith-hennessey
Good Stuff - thanks Familymang! There are 8000 FNMA shareholders and at 2650 views - at least over 2000 people interested in the GSE saga?
Hi Clarencebeaks21 - thank you for your insight.
What part of the litigation are you referring to when you stated this:
One thing gives me pause, though: the Collins appellate panel dismissed the Appropriations claim on a *procedural basis*.
Good Point Barron4664 - the Kelly Complaint should have been filed yesterday?
The GWB Administration definitely did not have authority. In fact they hid the fact that they leaked the Nationalization Memo on March 8, 2008 while they kept saying that they believed in the shareholder status of the GSEs. Totally hoodwinked Shelby, Dodd and Frank