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Wrong. This is still a regulated environment. Fannie Mae must maintain adequate capital to meet its regulated requirements or be deemed insolvent. At present, the remedy would be to draw funds from UST under the SPSPA arrangement. However, many like me fear the Congressional and press backlash against what would almost certainly be labelled another bailout that could trigger a fatal "knee jerk" reform measure imposed by Congress.
1. Nope.
2. Impediments from the do-or-die crowd can prevent any overall agreement from ever being reached.
When the $$$ runs out, we are potentially a cadaver.
If you think all remedies being sought in all pending litigations benefit all shareholders in all classes of stock equally, you have some serious homework to do.
The PWC "settlement" could be just the first shot fired across the bow. We are talking about huge amounts of $$$. That brings out a lot of territoriality in a lot of people.
I think the major pending suits in Fairhome and the Perry Appeal will benefit pretty much everyone from the way the complaints are structured. But what happens if those suits either get dismissed, or drag on in a legal impasse over documents and the money runs out in December. We are now in 2017. The porch is getting shorter and shorter in which to land this thing or watch it possibly crash and burn in a financial conflagration.
JMHO.
It is not pessimism, just concern. I have not sold one share. But the rhetoric of late has been ratcheted up to an increasingly polarized degree that only makes settlement and moving on an increasingly distant and possibly unreachable dream.
Remember, the money runs out in December. I don't want to go there with common shareholdings. I want to see this resolved before we near that risk precipice.
JMHO.
Looks like polarized shareholder actions paid off for the narrow plaintiff team in the PWC litigation, right? Did that help anyone but a few litigants? That may be where this impasse is headed. A court by court "victory" for named plaintiffs, only.
That risk probably deserves a song of its own. In fact, the same purloined tune and lyrical parody of the Beatle's "Strawberry Fields" could refocus on the opening line: "Let me take you down"... because that is where this hardening landscape may be leading us all.
JMHO.
Looks to me like David Fiderer has sold out, and moved from a longstanding position as an advocate for the GSEs to possibly becoming a paid shill for plaintiffs. He graduated from being a potential part of "the solution" to being part of the impasse and "the problem" in the Fanniegate saga.
Shareholders need a settlement to get anywhere concrete. As do Fannie Mae and Freddie Mac, not to mention the Housing industry, let alone the aspirational home buyers looking to join the American dream that relies on FnF for an open path to affordable mortgage products.
Why do so many "experts" that once spoke out for right vs. wrong now focus only on assignation of blame and stockholder windfalls? What is gained by a polarized and intractable rant against everything the government either did, or might have done instead of seeking some common ground where scorched earth gives way to a return to normalcy that benefits everyone concerned?
Fiderer, sadly, has regressed into a "Howard Beale" lunacy fixation on being "Mad as hell. I'm not going to take it any more" and has become some self-annointed avenging government anti-Christ. His shrill narrative as the herald of self-righteous condemnation of everything government is the ultimate blame game charade.
I am a substantial shareholder, here, in both preferred and common shares. My acquisition costs are substantially higher than many here who bought under more depressed prices. I want Fanniegate resolved, and yes I seek a financial gain in the endgame. But the "all or nothing" game being played by Fiderer and many, many other pundits only builds barriers to any reasonable, settled outcome. He does NOT speak for me.
JMHO.
Glad to see there is still some fraternal connection with Wayne and also, apparently, the Gator Capital entourage. Kindred spirits whose financial future is inexorably intertwined in the pursuit for litigation-driven Nirvana.
So how much did plaintiffs get from PWC to settle? How much farther ahead than other shareholders is the basically same plaintiff team that remains presumptively active in contesting the Deloitte parallel suit?
It looks like a team of vampire bats trying to bleed the same host, over and over again. Then creating alibis by papering timhoward717's blog and Seeking Alpha members with myriads of "explanatory" pixels to put forward a socially acceptable backdrop to a vulture meal that sates their financial appetite, just not all the other shareholders that are still waiting for a fair shot.
It is a noble pursuit. NOT!!!
JMHO.
Any views on why Wayne Olson was singled out, but Matt Hill was given a free pass? They were both PWC plaintiffs.
I don't believe the President has refused to do anything. The government's defense team has asserted privilege under a mix of Presidential, executive and bank examiner privileges. The plaintiffs have asserted that no privilege of any sort is appropriate which, so far, Judge Sweeney has agreed to with the issuance of her motion to compel.
Please see page 3 in the court docketed writ of mandamus filing.
I just don't see the documents under Presidential privilege to be really all that crucial to proving any of the claims before any court, but especially in Fairholme before Judge Sweeney.
Of the approximately 11,000 unreleased documents, I believe that there are only 4 protected under Presidential privilege.
Please do not associate me with this message's content or its author. Some of it I agree with and have posted here previously. But much of it I disavow and dislike, and I certainly express no view on the S A article having some basis in the PWC settlement. I could probably hazard a guess as to who sourced that claim, but I will not make that opinion public.
The one thing I did find interesting in this highly negative response to the golden share proposal in S A is that it confirms an earlier prediction of mine that friction would develop between preferred and common Fannie Mae shareholders when the money-counters sensed it was about time to do the divvy of proceeds in the endgame. The author of this condemning response wants to liquidate preferred shares worth $19 B, then issue $60 B in some new equity offer that magically will have no dilutive consequence for commons? Not EVER going to happen.
JMHO.
No dividends, preferred or common, can be paid other than to the government while the SPSPAs remain in effect under conservatorship. It is premature to consider dividend options until this shackle gets removed from Fannie & Freddie.
The problem with pending cases seeking dividend restoration is that a court can order the government to restore shareholder dividends on a parity or other basis with swept proceeds under either SPSPAs or Amendment 3, but the court cannot order UST to maintain the other parts of the arrangement if it chooses to exercise its right under the terms of contract. If UST balks and ends its $400 B draw backstop, neither GSE has sufficient reserves with which to pay out any dividends to anyone. It's a Catch 22.
So my advice is to keep your powder dry on divvy expectations until the situation gains some clarity. I believe both common and preferred shares could have enormous divvy returns at some point in their future. I'm just not counting on divvies anytime soon.
Great question.
I'm not so sure about that "no news expected until inauguration" prediction for Fannie Mae. The incoming class of both Congress and Senate elects gets sworn in momentarily. There could be legislative news being floated, very early in the new session that can definitely move markets and move FnF immediately.
Then there is the possibility of movement on nominating and confirming judicial nominees, creating a LOT of upward mobility opportunities for justices seeking an elevated position. Lots of reason for several justices to pick up the pace on some visible rulings that could attract attention and favor with the new administration. Could be very favorable to Fannie cases based on the early read of Trump's intentions.
This is a news driven stock. I would NOT want to go into the new year with a short position. More possibilities for good than bad news prior to January 20th. After that, it frankly all looks good.
A New Model for Recapitalization and Risk Sharing.
There are several arguments raging in the financial and investor press, the courts and in Congress that are never likely to find any comfortable level of full agreement. Did the GSEs need a bailout, at all? Did the government act to save FnF, or just the big banks? Do shareholders get all the profits while government shoulders all the risks in times of crisis? Were Fannie& Freddie really impaired by social engineering mandates for affordable housing?
Now we fast forward to another, new controversy to add to all the dissent: if momentum has turned towards a "privatization" approach, exactly what form will that take? Will the GSEs simply get restored to their prior role as monopolies in their corner of the mortgage finance business? Will the GSEs get shrunk down in some shared CSP environment to moderate risk? How much reacp $$$ is needed for the GSEs to resume whatever form of privatization gets adopted? There are HUGE variables in play depending on how these questions get answered. And then there is the 800# gorilla of capital running out in December risking further UST draws or liquidation and a huge, new round of litigation and claims for damages.
So why can't a simpler, risk-sharing strategy be formulated that removes the hard edge from the last 8 years of discord? It actually seems simple to me. All sides benefit from healthy GSEs functioning in a healthy housing market. So why can't all sides share in the risk side to guard against future and costly bailouts?
1. Form a risk pool on a 1/3 basis where default risk is equally shared by mortgage originators, the GSEs and the UST. Why do Fannie & Freddie have to shoulder all the risk? Government can keep its over-payments to form the basis for its reserves. Banks can set up reserves starting with new loans originated for the next so-many years, understanding that loans into mid-maturity rarely carry a default risk. Then Fannie and Freddie can recapitalize based on expected income and a return to preferred stock issuance without dilution.
2. Transfer affordable housing initiatives to Ginnie Mae where government-mandated social engineering goals become the government's responsibility. Ditto with the DTS mandates imposed under HERA.
3. All remaining aspects to conservatorship or the SPSPAs are cancelled and nullified.
4. Plaintiffs must then decide whether to go forward or continue to bear huge legal costs to continue for damages. Most will cash out and celebrate.
This is a simple approach. I like simple ways to resolve problems.
JMHO.
No Federal Judicial appointee has been approved since 2014. This partly explains why Judge Royce Lamberth was unable to retire and why he rendered the verdict he did to dismiss Richard Perry's suit that was so adverse to Fannie Mae shareholders.
Correction: Judge Merrick Garland, not Garner. But, see, that is what happens. His nomination was on March 16, 2016 by President Obama and NOTHING has happened, since. No confirmation. No hearing. No rejection.
GSE reform is not the only issue that Congress has delayed into oblivion. Failure to confirm judicial appointments has turned the entire judicial process into a political activity that violates the separation of power provisions of the Constitution.
This is a national disgrace.
https://www.judiciary.senate.gov/nominations
In Federal Courts there are 112 vacancies and 59 nominations that have not been approved by the Senate. That is out of around 670 total positions, systemwide. Link is shown in the judiciary website above.
JMHO.
I "get" all the angst regarding the court system and its apparent failure to resolve any of the Fanniegate litigation except for dismissals. Some of the problem surely is the government stonewalling campaign, and some of it likely stems from plaintiff obstinance and intractability on documents. But I recently have become increasingly concerned that our Federal judiciary is being hijacked for political re-engineering of the Federal benches.
The confirmation impasse for Justice Merrick Garner's nomination for the Supreme Court is just the tip of the iceberg. There are vacancies in many, many jurisdictions that go unfilled because of political gridlock in the confirmation process. It strikes me that the problem is far worse in the Circuit and Appeals Court area where the case load is far greater than the 80 or so SCOTUS decisions routinely heard before the court. There is tons of content on both Bing and Google that document and detail the "open bench" vacancy problem.
So when all of us are frustrated about Judge Sweeney or the Perry Tribunal's failure to act decisively, maybe we could encourage the Senate to get off its ass and get these vacancies filled in a fair and balanced way to get the gridlock cleared. How active does anyone think Justice Garner will be in getting his Appeals Court team moving faster to a verdict when his own nomination process hasn't even permitted him to present his credentials to the Senate Judiciary Committee?
Judge Lamberth is a prime example of a judge slated for retirement that was asked to stay on to help clear the court's caseload.
These endless delays only tend to serve the agenda of the Sammons appeal because nothing ever seems to get anywhere while the meter continues to run in the race to insolvency or further draws from Treasury come this December, 2017.
Happy New Year to all.
My point was and is that large Form T transactions at the end of a Friday session do not create a concern for some meltdown at the beginning of the next session. The November 4 FNMAT trade did no such damage. And I suspect the FNMA trade yesterday will be a similar non-event.
News moves Fannie Mae shares. The election did so. And the comments by Mnuchin did so, all over again. An arranged trade in a Form T transaction is not news. I have little concern for Tuesday's open, unless there is further news.
Happy New Year.
You may recall the two 14 M share trades on FNMAT that were Form T transactions, the Friday before the election in November. These late in session trades made nil impact on the S/P. However, on November 7, the S/P began its march upwards even before the impact of the Trump rally.
Would be a great start for 2017 to see this uptick phenomenon repeat itself in FNMA, come Tuesday.
No. The price was @ $3.90.
Rubbish. If you go to the opening page on investorshub for Fannie Mae and click on the "Trades" tab you will note 4 after hours Form T trades for Fannie Mae, including the large one you deny.
This is not unusual for this stock.
Horsecrap. There are Form T trades on FNMA shares almost every day. Many of them are overseas transactions.
It is a Form T trade. The information is NOT incorrect.
Happy New Year to all. Good health and good fortune to all good people. And may our USA remain a beacon of hope for all peoples seeking peace, equality, prosperity and community values of respect and love for all.
Yank
You are correct. He has never seen the documents and is making assumptions regarding their content, just like the rest of us. He is just stating his opinion and doing so in a way that infers it has some factual basis.
It is naive for anyone to assume Howard's narrative is solely informative. He is a resource for plaintiff actions, as you correctly observed, has at least some meaningful position in preferred shares and certainly might have a vested interest in protecting his involvement in anything that led to the conservatorship or may have influenced his earlier departure from Fannie Mae.
JMHO.
I wish you were correct, but I think not. The "right" complaint is not even on the record before the Delaware court.
JMHO.
Sorry, but I have said for over a year that Judge MoeRon Steal blew this opportunity out of the water, ultimately culminating with his motion to expand the complaint. He went off on this lame adventure instead of going for the Achilles Heel which was the potential illegality under Delaware State Law to pay one class of preferred shareholders a dividend without treating all preferred shareholders equally under the same pro-rata basis. So all he accomplished was dragging this morass out for endless more months with no deliverable outcome for shareholders. The MoeRon delayed the entire process, not the government's lawyers.
I am not paying for the legal expense to employ this MoeRon, so I guess I really don't get any vote in this, but this guy has gotten absolutely NOTHING done worth noting in my book. "Man of Steel?" Nah. Just an everyday MoeRon.
Tried to tell you.
JMHO.
Please provide proof of your claim that "PriceWaterhouse Cooper and Deloitte & Touche cooked the books of the GSEs..."
This is a very serious charge.
*Second Request*
You stated: "PWC was already sued by Freddie... Deloitte is being sued right now by Fannie."
This is factually incorrect. Neither GSE has filed suit against their auditors.
I have said for ages that the housing dilemma that pits a privatized Fannie Mae against the government is totally alleviated by simply transferring the affordable housing directives and DTS mandates to be fulfilled by Ginnie Mae and removed from the private sector GSEs. That is where much of the "risky business" originated from in 2007/08. That is why so many pundits flip out and demand 4.5% reserves for any re-privatized Fannie & Freddie.
It has become way to easy for critics to play the blame game by claiming shareholders want all the profits but want government to pay their way when times get tough. But it is just as easy and logical to point out that government, itself, creates a whole lot of the risk leading up to crises, and all that inherently large cost derived from same, because it insists the GSEs must actively support affordable housing "Social Engineering" programs.
I am not being critical of affordable housing goals or support for programs that facilitate them. I am simply observing that the government should own the risks and costs for their agendized housing programs, not private enterprise firms like Fannie Mae and Freddie Mac.
The answer to most things "government" is the simple one.
No, I have to disagree with that assessment. I do not see the recap funding as having any immediacy. The crisis is over. Fannie's cash position is strong. Fannie's at risk loan portfolio has been cleansed and probably needs no more than a 1.5 - 2% reserve, allowing a cushion of several years where income can be used to fund either borrowings or interest on new equity offers.
I do not think Trump or Mnuchin will want to see the documents released, anymore than Obama did. There are secrets that need to remain secrets in government affairs. Embarrassing Obama only greases the skids for a later embarrassment of Trump. Nobody wants or benefits from "going there".
Congress railed on for years about reforming the GSEs including during the pre-conservatorship era of accounting scandals, lobbying excesses and "wild west" behavior that rankled many inside the Beltway. Going back to where things were in August, 2008 is not an extreme or especially risky move, whatsoever. It would resolve the vast majority of pending legal complaints, and leave the courts to argue over the minutia... assuming the bankrolling sponsors in the hedge fund actions don't just take their victory-in-hand and bail on the entire, prolonged and hugely expensive venture.
JMHO.
Watt and Lew have about 3 weeks to get together and concur on a release mechanism that will become their legacy and not Trump's accomplishment. The payment to UST must be received before this happens.
Trump's "watch" begins with the numbers commencing in January.
What better a way for the Obama team to welcome him to Washington than to bust the GSE piggy bank for the last and final time. Everything just goes back to where it was in August, 2008 under George W. Bush. No conservatorship, no SPSPAs, no more SPD, no more "Sweep" and no more warrants. There is no government guarantee, stated or implied ((as in 2008) and there is no $400 B draw provision from UST. The financial crisis is over. And so then is the need for conservatorship.
Then the Congressional discussion over reform can recommence at whatever pace the new Trump Administration can muster. And the courts can conclude whatever further actions they wish to order via eventual rulings, any penalties then becoming the burden of the incoming team.
Watt and Lew both risk legal entanglements in 2017, or beyond, as pending litigation contiues to churn in the courts. Resolving this problem before a new team takes over is in their best interests, as well as most all other parties with skin in this game.
Happy New Year, everyone. My scenario certainly would turn that wish into a reality after 8 years of havoc for just about everybody.
JMHO.
Please see the "Covenants" section of Fannie Mae 2015 Form 10-K, pages F-54 & F-55 which clearly delineate the areas within the Senior Preferred Share Purchase Agreement that must obtain prior written approval from the U.S. Department of Treasury. This confirms exactly what you stated. The Director is not empowered to act autonomously without UST consent in pretty much any way (other than a declared insolvency).
Please provide evidence of your claim that the auditors for both Fannie Mae and Freddie Mac "cooked the books". This is a very serious charge.
I watched the interview back when it ran in November and, no, Steve Mnuchin did not specifically lay out a total for recap. However, Fannie Mae's own 2015 Form 10-K specifically pegs a total for its own "Deficit of core capital over statutory minimum capital requirement" at $139.670 billion.
The data is recapped on page F-57.
I'm not saying I support that huge number, but it is what it is from Fannie's own perspective.
Regarding new share issues, you asked: "doesn't that make investments into the current commons and preferreds worthless?"
No, absolutely not. It simply requires that dividends get restored for the class of shares IPO'd. Both GSEs historically issued new preferred share offers to raise needed capital. The great likelihood is that new issues would be preferred offers since I believe FNMA's registration filing limits its authorized shares to something close to current shares outstanding.
The Congressional Budget Office insists FnF are Federal entities that belong on the government's books. The White House Office of Management & Budget has insisted they are private enterprises that belong off the balance sheet and off the government's books. This divide is likely to give way to a consensus in 2017. The solution is likely to ensure a full privatization of Fannie & Freddie takes place before the interim spending appropriation bill runs out March 31, 2017. Otherwise, the tax cut proposed will never gain traction with so large a variable left hanging. Mulvaney will never let this ride like Obama's OMB did.
This is part of my confidence on both release and that warrants will not be exercised. Warrants "could" be sold, but only with Congressional approval which seems highly unlikely, courtesy of Senator Corker's amendment to the 2015 spending bill from last December.
JMHO.
The simple answer is "Yes" although other, more exotic options exist in the realm of the highly unlikely event classification. I have always thought the liquidation scenario was more of a threat than reality as courts pondered stratospheric penalty awards suggested by certain plaintiff legal teams seeking judgments the government also could simply not afford to pay.
Insolvency would make it impossible for Fannie or Freddie to find money with which to purchase bank mortgages, providing liquidity for them to originate more new mortgages. There is NOBODY else that does what Fannie & Freddie do.