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(2) is TINA - but it seems they try to kick the can down the road as long as possible.
The Lamberth trial will be repeated no later than the end of Q2 2023. If a jury trial ends as a mistrial (happens in 5% of cases), there is almost always a decision at the retrial. The jury could, of course, decide against the shareholders. However, Lamberth's greatly reduced damages (only compensation for the stock price decline on 8/17/12) are so small that a convinced jury should swallow them. And the government could live with it, too, because it doesn't cost them a cent. The damages are paid by FnF or the FHFA - and the total amount is only about $2.6 billion, equivalent to just 1.5 months of FnF net income.
All JPS sold? And what if, in the second Fairholmes trial, the jury finds in favor of the shareholders? In that case, the JPS would be paid an average of about $2 in damages. I.e. anyone who buys JPS now below $2 (like FNMAT or FMCKJ) would practically get them for free, assuming the jury rules in the shareholders' favor. For me, this is a reason to hold the JPS.
Old news (Dec. 4 article) doesn't help here.
The government makes much more money by converting its SPS to commons. In that case they would get about 99,5% of the pie. With warrant execution alone they would only get 80%. So for getting this extra 19,5% they'll throw the commons under the bus.
What are the benefits to the government of having full control over the GSEs? There are also risks involved. As long as FnF have too little equity and no responsibility (due to conservatorship), the government is liable for any losses in the MBS. A capital raise would add about $150 billion to the protective buffer of 1st loss capital. Add to that up to $100 billion the governments cashes in from recap/release after selling its stake. Adds up to $250 billion, which is not peanuts.
Commons falling to zero is very unlikely because the government would then lose the up to $100 billion from its "stake" in the GSEs.
A price increase from 38 cents to $7 in 10 years is something even Warren Buffett would not disdain. Won't happen, though.
Home sales tumbled more than 7% in November, the 10th straight month of declines
https://www.cnbc.com/2022/12/21/home-sales-tumbled-november.html
Wells Fargo has agreed to a settlement with the Consumer Financial Protection Bureau on Tuesday.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Rohit Chopra, head of the CFPB, said in the release. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
https://www.cnbc.com/2022/12/20/wells-fargo-agrees-to-3point7-billion-settlement-with-cfpb-over-consumer-abuses.html
It is not helpful to use inflated numbers, also in the letters to politicians. Treasury paid $191 billion to FnF, and this sum at least must be subtracted from the $300+ billion paid by FnF. This is true whether the government made a $191 billion loan - as was the case with the TBTF banks - or whether the government took a stake in the GSEs via SPS preferred stock.
Cancellation of the NWS would not make the government's $191 billion claim go away. Also, the SPS's regular 10% dividends are legitimate claims of the government under HERA. A serious violation of the law and overreach was to increase the SPS dividend to the total Net Worth of FnF from 2012. However, cancellation of the NWS would only make this overpayment refundable - unless HERA is challenged as well.
There was a good reason why the Collins plaintiffs before SCOTUS had only asked for about $29 billion in compensation (besides cancellation of the SPS). Had the Collins plaintiffs asked for $300 billion, they would have made fools of themselves. So would anyone else here citing that $300 billion as a legitimate claim.
On the other hand, Wall Street and the politicians (Reps & Dems) love FHFA because it gives them total control over the twins. Democrats have siphoned off $150 billion for Obamacare through the NWS. The Reps want more mortgage business for the TBTF banks, which they get if FHFA keeps the GSEs' footprint small (like Catman did). Wall Street enjoys the regular free billions from useless CRTs, and it is eagerly fed by Sandra T.
So I have grave doubts that the judiciary will take as rigorous a judicial approach to the FHFA as it did to the CFBP. Legally, the cases are similar; politically, they are not.
An IPO is not needed if you wait at least another decade (organic recap from NWS stop). It is needed if Biden wants free money now. He could get it by screwing common shareholder once again, by warrants execution and/or SPS to common conversion followed by an re-IPO. And he can spend the up to $100 billion for whatever he wants (probably affordable housing) without asking congress. That's quite an incentive.
If Biden wants the up to $100 billion from the re-IPO before the end of his term (he could use the funds for affordable housing programs without having to ask congress) there would be an incentive to settle - as long as the total cost of all remaining settlements stays below the $5 billion limit FnF has reserved for them.
In my opinion, it's the other way around: Prerequisite for a capital raise is that (almost) all lawsuits have been settled beforehand. Outstanding cases may not exceed $5 billion in dispute value. The 4th letter agreement states that FnF have $5 billion in their balance sheets available for settlement payments.
Perhaps because they want the $150 billion or so that would come from new shareholders in the IPO as additional "first loss capital." Otherwise, Treasury would have to pay for MBS credit losses in the event of another real estate downturn.
At worst, even the SPS could become worthless if a new housing crisis emerges. In an IPO, on the other hand, the government earns up to an additional $100 billion on its "investment".
Congressional approval is not required for recap/release. A letter agreement between FHFA and Treasury is sufficient. Therefore, Biden can still get the up to $100 billion out of FnF in his lame duck period (via warrants execution and/or SPS conversion).
If they were to nationalize the GSEs, the over $7 trillion from the MBS would have to be added to the U.S. national debt. That's not in Tsy's interest. It would drive up the ratio of government debt to GDP.
In fact, the main reason Fannie went public in 1968 was to take the MBS off government's balance sheet. Therefore, IMHO, there is no alternative to recap/release. However, FHFA und Tsy could delay it for a few more years.
Whether Biden has the guts to do the IPO by 2024, no mortal knows. To be sure, the up to $100 billion he would receive - off balance sheet - is a big draw. But keeping the GSE in limbo is most convenient.
It's mean, even though it doesn't lack a certain legal logic*.
*Judge Ellison wrote: "Their new Appropriations Clause claims exceed the scope of the remand."
Higher damages in the Lamberth saga?
Quick thought #Fanniegate Fans. I suspect that the next step in the Lamberth saga (besides scheduling) will be a renewed battle over whether higher damages will be allowed. Ps will probably try again to have Dr. Mason supplement his report.
Lamberth indicated in a previous opinion that the higher damages seemed like a windfall, so Lamberth will probably restrict Ps to at most 2.9B+interest and possibly just keep them stuck at 1.6B+interest. Once that question is determined, there is a possibility of a settlement.
Quick thought #Fanniegate Fans. I suspect that the next step in the Lamberth saga (besides scheduling) will be a renewed battle over whether higher damages will be allowed. Ps will probably try again to have Dr. Mason supplement his report.
— FnFan (@FnFGateFan) November 16, 2022
Thank you for the clarification. What would be interesting to know is if the termination of conservatorship would result in a significant reduction of FHFA's workforce. If so, my argument that there would be little incentive to end conservatorship would still be justified within limits.
Fannie and Freddie are now getting fierce competition from Mark Zuckerberg. Meta/Facebook wants to sell virtual land in the metaverse.
https://www.entrepreneur.com/science-technology/how-to-buy-digital-real-estate-in-the-metaverse/432480
Mark is desperately looking for new "unreal estate" brokers. Top salaries await former used car dealers and professional poker players.
Would also be an ideal new field of activity for Sam Bankrupt from FTX - who should, however, change his name to Joshua BlankAss beforehand.
What bothers me is the conflict of interest. HERA allows FHFA and Treasury to end the conservatorship, but how would FHFA ever agree to that if most of the jobs there get lost?
I don't agree. FHFA was established for the management of conservatorship. Therefore, FHFA becomes redundant once the conservatorship ends. FHFA employees would no longer be paid. Which in turn means that there is very little incentive for FHFA to voluntarily end conservatorship.
Please correct me if I'm wrong.
It looks like FHFA is a malignant tumor that has grown on the necks of Fannie and Freddie (and their shareholders), permanently cutting off their air.
Why should FHFA bureaucrats ever think of abolishing themselves by ending conservatorship? It is so convenient - and "in the interest of the public" (themselves) - to collect paychecks every month forever.
In other words: There is a lack of incentive to implement what is long overdue.
At least I'm glad that someone pays for them.
He is posting from inside a black hole. Information can come in, but flows out only sparsely due to strong gravitational forces. This is also the secret behind the secret plan.
The sweeps ended in 2019, after the Treasury had taken in some $301 billion in profits from Fannie and Freddie — compared with $191 billion in capital injections made by the government. The sweeps, the suing investors claim, harmed their future dividend prospects, leading the Fairholme Funds litigation against the GSE’s conservator, FHFA.
https://www.housingwire.com/articles/federal-judge-rules-in-favor-of-fhfa-on-net-worth-sweeps/
#BREAKING: A DC federal judge has declared a mistrial after a jury reached an “impasse” in deliberations over @FannieMae & @FreddieMac shareholders’ claims that the @FHFA improperly amended stock purchase agreements to allow the U.S. Treasury to sweep up their net worths.
#BREAKING: A DC federal judge has declared a mistrial after a jury reached an “impasse” in deliberations over @FannieMae & @FreddieMac shareholders’ claims that the @FHFA improperly amended stock purchase agreements to allow the U.S. Treasury to sweep up their net worths.
— Katie Buehler (@bykatiebuehler) November 7, 2022
Counsel for @FannieMae & @FreddieMac shareholders once again moved for a mistrial in their trial against @FHFA after revealing the final jury note sent Friday told the court for the third time the jury is sharply divided. The court denied that motion.
...The court will give jurors an anti-deadlock instruction advising them they are not required to reach a verdict.
Counsel for @FannieMae & @FreddieMac shareholders once again moved for a mistrial in their trial against @FHFA after revealing the final jury note sent Friday told the court for the third time the jury is sharply divided. The court denied that motion.
— Katie Buehler (@bykatiebuehler) November 7, 2022
# 2 is written too complicated. Laymen from the jury probably can't understand that. You should also put # 3 in second place.
Finally, the Lamberth court cannot "revoke the NWS". It can only grant compensation.
Deliberation could last till Tuesday.
At 17 hours into deliberation, jurors have sent another note in the @FannieMae & @FreddieMac shareholders’ lawsuit against the @FHFA, stating they are still deeply divided and may need until Tuesday to agree on a verdict.
At 17 hours into deliberation, jurors have sent another note in the @FannieMae & @FreddieMac shareholders’ lawsuit against the @FHFA, stating they are still deeply divided and may need until Tuesday to agree on a verdict.
— Katie Buehler (@bykatiebuehler) November 4, 2022
Perhaps the government's own lawyers are too incompetent? It is important for the government to rely on the private sector.
jury all left together, talking and laughing. Not sure what that means verdict-wise.
Kathie Buehler
For what it’s worth, the jury all left together, talking and laughing. Not sure what that means verdict-wise.
— Katie Buehler (@bykatiebuehler) November 3, 2022
Ps have moved for a mistrial on the basis of a hung jury and the possibility of a tainted verdict because the jury was instructed not to reveal the split but they did. Ds took no position on the motion and L took it under advisement, but did not make any decision.
— FnFan (@FnFGateFan) November 2, 2022
That's why there is still silence regarding recap/release.
The jury began deliberations around 1:40 p.m.
Katie Buehler
The jury began deliberations around 1:40 p.m.
— Katie Buehler (@bykatiebuehler) November 1, 2022
I believe that the jury will grant double the "maximum amount":
1.6B x 2 = 3.2B
Add to that 6% interest since 2012, bringing the total to $5.2 billion.
Guido 500B
Klopster 191B
nagoya1 50B
Release Us 25B
Robertus 4.8B
LuLeVan 3.2B
Eternal 1.6B
Jeddiemack 0
Both groups overlap (IMHO).