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The Lamberth Class Action will allow the plaintiffs lawyers to settle all the dividend related claims for the three classes. For example they could agree to transfer some of the UST SPS to the Class participants for loss dividends to settle all dividend related claims and then just start paying dividends as scheduled to the JPS classes and an agreed upon rate to the Freddie common.
If the JPS classes have enough participation the plaintiffs could vote on behalf of the JPS class series by series and accept the settlement on behalf of each complete series of JPS.
Once the JPS issues regarding past dividends are resolved for each JPS series, the UST could just start paying dividends to the JPS as scheduled and the JPS plaintiffs claims would be Moot for all outstanding litigation.
The Freddie common class is more problematic but they could represent the majority of the outstanding shares by proxy for a future shareholder vote in exchange for a settlement.
If the JPS claims are settled - is there anyone to continue to litigate on behalf of common or particularly FNMA common? This is probably a good problem to have but it seems that the litigation is being prosecuted primarily by JPS claimants?
Does that make sense?
I see no reason not to stay in for JPS and hope for a settlement. Not sure how the common will prove damages so there may be a better option down the road for common but personally I am staying in for most of my common also. The UST should really want this case to survive the Motion for Summary Judgement because they can move forward with the Utility Model - they could resolve all JPS issues and decided to refinance the JPS later after they proceed with the cap raise for the Utility Model. If they get enough participation they would have the votes to settle the JPS issues class by class.
Thanks MIA - I have multiple accounts so I am thinking about opting out for one account for only Freddie Common just in case we retain rights post conservatorship and prosecute our claims as minority shareholders under the laws of the Commonwealth of Virgina. I will NOT opt out on any JPS and for most of my Freddie common.
FFF Facts - sorry not to have asked you. Do you have any thoughts about the DC Circuit Opinion being an "outlier" regarding the separation of powers claim?
See my comments to Golfbum.
Hi MIA - same for me - Freddie Common at TD Ameritrade and no contact regarding opt out. I will NOT opt out regarding JPS but thinking about opting out for some one of my accounts that hold common.
Thanks Golfbum - Interesting
The "outlier" decision of the DC Circuit could be relevant for this panel and it probably is important which Judges from the 6th are on the panel - DJT made some excellent appts.
Here is from page 27 and 28 of the March 14th filing by the Rop Plaintiffs.
The Federal Circuit recently endorsed some of Defendants’ arguments, Fairholme Funds, Inc. v. United States, No. 2020-1912, 2022 WL 518222, at *19- 20 (Fed. Cir. Feb. 22, 2022), but it did so with no briefing from the parties on any of these issues. Moreover, the opinion purported The Federal Circuit recently endorsed some of Defendants’ arguments, Fairholme Funds, Inc. v. United States, No. 2020-1912, 2022 WL 518222, at *19- 20 (Fed. Cir. Feb. 22, 2022), but it did so with no briefing from the parties on any of these issues. Moreover, the opinion purported to follow Fifth Circuit precedent; but just last week, that court—with the benefit of adversarial briefing—remanded, rather than rejected, an identical removal claim. Collins v. Yellen, No. 17-20364, 2022 WL 628645 (5th Cir. 2022) (en banc). The Eighth Circuit followed the same course after Case: 20-2071 Document: 40 Filed: 03/11/2022 Page: 28 24 Collins. Bhatti v. FHFA, 15 F. 4th 848, 854 (8th Cir. 2021). 4 Thus, the Federal Circuit’s decision is an outlier.
We are still waiting for the All American decision that has the same separation of powers issue from the 5th which was relied upon by the DC Circuit.
The Bhatti separation of powers litigation is the most advanced and also has a June hearing date - maybe this get delayed until the 6th Panel rules. The 6th will probably consider what happens in the 5th with All American.
We are also waiting for the Remand of Collins to the Southern District of Texas to proceed - have not seen anything on this yet.
Familymang, Kim Brown, Ano , Obi , Glen, others - thoughts?
Hi Man with No Name,
Didn't the Rop and Bhatti plaintiffs also ask for a complete write down of the SPS since they have been completely paid off? It seems you are ignoring the substance of text of the Trump Letter which stated that the FHFA is trying to" steal the retirement savings of hardworking Americans.."
Why do you put so much trust in an "outlier" decision of the US District Ct. of Appeals. Here is from page 27 and 28 of the March 14th filing by the Rop Plaintiffs.
The Federal Circuit recently endorsed some of Defendants’ arguments, Fairholme Funds, Inc. v. United States, No. 2020-1912, 2022 WL 518222, at *19- 20 (Fed. Cir. Feb. 22, 2022), but it did so with no briefing from the parties on any of these issues. Moreover, the opinion purported The Federal Circuit recently endorsed some of Defendants’ arguments, Fairholme Funds, Inc. v. United States, No. 2020-1912, 2022 WL 518222, at *19- 20 (Fed. Cir. Feb. 22, 2022), but it did so with no briefing from the parties on any of these issues. Moreover, the opinion purported to follow Fifth Circuit precedent; but just last week, that court—with the benefit of adversarial briefing—remanded, rather than rejected, an identical removal claim. Collins v. Yellen, No. 17-20364, 2022 WL 628645 (5th Cir. 2022) (en banc). The Eighth Circuit followed the same course after Case: 20-2071 Document: 40 Filed: 03/11/2022 Page: 28 24 Collins. Bhatti v. FHFA, 15 F. 4th 848, 854 (8th Cir. 2021). 4 Thus, the Federal Circuit’s decision is an outlier.
Doesn't this "outlier" notation indicate that the DC Circuit is setting up a potential conflict with the 5th Circuit if it rules for retroactive relief?
Hi Kthomp
Bryndon Fisher and Bruce Reid are All American Patriots! They spent time and treasure in an effort to uphold the rule of law and protect shareholders who risked their investments in our market based system.
Some questions:
1. Aren't you being hypocritical admonishing Mr. Fisher - he had a legal theory and brought several law suits - isnt this exactly what your tag line is?
2. Aren't you being premature to make the determination that the takings claims are dead - isnt there still a possibility of an En Banc and Cert?
3. Didnt the DC Circuit rely on the 5th Circuit regarding whether or not there were retroactive damages for the separation of powers claim? Why dont you think the DC Circuit considered the Trump letter in their opinion?
4. Has the 5th Circuit determined the issue of retroactive damages on the Collins Remand? Isnt there still the All American v CFPB and the Collins Remand to the District Court outstanding?
5. Do you think there is a possibility that the 5th will rule for the shareholders and grant retroactive relief for the separation of powers which will result in a split between the 5th and DC Circuit ?
6. Isnt the retroactive damages cause of action being considered now in the Bhatti case at the District Court level
7. Doesnt the Rop Case also have a separation of powers retroactive damages claim that needs to be resolved?
8. Are you really saying that the common will get 10 cents or are you just assuming Glen really believes that will be so?
Hi MIA
UST values the SPS at $ 221bn for the 2023 Budget vs $109bn for the 2022 Budget. They obviously have a valuation model and increased the value more than the retained earnings for the intervening calendar year.
See the previous post with links to both Budgets
Thanks for the reply Glen!
Seems like a lot is going to happen in May:
1. Confirmation of Director Thompson
2. Effective Date for Enterprise Required Cap rules which were published in final form on 3/16
3. Potential implementation of Cap Budgeting Rule. Comment period ended on 2/25 so we are waiting for a Final Rule to be published. Cap Budgets are supposed to be submitted by GSEs to FHFA by May 20 - Glen - do you have any comments on the timing and implementation of the Cap Budgeting Rule - will this be required for 2022?
4. Possible UST report which is already 6 months overdue according to Senator Toomey.
Here is the Cap Budgeting rule that was out for comment until 2/25
https://www.fhfa.gov/SupervisionRegulation/Rules/RuleDocuments/Enterprise%20Capital%20Planning%20NPR%2012-15-21%20to%20Fed%20Reg_Website.pdf
Excerpt from Pages 22 and 23:
(d) Capital planning requirements and procedures—(1)Annual capital planning. (i) An Enterprise must develop and maintain a capital plan. (ii) An Enterprise must submit its complete capital plan to FHFA by May 20 of each calendar year, or such later date as directed by FHFA. (iii) The Enterprise’s board of directors or a designated committee thereof must at least annually and prior to submission of the capital plan under paragraph (d)(1)(ii) of this section: (A) Review the robustness of the Enterprise’s process for assessing capital adequacy; (B) Ensure that any deficiencies in the Enterprise’s process for assessing capital adequacy are appropriately remedied; and (C) Approve the Enterprise’s capital plan. (2) Mandatory elements of capital plan. A capital plan must contain at least the following elements: 21 (i) An assessment of the expected uses and sources of capital over the planning horizon that reflects the Enterprise’s size, complexity, risk profile, and scope of operations, assuming both expected and stressful conditions, including: (A) Estimates of projected revenues, expenses, losses, reserves, and pro forma capital levels, including regulatory capital ratios, and any additional capital measures deemed relevant by the Enterprise, over the planning horizon under a range of scenarios, including the Internal baseline scenario and at least one Internal stress scenario, as well as any additional scenarios that FHFA may provide the Enterprise after giving notice to the Enterprise; (B) A discussion of the results of any stress test required by law or regulation, and an explanation of how the capital plan takes these results into account; and (C) A description of all planned capital actions over the planning horizon. Planned capital actions must be consistent with any effective capital distribution limitations, except as may be adjusted pursuant to paragraph (g) of this section. In determining whether an Enterprise’s planned capital distributions are consistent with effective capital distribution limitations, an Enterprise must assume that: (1) Any countercyclical capital buffer amount currently applicable to the Enterprise remains at the same level, except that the Enterprise must reflect any increases or decreases in the countercyclical capital buffer amount that have been announced by FHFA at the times indicated by FHFA’s announcement for when such increases or decreases will take effect; and (2) Any stability capital buffer currently applicable to the Enterprise when the capital plan is submitted remains at the same level, except that the Enterprise must reflect 22 any increase in its stability capital buffer pursuant to § 1240.400(c)(1), beginning in the fifth quarter of the planning horizon. (ii) A detailed description of the Enterprise’s process for assessing capital adequacy, including: (A) A discussion of how the Enterprise will, under expected and stressful conditions, maintain capital commensurate with its risks, and maintain capital above the regulatory capital ratios; (B) A discussion of how the Enterprise will, under expected and stressful conditions, maintain sufficient capital to continue its operations by maintaining ready access to funding, meeting its obligations to creditors and other counterparties, and continuing to serve as a credit intermediary; (iii) The Enterprise’s capital policy; and (iv) A discussion of any expected changes to the Enterprise’s business plan that are likely to have a material impact on the Enterprise’s capital adequacy or liquidity. (3) Data collection. Upon the request of FHFA, the Enterprise shall provide FHFA with information regarding: (i) The Enterprise’s financial condition, including its capital; (ii) The Enterprise’s structure; (iii) Amount and risk characteristics of the Enterprise’s on- and off-balance sheet exposures, including exposures within the Enterprise’s trading account, other trading-related exposures (such as counterparty-credit risk exposures) or other items sensitive to changes in market factors, including, as appropriate, information about the sensitivity of positions to changes in market rates and prices; 23 (iv) The Enterprise’s relevant policies and procedures, including risk management policies and procedures; (v) The Enterprise’s liquidity profile and management; (vi) The loss, revenue, and expense estimation models used by the Enterprise for stress scenario analysis, including supporting documentation regarding each model's development and validation; and (vii) Any other relevant qualitative or quantitative information requested by FHFA to facilitate review of the Enterprise’s capital plan under this section. (4) Resubmission of a capital plan. (i) An Enterprise must update an
Good Morning Guido.
Thought you may appreciate the irony about the mailing address from the FHFA website to report fraud, abuse ect.. to the FHFA:
Report Waste, Fraud or Abuse
Contact the FHFA Office of Inspector General www.fhfaoig.gov.
Address:
Constitution Center
400 7th Street, SW
Washington, D.C. 20219
Please note: that all mail sent to FHFA via the post office is routed through a security process that may delay the delivery by approximately two weeks. For time sensitive correspondence, please plan accordingly.
Thanks Guido!
Here is what Senator Toomey released on Feb 10th:
https://www.banking.senate.gov/newsroom/minority/toomey-urges-biden-administration-to-engage-in-bipartisan-housing-finance-reform
Seems like he smells an Administrative Action coming and is doing whatever he can since he is in the Minority.
In this post he mentions that the UST is 4 months late in submitting a Housing Reform Plan.
Hi Familymang
Regarding the Rop Case - has this case been assigned to a specific panel in the 6th Circuit? Is it possible it will be En Banc?
Are there both separation and powers and appointments clause issues still outstanding in this case?
What is the next step in this litigation?
Hi Glen,
Did you see this News Release by Senator Toomey on March 31st?
https://www.banking.senate.gov/newsroom/minority/toomey-misguided-government-policy-is-making-housing-unaffordable
Do you know what report he is referring to when he says that the UST is 6 months late in reporting to Congress toward the bottom of the News Release?
Hi Glen,
Do you have any thoughts about the timing for Confirming Director Thompson?
https://www.senate.gov/legislative/LIS/executive_calendar/2022/04_11_2022.pdf
Looks like they are sitting up a cloture vote for Brainard who testified the same day as Thompson but no mention of Thompson? Maybe this is good news because this seems like destined to be a cloture vote? Has Powell been reconfirmed yet ? - Maybe Thompson could be with Powell?
Thoughts?
Hi Familymang,
Thank you for your perspectives and timeline on the outstanding litigations:
Would you be willing to clarify a few issues regarding the status and outstanding issues for the cases in your timeline?
Regarding the Bhatti case:
Is the only remaining issue is whether there can be damages for the separation of powers constitutional violation as was decided in Collins by SCOTUS?
Has the case been remanded back to the District Court for the District of Minnesota?
Is Judge Patrick Schiltz and an appointed Magistrate presiding over this case? Why is there a Magistrate involved and why havent we seen a Magistrate in other cases or have we?
Do you have a timeline for the next court action in this case?
Do you think this case can be decided before the Remand of Collins in the 5th Circuit to the Southern District of Texas?
Thanks - sounds like some strategic decision by the plaintiff's lawyers?
Good Morning and Thank You Louie. Does anyone know why Fannie common was not included in the Lamberth Class Action - something about the Freddie Certificate wording?
Agreed - I did not opt out. I have been invested since May of 2008.
Does anyone know how much of the JPS and FMCC Common class opted out of the Lamberth class action?
Also - if the JPS settles - are there any live common shareholder suits?
Shout out to Brydon Fisher who has been sticking up for the common for years. Dont know if he has any litigation outside of the DC Circuit purview which has been dismissed? We may need someone to just represent common if the JPS suits get settled or become moot.
Thanks again. It seems odd that they totally ignored the Trump Letter and seemed to rely on the 5th in their opinion. The day after the FHFA gave notice to the 5th, the 5th En Banc remanded Collins. All American which was heard by the 5th En Banc on the same day as Collins has not been decided. We know where Judge Edith Jones stands on administrative law abuses of power so it is not unforeseeable that the 5th En Banc could grant retroactive relief in the favor of All American.
Thanks for the follow up familymang. Do you think the DC Circuit was right to rely on the 5th Circuit opinion in dismissing the separation of powers claim regarding the potential for retroactive damages? Isnt that issue being currently litigated in the 5th with the Collins Remand and All American?
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?
Apologies for previous post which I quoted the $ 109 bn number - did not realize I had 2022 Fiscal year vs new 2023 Fiscal year numbers.
Thanks again for the post.
Amelia - since you are in corporate finance - Do you have a valuation for FNMA and FMCC if they were not in Conservatorship? It would be great to get a professional's opinion about what shareholders are loosing due to the SCOTUS opinion and Conservatorship.
For what it is worth I think the Budget foreshadows what you have been saying. I thought it was odd that they footnote the value of the GSE Warrants at $ 13 bn in the Budget with a total value of the UST Stake at $ 109 bn vs the value of the GSE Warrants for Scenario 1 of Table 3 of the CBO report at $ 110 bn. Do you know if this is different from past budgets? Still even at $ 13 bn - it is not a 10 cent cramdown since it implies a $ 3.25 bn public stock value.
Great video Stockprofitter. Did you see that Sandra Thompson is sitting to the left of Director Watt when he was questioned by Mulvaney at the end of the clips? Everybody knows whats going on. Hank's and Rubin's exchange at the Milken Institute Conference is also classic.
Appreciate the response and comments Glen. Ultimately I see this playing out in political terms on whether Congress wants to let this pass as precedent as a playbook for future Nationalizations - that is why it is important to have transparency around what really happened. The CBO restructuring report it clear that relationship between the US Government and the Farm Credit System can be impacted about how the GSE Conservatorship is resolved.
Here is the last paragraph of the CBO Report:
In addition, changing the federal government’s relationship with Fannie Mae and Freddie Mac might prompt an
assessment of the government’s relationship with other
government-sponsored enterprises that support mortgage
lending. Those other GSEs include the Federal Home
Loan Banks, which make low-cost loans to their member
institutions (such as commercial banks, credit unions,
and insurance companies), and the Farm Credit System,
which provides financial assistance for rural mortgages
and other loans guaranteed by the Department of
Agriculture
It is forseeable that a financial crisis could emerge in the Farm and rural economy as happened in the Stagflation environment in the 70's. There is too much commodity risk for most farmers to manage through high interest rates for operating loans and equipment financing and high energy costs that will impact fertilizer, transport and equipment operating costs. Will a future Administration use the GSE resolution as a way to Nationalize the farm credit system and reallocate wealth and priorities along woke and climate change priorities? What you are proposing will make a great playbook for those who want to do so.
Budget is out.
GSE Warrants valued at $ 13 bn at the end of 2020 - see Footnote 7 Page 62 Looks like they are valuing GSE stake at $ 109 bn.
Big increase in Housing Trust Fund starting in 2025 Page 45
https://www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf
Dont know how GSE related valuations are different from years past.
Glen - the only part of the SPS that probably is legal is the $ 1 bn of SPS that were given by FNMA and FMCC upon Conservatorship. Otherwise all the money that was forced on the GSEs due to the hyped up accounting shenanigans were fully paid off with 10% interest and the UST ripped off the GSEs for another $ 30 bn.
If the UST wants to use the SPS as part of the GSE capital structure to finance Mike Calhoun's Willy Wonka $ 100bn Golden Ticket they would be wise to take Angel's idea and use it to settle the Lamberth litigation. Then there would actually be consideration given for the SPS and it would past muster under CFR 31 902.2 as discussed in footnote 30 of the CBO report. They should also settle with the common via Bryndon Fisher and avoid seeing their $ 100bn Golden Ticket morph into a Round Trip Ticket back to a housing market/MBS crisis because the UST has raided the GSE retained earnings for about $ 300 bn that should have been retained earnings to buffer the US Taxpayer rather than bailing out the BO Admin during a negotiation for raising the debt limit.
If Mike Calhoun wants his $ 100 bn Golden Ticket he should listen to this guy about inflation:
https://www.bloomberg.com/news/videos/2021-12-16/carlyle-managing-director-on-inflation-video
This guy knows a lot about the GSEs and Nationalization strategies - check out his resume-
https://docs.house.gov/meetings/PW/PW14/20150203/102881/HHRG-114-PW14-Bio-ThomasJ-20150203.pdf
He is a good Memo writer and already developed a model for the GSEs way back in March 2008 - he also knew that the DOJ would try to convict the FNMA Management for fraud back in 2008 -
http://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
He also knew the right way to stop a bailout by Congress but cause a Nationalization was to string along FNMA Management and plant an article with Barron's during a critical juncture in the negotiation with Congress.-
https://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2007-2008_Fannie_Mae_Timeline_and_Supporting_Documents.pdf
The FACTS really really stink Glen. There should be no cramdown but a fair settlement - GSE shareholders were ripped off and suffered at the hands of our Government for over a decade.
Dont let the DOJ waste Mike Calhoun's Willy Wonka moment!! Listen to the experts about inflation and the duration risk inherent in the equity side of the GSE Capital Structure.
My motivation in the posts was to share info and perspective between trading days. It turned out to be a nothing burger but this is the first time I have seen an actual settlement offer which if taken could make the common position more problematic as you suggest in your post. My mistake was not understanding the reference to Fairholme Funds Inc as meaning Fairholme Funds Inc v US rather than Fairholme Funds Inc. v FHFA.
Regarding understanding finance - I know enough that I had $ 500 K back in 2008 that I lost due to the NEC and UST shenanigans prior to Conservatorship. This has been my worst investment of my lifetime but I dont give up when I have been ripped off and there is money to recover. Too bad this is not a bankruptcy case.
I do think that the structure of the Angel Settlement Offer is clever and makes me more concerned about the relative position of commons while the GSEs are still in Conservatorship which I believe will be at least until the JB Admin term is over in 2025. I bought more JPS but not more common as the result of this news - everyone may want to have a mix of JPS and common and know that common offers the most risk although it may be the best possible payoff. Of course - it is a free country still and you should do what you think is best for your investment program. Ultimately commons may have the most leverage as a minority shareholder post Conservatorship but it is not clear if there will be standing to sue since the cramdown would have taken place under the Conservatorship powers of HERA per the powers granted the FHFA by SCOTUS in Collins.
Thank You Kimbrown. I made the mistake of confusing Fairholme Funds Inc. vs US with Fairholme Funds Inc v FHFA which is the class action case before Judge Lamberth.
Just to be clear - Judge Sweeney is not imposing the stay until the FHFA class action suit is final but just the Fairholme v US case - correct?
Also - do you have any opinion if the DC Ct of Appeals has properly relied on the 5th Circuit regarding retroactive damages for a separation of powers violation?
Here is the last paragraph of the DC Ct. of Appeals Fairholme v US Opinion:
Given all these realities, especially the Supreme Court's
description of the extreme limits on the possible relief
available to similarly situated shareholders, we agree with
the Fifth Circuit that the shareholders have already been
afforded the only possible remedy available for Barrett's
alleged separation-of-powers violation. We thus conclude that
Barrett no longer can assert such a claim on which relief can
be granted and that his separation-of-powers claim must also
be dismissed under Rule 12(b)(6).
How can the DC Circuit rely on the 5th Circuit when Collins has been Remanded to the District Court and the All American case is still outstanding? Both of these cases are going to decide whether the respective plaintiffs have been "afforded the only possible remedy". What happens if the 5th grants Declatory Judgement for the All American plaintiffs and dismisses the administrative action retroactively?
Why didnt the DC Circuit even consider the DJT Letter in its opinion?
If All American goes against the DOJ - isnt this grounds for an En Banc for the DC Circuit?
Guido - I have the same questions. It was interesting how she referred to the Kelly case for example. Also my fear is that they will use the delay to dismiss everything with a motion for summary judgement by the DOJ. I was hoping to see the Cert petition which seems to be stayed.
MoneyRobot - you are right on all the points. I am just trying to offer a possible explanation - I could be totally wrong. Glen and a few others have been talking about a cram down and perhaps they knew this type of settlement proposal was coming. Basically no cash is exchanged and they just turn on divs at some point in the near future to make all the JPS cases settled and moot.
My point is that if this happens they should be fair with the common but there will be those who would be willing to settle along the way since the common price is so low right now. UST should just start offering settlements with common and common holders and decide to wait or exercise their rights as minority shareholders in Delaware and Virgina once the GSEs are released.
Perhaps nothing happens again - like has been the case for the last 13.5 years.
Here is the actual proposal from the 3/24 Angel filing:
In addition to voluntarily dismissing the case with
prejudice, the agreement’s basic terms include Treasury commitment to cause:
(i) the GSEs’ respective Board of Directors to declare (not pay) Junior Preferred Share
dividends equal to the total dividends declared or declarable between January 1,
2013 and the Angel II Settlement’s Effective Date (i.e., approximately $18 billion)
(“Dividend Declaration Amount”);
(ii) the GSEs make a corrective balance sheet transfer of capital reserve amounts
(with full legal entitlements inherent therein), from the Senior Preferred Share
Dividend Payable, to Junior Preferred Share Dividend Payable, and ex post facto
income statement expense from reflection on the Companies’ income statements,
from Senior Preferred Share Dividend Expense, to Junior Preferred Dividend
Expense, in amount exactly equal to the Total Dividend Declaration Amount, and
thus tangential validation of Perfidy government implicit guaranty of Junior
Preferred Share timely payment and rating Agencies’ Government Securities Risk
classification;
The key words regarding back dividends is "not pay" - what they are proposing is to transfer part of the UST SPS balance to JPS. This puts part of the JPS in the same position as the SPS and is kind of what Bradford was talking about where he is talking conversion into equity.
You have to expect the UST to follow the CBO Paper and so just substitute 18 bn of what is listed as SPS to JPS SPS. This could be exchanged for common prior to release and the UST would not go over the 80 pct for consolidation - in fact takes them down so they also could convert to get back to 80 pct. It really is a clever idea and answers some of my doubts about how UST could possibly cram down before release and not get over 80 pct.
We will need the 5th to invalidate the SPS all together to have maximum leverage for common but this development is a clever way to potentially cram down because it allows for a lot of flexibility pre-release. Definitely better for JPS in the near term at least. Of course - this is just off the cuff guess work on my part but wanted to throw this out.
Regarding divs on the JPS prospectively - if they amend the SPS and let divs be paid to JPS now they moot the litigation with this settlement. It is kind of like settling without having a legal agreement - just pay the div due under the JPS Certificate. After Release they can just call series by series if then current ROI for JPS is less than the coupon interest rate for each series.
The best timing for release is the 2025 scenario but it probably is important to look at FMCC and FNMA individually. FMCC has less capital to raise but settling everything would definitely make it easier for the UST to monetize its stake during the JB Admin.
Another important factor is how much of each series did not opt out in the Lamberth class action . This type of settlement could be applied to the Lamberth litigation and could lead to the necessary vote to apply the settlement across each class of JPS. Really something UST should do because the Class Action mechanics allows a total clean up for the JPS. FMCC common is much more uncertain and FNMA is more uncertain but UST should really take it step by step and in reality there is more than enough money to go around if they are smart. Some common could hold out post recap rather than settle which could be a good strategy since the amount of hostile shareholders will diminish over time as incremental settlements are made. A lot of common would jump at $ 3 , 5 and so on even though real damages could be up to $ 30 . Just a guess but thought I would share.
Overall clever move by Angel. Looking for the next shoe to fall which could be a kick in the old fanny for shareholders but I am hoping the 5th gives it to UST.
http://www.glenbradford.com/2022/03/fnma-fanniegate-1115/
Angel has proposed the following Settlment:
Pay the dividends on the JPS since 2013 -$ 18 billion and turn on the dividends on the JPS going forward.
This would make the JPS cases moot. The FMCC divs could be settled as part of a class that did not opt out in Lamberth.
Just leaving FNMA common for damages and divs, FMCC opt out for damages and divs, and FMCC damages. Just settle and be done or continue to fight and let the facts of the Nationalization leak out while trying to monetize the UST Stake.
We need and ALL AMERICAN fanny wooping out of the 5th to get the DOJ cover to settle. Prob pie in the sky but it is definitely logical given all the interest rate risk in the value of the UST Stake so it will probably be another flub by this Admin.
Thank MIA! This is just an personal opinion so it is probably wrong but I think the next big thing is the ALL American case in the 5th Circuit because it will determine damages for the violation of the separation of powers violation for the CFPB. Collins on REMAND will be subject to the precedent that the 5th Circuit determines in ALL American. I dont think anyone has answered my query but it seemed to me that the DC Ct of Appeals relied on the 5th Circuit for the separation of powers dismissal in the very last paragraph of its opinion. Seems like the precursor for something good or a big set up - unfortunately could be either. Wonder what percentage of the JPS and FMCC opted out of the class in Lamberth - the DOJ would be wise to settle the Divs part of damages and start paying divs to make the JPS cause of action moot. All they would have to deal with is FNMA for damages and divs and FMCC for damages. Everthing else would be settled and moot. Probably all wrong but it really is a good opportunity for the DOJ if they are serious about using the UST equity for the Calhoun plan.
Hi Glen, Have you considered the possible impact that the CFPB v All American in the 5th Circuit may have on the separation of powers claims? It was heard on the same day as the Collins En Banc and the Plaintiffs are seeking a Declaratory Judgement in their favor.
Did you know that the new CFPB headquarters in DC cost more to build than the Trump Hotel in DC?
We had two motions for summary judgement filed yesterday. One by the Defendant - the FHFA under seal to dismiss the class action and one by the Plaintiffs - which was a motion for partial summary judgement. Isnt that right Glen?. Any thoughts on the plaintiff's motion? Seems very technical but interesting?
Where do you see the request for a Bench Trial?