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Good point on the 2nd part of your comment. Hope familymang is right on the first part. Its like they must have cocktail parties in DC and talk about how they are going to screw us.
Thanks MIA and Navy for the old Maxine Waters interview. It is a shame that the FCIC emails were not released prior to the start of all the litigation - I would think that the NWS would have been framed as just the continuation of the theft that started with the Nationalization Memo of March 8, 2008. I wonder if the NWS was at least partly motivated to cover up the past misdeeds of the NEC in 2008
Thanks Guido - great to know that Greta is still on the hunt for fraudsters.
There are a lot of people in powerful positions who know what really happened with the GSEs and how GSE investors got screwed. Dont see why these people would want the focus to fall on them when they are so secure in the current careers.
By the way - the smartest thing that UST could do would be to settle and work out fair deals with common and JPS in order to manage their interest rate risk in the recap.
Here is an interview with a smart guy who is currently a Managing Director talking about inflation.
https://www.bloomberg.com/news/videos/2021-12-16/carlyle-managing-director-on-inflation-video
This guy is not only an expert on inflation but also an old expert on the GSEs when he was a Special Advisor to the President as part of the GWB NEC
Thanks for the reply Kthomp. I think you are right that the UST will start out with a model showing a SPS priority paydown like the current CBO proposal but I dont see why they would talk cramdown at least until all the litigation is settled or dismissed.
Seriously is there a scenario where the UST could own more than 80% of the equity? All I can imagine is a scenario where the UST actually sells part of its stake and THEN coverting part of the SPS taking UST back up to 80%.
Again - why would UST go above 80% of common ownership at ANY time?
What is the earliest you would expect a conversion of SPS to common to take place?
Probably more important is the ROI required by new equity and this is where UST should move as fast as possible to get the recap done. Why try to cram down common when it is more important to get things settled to manage duration risk?
Great quote from Epstein that summaries our loss at SCOTUS on the HERA issue. Brilliant.
You ask about what does Esptein's realistic quote make common shareholders? I will tell you why I continue to hold FMCC common going back to May of 2008?
1. Mr. Market continues to value FMCC common much above the 10 cent level that many have proposed. The current price is about 30% of JPS which has priority and the potential for dividend recapture. This price differential seems reasonable to me because the potential payout is about twice as high -40 X vs JPS which is about 20X. More risk - more return. Who are buying these shares at these prices when many think the US Government will execute a cramdown that will make them worth 10 cents?
2. The current holders of FMCC Common will have voting rights and all the rights of shareholders under the laws of the Commonwealth of Virgina once released from Conservatorship.
3. Currently we own 20 pct of the fully diluted shares of a publicly listed entity with an equity value of approximately $ 150 bn. The UST will likely make $ 75 to $ 125 bn on FMCC alone.
4. It is unlikely that the UST will be able to even try to convert the SPSA to common until it can of dispose of an equity stake to stay below 80% upon conversion because the UST does not want FMCC to be a consolidated entity and also because the SPSA needs to be intact to assure MBS investors since there is no explicit USG guarantee but just an implied guarantee.
5. Tim Howard doesnt think the cramdown will happen
6. There are viable law suits outstanding calling for the write down or the SPSA.
7. FMCC never should have gone into Conservatorship in the first place - it was always cash flow positive.
8. The JB Admin will probably run out of time to execute a cram down and get a Utility model in place
9. A cramdown will set a terrible precedent and just will be a play book for future nationalizations like the Farm Credit System
10. It is only trading at 80 cents
Regarding Epstein - he kind of had to lower his profile because he was becoming a larger target on social media. His has publicly opposed the BO Presidential Library and took a very wrong stance on the Covid Pandemic early on.
Thanks for sharing the link Guido - I never have looked at these cases but knew of them from Palagria's book. I wonder what will happen when the GSEs are actually released and if State Law will provide any actionable remedies that HERA mooted during Conservatorship?
I cant keep thinking about how unfortunate the FCIC emails were not released until 2016?
Dont you think someone at some point will do an expose on all misdeeds? We need someone like Greta Morgenson to do a new piece of investigative journalism?
I agree with your interpretation of the Lamberth case. FMCC was paying $.50 in dividends prior to the Conservatorship but it seems hard to make the case that they would have been paying a substantial div on common in the midst of a financial recap. Perhaps $ .50 to $ 3 to FMCC common in damages - perhaps nothing
We will have to rely on the 5th Circuit or Ropp and Bhatti to get the SPS written off.
The best thing we have going for us is the underlying facts and the limited time to get the Utility model done in a recap that can not be unwound by DJT II. If the UST wants to maximize the value of their stake they should settle and issue equity as soon as possible before the ROI required by new investors goes up as interest rates rise.
If you follow Richard Epstein, you will come to realize that Richard Epstein does not give up but is a realist. This is just an article about how bad the SCOTUS decision was regarding HERA. The US Court of Appeals decision was more of the same but just made it clear that derivative suits wont be able to go forward also by overturning Sweeney.
It is really interesting that Epstein and BO actually know each other and were on the faculty of University of Chicago Law School at the same time. BO was a part time lecturer on Constitutional Law and Epstein was an Interim Dean for a while before he joined the Hoover Institute. I dont think either of them knew about the NEC March 8, 2008 Barron's Memo at the time of the NWS - too bad for all of us.
I think Epstein feels the same way as a lot of us:
"It is odd to observe the tension between my happy personal life and the visible collective uneasiness about matters both domestic and foreign. I do try not to let the gloom of the world influence daily living and am known to sing (off-key) as a walk down the corridors. "
From the last sentence of what Epstein is doing now.
Thanks for your thoughts Louie.
Dimon at JPM and Mack at MS seemed to be stand up guys during the MBS meltdown and Financial Crisis. JPM obviously did well cleaning up but dont think they was any a lot of chatter about these firms having " any special insight " as DJT's first NEC Director mentioned in his FCIC testimony.
http://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2010-0630-Cohn.pdf
Hank's old firm seemed to have the best call on the MBS market meltdown. Some people obviously thought they had " a special insight "
First of three posts - I am only looking at FMCC but come up with a best case value around $ 30 in 2025-27 time frame post recap and release. Of course just a total guess but this value would only be fair. FMCC was around $ 20 per share before the NEC and UST torpedoed the negotiations with Congress on March 8, 2008 with the Barron's Memo that would stabilized the MBS market. Add $ 10 for loss dividend and you get $ 30. Ackman also came up with a valuation in the $ 30 range. The key is that the UST needs to get the new capital ASAP to minimize duration risk and maximize their returns. Trying to cramdown legacy common is just plain dumb when inflation is a real concern and their biggest exposure is the duration risk in the required ROI for new capital.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=168201323
I agree with you Louie and I think Tim Howard has it right regarding the cramdown but the question is what path this takes. It may take a couple a years to get there and that in itself is better than no action by the UST and FHFA - hence we are sitting at $.80 right now.
I think familymang has it right regarding the CBO model. The CBO obviously has this modeled and the question is what is going on with MS and JPM and what they will propose. It is kind of not worth speculating too much because if the Calhoun Utility model is going to be viable the UST will have to move in the next few months because it will take time.
Our big lost is it seems a large derivative claim is now not possible with the US Court of Appeals decision. Guido was right about the potential for the Kelly cased due to the fact pattern.
Lets see what develops. Both commons and JPS have a lot of potential - the road for JPS is much clearer but commons have more potential if the SPS is written down. The commons dont have the derivative suit any more and recovery for lost dividends will be hard to prove. We have to bank on the 20/80 split of the whole UST stake to get a fair deal in my opinion.
The fair deal will come either from a write down of the SPS by a Court order, pressure from Congress because it is a socialist scam or negotiation to get a deal done in time before DJT II takes over and/or DJT II himself. Unfortunately I dont have a lot of hope that the JB Admin will propose a fair deal but hopefully we will see soon.
We cant expect the UST or FHFA to propose anything that does not claim that the SPSA liquidation value is legit to start. The Jan 2020 Amendment stands and the CBO has already come out with this methodology.
Ultimately I think Tim Howard is right and the common cram down does not happen. I know that many believe that the warrants are not valid but it is my opinion that is our best case in that we will be 20/80 with the UST.
All the shenanigans should scare the shit out of Congress and they should not let the woke crowd use the GSE heist as a playbook for future Nationalizations. The CBO paper mentions the Farm Credit system as having a similar structure and it is not unforseeable that the rise in interest rates and oil prices could cause a financial meltdown for the farm credit system.
The remaining cases should be on our side and promote a good settlement if they want to get the Calhoun plan done in a way that cant be unwound but we have good reason to be wary of SCOTUS and the Court system in particular.
The public Common is worth $ 20 to $ 60 bn - will the UST take it?
Most of all the way UST can maximize its investment is to treat the public common right and raise equity as soon as possible to minimize duration risk. The potential for UST stake losses due to duration risk in its equity portion of the future GSE capital structure is much more than what they potentially can rip off investors for.
There is also a Washington insider panel - probably nothing since it seems to be lower level people. One person seems to be a talented member of Sen Portman's staff who worked on the Bipartisan infrastructure bill. Portman is retiring though.
As familymang said:
https://www.brookings.edu/research/government-sponsored-enterprises-at-the-crossroads/
The key structuring component is the CSS subsidiary that jointly owned by FNMA and FMCC. The idea is that a new affordable housing jointly owned sub would be set up and the UST stake would be deposited in that corporate entity and the UST equity stake would be sold off over time. Calhoun should be the CEO for this entity - it if probably better that he is CEO of this entity - BBB Affordable Housing Solutions - than the FHFA itself.
This will be a very difficult task and the JB Admin will want to make sure it can not be unwound by DJT II. This is why I dont think the 10 cent Cram Down will work because it will be too complex to get done in an way that can not be changed by DJT II with the restrictions and requirements of Administrative Law.
Are you talking about the related COFC cases? or all cases?
Does this Fat Lady sing in Latin - Cer - ti - ora - i !!
Agreed - it is not about Politics but more related to corruption in the swamp. We would not have been here if the GWB Administration did run a stealth campaign to Nationalize the GSES. The March 8th 2008 For Your Eyes Only Memo came out of GWBs NEC and was tacitly approved to be published in Barrons by the Undersecretary of the UST under Hank who claims to be a Republican. BO wanted to wind down the GSEs but it is not clear if he ever knew that the GWB Admin wanted to Nationalize before he even came into power.
Why did Mike Round's vote Thompson out of the Banking Committee. He was the lone Republican vote - otherwise it would have been 12-12 and they would have to had gone to the full Senate like they are doing with one of the Fed Nominees.
Also - why did SCOTUS flip from the tenor of the Oral Arguments and come up with this " special conservatorship" type of idea?. Some would argue that this came from the GSE haters at the Federalist Society. Hopefully it did not come from the connected swampsters who want to cover up how we got into this situation in the first place. Where would we have been if Congress had backstopped the GSEs in the Spring of 2008? Bear may not have failed, Wachovia may not have failed - Lehman may not have failed. Freddie should have probably never been grouped with Fannie because it did not have the subprime exposure that Mozillo at Countrywide stuffed FNMA with.
Navy - Tom Sullivan has a call in radio talk show. You can start by calling his radio talk show or emailing the guy
http://tomsullivan.com/?_
Thanks - yes - learn something new every day. Got to say I have learned too much about how government really works and it has been really really disappointing to learn how corrupt it is.
WOW! Thanks for sharing - sounds like it may take some time for the plan to emerge. I am hoping we get past the Motion for Summary Judgement and start to see how the lost divs claim is framed.
What time period for JPS and how will they handle the divs on the FMCC common.
Also - this just shows how difficult the APA is regarding any change in the Governance of the GSES. Calhoun's plan will not be easy or fast to get done. Not to mention avoid doing something that will roil the MBS market.
You are right - sorry - my bad
Here is the link with a comment period that just ended Feb 25.
https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Capital-Planning-and-Stress-Capital-Buffer-Determination-Proposed-Rule.aspx
Doesnt seem like the May 20th deadline is feasible. The FHFA can extend but will they start this process for sure in 2022?
Thanks!!
Rule was published yesterday March 16th, and effective May 16th - May 20th will work.
https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Enterprise-Regulatory-Capital-Framework%e2%80%93-Prescribed-Leverage-Buffer-Amount-and-Credit-Risk-Transfer.aspx
Familymang timeline for Lamberth:
5/6 Response for MSJ
5/12 Pretrial conference
We should have an assignment for Collins Remand by then
I think there is a chance for a Declaratory Judgement in the favor All American in the 5th Circuit by then also.
April 8th is the last day that the Senate is in Session before a 2 week recess. Thompson should be confirmed by then.
Wasnt the US Treasury suppose to issue a report under the last SPSA Amendment?. I think Toomey asked for it.
Yes - Thanks!! I forgot the exact day.
Question is what analysis and advice will the FHFA rely on for the Capital Budget?
Got to believe that both FNMA and FMCC will submit info to the FHFA?
Will FNMA and FMCC get input from JPM and MS to come up with their individual plans? Are JPM and MS still involved?
These plans are probably material events and will be disclosed in an 8-K when submitted to the FHFA or some time point around then.
Will UST submit their report by the May 20th date?
https://www.uscourts.gov/about-federal-courts/court-role-and-structure#:~:text=Court%20Role%20and%20Structure%201%20Supreme%20Court.%20The,Bankruptcy%20Courts.%20...%205%20Article%20I%20Courts.%20
District Court is where you start if you have case that belongs or is in the jurisdiction of the Feder Court System.
I think you have situations like the Remand in Collins where the 5th Circuit Court of Appeals sent the case down to the Southern District Court of Texas. Appellate Courts generally do not decide issues of fact but focus on whether the correct law was applied to the facts or if the parties were treated correctly under the law
Some cases belong in State court system - ie where the issue is local and the parties are residents of the same State. Most cases are probably litigated in State courts
Klein was part of BO's White House - Early on in the Event Klein mentions what the BO White House did after they got creamed in the mid terms. He said they were told to find policy actions that they could achieve via Administrative Action without Congressional Approval. He said the polls are predicting losses for the Dems in the 2022 mid terms and by implication now is the time to come up with an Administrative action for Affordable Housing Policy - this is where Calhoun gave his presentation saying his plan can be done by Administrative Action
Interesting mention of the Capital Rule by Bradford - I believe this is the Rule which will require the FHFA to come up with a capital raising plan by May 1 - perhaps Glen wants to elaborate - or not?
The mob has got ahold of us - and it is the mob that Sweeney mentioned - not the guys asking questions or making comments on this Board.
familymang - Thank You for taking the time and I agree you should not have to explain anything more about the appeal process for the US Court of Appeals. I have to admit that I was confused about where this opinion came from because all of the other Appellate Courts are identified as Circuits. It is also confusing to understand how the COFC and the DC Circuit fit together and how the Appellate process works for claims against the US Government are adjudicated and potentially appealed.
Here is the link to the video for the Committee Vote during an Executive Session that took place yesterday - March 16th
https://www.banking.senate.gov/hearings/03/16/2022/executive-session
The Video is blank until approx the 7:30 time period. Brown discussed all the nominees - Toomey made a good statement about representing the people. Brown starts discussing Thompson around 10:25 and the vote happens. All the Democrats were there and voted in person. Only four Republicans were there and the rest voted by proxy.
Turn up the volume to hear the actual votes.
Thanks for the question - We all are learning about politics and law. When I bought that IPO of FNMAT for my wife's IRA in May of 2008 - I never thought that I would have to know so much just to be treated fairly as an investor in the capital markets.
It is my understanding that a nomination would not go forward unless the Senate Majority Leader knows he has the votes to get the Nominee confirmed.
The Majority of the Senate is needed for confirmation.
Thompson was confirmed 13-11 with all Democrat senators voting yes and Senator Mike Rounds from South Dakota voting yes - all other Republicans voted no. If Mike Rounds votes yes in the full senate vote they will have at least 51-49 to confirm.
At this point I do not think a Senate Vote has been scheduled but it is expected that all of the Fed Nominees and Thompson will be confirmed before Senate Recess. Senators have the right to talk to nominees before the Vote and make public statements during the Vote to let their constituents know why they are voting one way or another.
This is my understanding of the process which I believe is generally correct but perhaps others on this Board know more and I am open to be corrected.
Full Senate will have to vote on Thompson's nomination.
Here is Sen Toomey's Statement
On Acting Director Thompson:
“As Acting Director, Ms. Thompson has allowed the GSEs to be re-purposed as instrumentalities of the administration’s radical housing policy. To that end, she has reduced capital requirements, suspended restrictions on the GSEs’ acquisitions of high-risk loans, and required the GSEs to develop plans to advance affirmative action in housing. These steps will only drive further increases in housing prices and risk another round of taxpayer bailouts.”
###
What is your interpretation of the last paragraph of the Opinion regarding the Separation of Powers claim?
Here is the paragraph:
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).
Has the 5th Circuit decided that the plaintiff's "..have already been afforded the only possible remedy .."?
Isn't that what the Collins Remand about? The remaining issues in the CFPB V All American case?
Appreciate your thoughts.
Greta was right!! Just look at who moderated the 9:30 am panel and who met with the UST multiple - multiple times - including his now partner who was then working for HUD on 2/24/11
https://www.treasury.gov/initiatives/wsr/Pages/dfa2_11.aspx
Thanks for the insight - makes sense. What is the status of the Mike Kelly litigation? I think it was stayed and he has the same lawyers as Wash Fed.
Also - does this get assigned away from Judge Schwartz?
Jared seems like a serious well intentioned guy - sort of a liberal renaissance guy with a good enough jump shot to play basketball with the BO insiders. Give him credit to step away with Larry Summers from the BO White House before the sausage of the NWS was made. I think of him in the Mike Calhoun cohort - well intentioned but liberal. Good enough to want to serve now rather than make gobs of money off the plight of GSE common shareholders as a Advisor.
The key is that need to get something done now and they are almost certainly try to ram it though via Admin Action. DJT II timing and possibly a Tim Scott Chair of Senate Banking Committee will probably cause them to abandon to cram down to get something done administratively before it can be unwound by DJT II
What he has said in the past:
https://jaredbernsteinblog.com/
Glen - no wonder you want the Golden Ticket - it is your destiny!
https://www.bing.com/search?q=peter+ostrum+photos&cvid=80e9f5fcd95b4de998e00eee5127be50&aqs=edge.0.0.7425j0j1&pglt=2083&FORM=ANSPA1&PC=U531