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you know I love you debil....you always make me smile.
and if those politics win...we go to zero...that's a warning to anyone out there thinking that this investment thesis is in the bag....
Most interesting note, this sort of pits executives of fannie against the government:
"The potential payment would be the upshot of an accounting move that Fannie Mae's senior executives are looking to make whereby the company would reclaim certain tax benefits that were written down shortly after the company was placed under federal control in 2008."
I have long wondered if there was light at the end of the tunnel would the execs try to get out of conservatorship and profit handsomely. However, I note recent departures of senior execs, including Freddie CFO, who would be in the know if they could survive and make multi-millions staying there. But they left. CEOs are already multi-millionaires and aging, and probably took the job as public service (make a few million on the side for a few years, but forget the 8 figure future payouts)
I don't know.
Also:
No comment on what happens to jr. equity...more positive than bloomberg, but just because there is lack of comment, IMHO, should not be construed by our glass-half-full brethren to mean that this is support for jr. equity profit.
WSJ: Fannie Sees a Way to Repay Billions
http://online.wsj.com/article/SB10001424127887323639604578368443773821834.html?ru=yahoo&mod=yahoo_hs
By NICK TIMIRAOS and ALAN ZIBEL
The rebounding housing market has helped return Fannie Mae FNMA +30.25% to profitability and now might allow the government-controlled mortgage-finance company to do the once unthinkable: repay as much as $61.5 billion in rescue funds to the U.S. Treasury.
The potential payment would be the upshot of an accounting move that Fannie Mae's senior executives are looking to make whereby the company would reclaim certain tax benefits that were written down shortly after the company was placed under federal control in 2008. The potential move was disclosed last week in a regulatory filing in which the company said it would delay the release of its annual report, due by Monday, as it tries to reach resolution with its accountants and regulator over the timing of the accounting move.
The debate about when Fannie should be allowed to reclaim the so-called deferred-tax assets comes as Fannie and its smaller sibling, Freddie Mac, FMCC +27.83% are likely to show large profits in the coming quarters as the housing market gradually recovers from a prolonged bust, home prices rise and mortgage delinquencies fall.
The potential payment also has political implications as lawmakers and regulators wrangle over the fate of the firms, which were placed into a federal conservatorship amid soaring losses. The Obama administration has publicly said the two companies eventually would be wound down and has blocked them from retaining profits, but has done little to de-emphasize their role in the mortgage market.
A spokeswoman for the company's regulator, the Federal Housing Finance Agency, declined to comment.
While a payment wouldn't erase its debt to taxpayers or remove it from government control, Fannie said in its filing that the accounting change would result "in a significant dividend payment" to the U.S. Treasury. The payment would flow straight to the Treasury, and the company could be able to repay the bailout funds it extracted from the Treasury sooner than many observers expected.
At issue are the credits and deductions a company can retain and use to defray taxes on its future profits. The assets must be written down if a company believes it won't be able to generate enough taxable income soon enough to use the credits. Fannie had recorded a total of $61.5 billion in write-downs of deferred-tax assets as of Sept. 30, 2012, virtually all of the assets' value.
Now, Fannie may be able to reverse some or all of those losses if the company concludes it is likely to have taxable income. Fannie reported $9.6 billion in net income for the first three quarters of 2012, compared with losses of $14.5 billion for the same period in the previous year. The company has said it plans to report a significant profit for the fourth quarter, which is expected to mark its largest ever annual profit and its first in six years.
For its part, Freddie said in its annual report that the conditions facing the company didn't warrant reversing any of its $31.7 billion in tax-asset write-downs as of the end of 2012.
Jim Vogel, an analyst who covers the companies at FTN Financial, said it is likely the companies would eventually be able to reverse some but not all of their deferred-tax write-downs.
Even though the potential payment results largely from a bookkeeping change, the prospect of Fannie remitting billions of dollars to the Treasury "could have important repercussions for reform and other housing-finance discussions," Mr. Vogel said.
Critics of the companies said they are worried that such a large payment to the Treasury would exaggerate their financial health and could remove the incentive to replace or wind down the firms. "While not truly representing a marketable asset, Fannie is likely to present its tax losses as a financial gain and use it as proof that they have turned the corner and should be allowed to continue as a company in their current state," said Mark Calabria, director of financial regulation studies at the libertarian Cato Institute.
Meanwhile, there are signs that Congress is starting to pay attention as worries that the firms would long remain a drain on the U.S. Treasury have given way to a new issue: that the companies' revenue stream might be used to pay for government spending amid efforts to reduce deficits.
Last week, four U.S. senators—two Democrats and two Republicans—introduced a measure that would bar lawmakers from using the firms' revenues to pay for unrelated government expenses. The bill would also require Congress to vote on any plan by the Obama administration to sell any of the Treasury's senior preferred shares in the firms.
When Fannie and Freddie were seized in 2008, the government agreed to inject the firms with cash to keep them solvent and took senior preferred shares in the firms in exchange for that backing. Under the terms of a revamped agreement reached last summer, any profits at the end of each quarter are swept away as a dividend payment on those preferred shares.
So far, Fannie and Freddie have received nearly $188 billion from the U.S. Treasury and they have paid dividends of $58 billion, bringing the total cost of their rescues to $130 billion, with around $88 billion for Fannie and $42 billion for Freddie.
Write to Nick Timiraos at nick.timiraos@wsj.com and Alan Zibel at alan.zibel@dowjones.com
SA -- I suspect you are right. I think he could drop another bomb while testafying that scares us all to hell. I was adamant keeping my shares till FNMA earnings...but I fear another Auguest 17th everyday. wondering why i didn't cut my losses friday and monday as I am NEARLY whole on original preferred investment (but still down 40% on common investment which I got killed on before switching over from the dark side of the force)
joe...i've been openly supportive, but wounded has a point on leadership point of view. it's tough to think how to best lead when not convinced of the outcome...it is a very hard thing to do....
as for bloomberg, fine...they find all the negative spin. is anyone out there giving an alternate opinion??? I haven't heard one.
so, dealing with what we know, everyone is saying F&F return nothing to jr. equity. sucks, but that's what I see.
bloomberg article says no $$$ for us:
slams it pretty hard into the ground, multiple sources say no way anyone below sr. preferred status gets paid. is this the final-final-final warning to get out?????
http://www.bloomberg.com/news/2013-03-18/demarco-calls-for-new-push-on-reform-as-fannie-profits-return.html?cmpid=yhoo
DeMarco Calls for New Push on Reform as Fannie Profits Return
By Cheyenne Hopkins & Jody Shenn - Mar 18, 2013 5:36 PM CT
Fannie Mae and Freddie Mac, the two government-seized mortgage financiers, appear increasingly likely to pay billions of dollars to the U.S. Treasury, focusing attention in Washington on what should replace them.
Edward J. DeMarco, the acting regulator of the two companies, is scheduled to appear before the House Financial Services Committee tomorrow and will urge lawmakers to reduce or eliminate the mortgage market’s reliance on taxpayers. At the same time, a Senate panel will hear testimony from the authors of an alternate plan for housing-finance reform issued in February by an independent commission.
“I have been observing a developing ‘consensus’ among private-market participants that the conforming conventional mortgage market cannot operate without the American taxpayer providing the ultimate credit guarantee for most of the market,” DeMarco said in written testimony prepared for delivery at the House hearing. “That clearly is one outcome, but I do not believe it is the only outcome that can give our country a strong housing finance system. I believe that our country, and its financial system, are stronger than that.”
Washington-based Fannie Mae (FNMA) and McLean, Virginia-based Freddie Mac have been under U.S. conservatorship since 2008 and have drawn nearly $190 billion in taxpayer aid to stay afloat during that time. Lawmakers who don’t want the companies to return to their previous government-sponsored status are becoming concerned that political momentum for winding down and replacing them could erode as the housing market rebounds and profits soar.
Paying Billions
Fannie Mae, in a regulatory filing on Thursday, raised the possibility that it could soon be required to send as much as $62 billion to the U.S. Treasury because, once it is profitable, it may have to start counting potential tax credits as part of its net worth. The company said it would delay filing its earnings report for the quarter ending Dec. 31, 2012 while it studies the accounting issue.
Regardless of the outcome, Fannie Mae said it still expects to report “significant net income” for the quarter.
The news helped send Fannie Mae’s preferred stock soaring to the highest point since September of 2008, when it was seized by the government and dividends were suspended. Fannie Mae’s $7 billion of 8.25 percent preferred shares climbed to $2.96 in New York on March 15 from $2.08 on March 13. Shares fell to 2.79 at 4:15 p.m. today.
The company’s common shares, which reached as high as $69.49 in 2007, soared almost 7 percent over the two trading days through today to 52 cents.
No Repayment
The securities may be worthless unless the companies can pay off the funds they owe to taxpayers or see their bailouts reworked. Under the current terms of the companies’ aid agreements, any money they send to Treasury is considered a return on the taxpayers’ investment, not a repayment. That’s because the federal government structured the bailout so that they could not regain independence without a new housing finance system in place.
Lawmakers including Louisiana Republican David Vitter and Elizabeth Warren, a Massachusetts Democrat, Thursday introduced a bill that would ensure Fannie Mae and Freddie Mac wouldn’t be able to emerge from government control even if they end up paying more back to the Treasury than they took in aid. The measure would ban sales of senior-ranking U.S. Treasury-owned preferred shares without congressional approval.
“This bill shows that Republicans and Democrats do agree on the urgency required to reform the mortgage finance system,” Vitter said in a statement. “Reform can’t happen if the U.S. Treasury pulls a fast one on taxpayers by selling their preferred share investment, but our bill will ensure the taxpayers will get the reform they were promised in 2008.”
Outlook Improved
Even without legislation, Treasury is extremely unlikely to change the rules to allow the companies to emerge from conservatorship, said Thomas Lawler, a former Fannie Mae economist who’s now a housing consultant in Leesburg, Virginia.
“Even though the outlook for the company has dramatically improved, I don’t think anyone would agree that it’s a good idea for them to become any kind of stand-alone,” Lawler said in an interview.
Investors are wrong to expect that Fannie Mae and Freddie Mac (FMCC) will emerge from government control in a manner similar to American International Group Inc., the insurer that repaid its government bailout in December, said Ed Mills, an analyst at FBR Capital Markets & Co. in Arlington, Virginia.
‘Political Baggage’
“The difference between AIG and Fannie and Freddie couldn’t be more stark,” Mills said in a telephone interview. The two mortgage companies were government-sponsored with long histories of implicit taxpayer support before their rescues. In addition, he said, Fannie Mae “has the greatest amount of political baggage of any company to have ever existed in the history of the United States.”
Ralph Axel, a Bank of America Corp. analyst, wrote in a March 15 report that while “the market is clearly looking past the current agreements at a possible future in which private GSEs are profitable and paying dividends to existing private equity holders,” the reality is that “such a future is not in the cards.”
A privatization isn’t feasible in part because the companies would need to raise “a great deal” of capital along with repaying the government, Axel wrote. At the same time, the size of their investment portfolios are being shrunk and the holdings’ profitability would be limited if they didn’t have taxpayer backing, which reduces their borrowing costs, he said.
Awaiting Overhaul
Meanwhile, Democrats and Republicans remain divided on what should replace the two companies, and the White House has yet to present a plan for a housing-finance overhaul. That leaves DeMarco, who leads the Federal Housing Finance Agency, to gradually shrink them on his own.
President Barack Obama is getting closer to nominating a replacement for DeMarco, 52, a career government employee who has been in his current post since 2009. DeMarco has been criticized by housing advocates and Democratic lawmakers for refusing to let the two U.S.-owned companies cut debt for borrowers whose mortgages exceed the value of their homes. At the same time, he has earned praise from Republican lawmakers for his focus on improving the bottom line at the two companies.
One of the potential replacements for DeMarco: North Carolina Congressman Mel Watt, a Democrat, who sits on the Financial Services Committee.
In his prepared testimony, DeMarco urged Congress to act on an overhaul.
“The U.S. housing finance system cannot really get going again until we remove this cloud of uncertainty and it will take legislation to do it,” he said.
To contact the reporter on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net
To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net
well, demarco better have a damn good argument...auditors will never sign a document they don't agree with.
honorable is a term used if they used to hold a high office like congressman, ambassador, mayor of a city, and other things.
notice the ctr. american progress lady did not get the title...
freddie 10-K said it and demarco's latest speech he said it. (at least in the transcript on FHFA website)
I didn't see august 17th either. a day that will live in infamy. we have nothing to fear except fear itself. and the US Treasury reminding us, again, that shares may have little or no value.
Let's all remember as we get rich this day, a fool and his money are soon parted. I hope we are not fools. Financially, the game is playing out as predicted.
I don't trust politicians....
Bitch slap coming?
To re-post:
I fear August 17th
just when we feel out of the woods, US Treasury beats us down...I feel like an abused co-dependent...all looks great, but when is the next beating going to come?!?!!? or are we finally going to have peace and happiness?
FMCCH 09:52am EDT 5.70 Up 0.70 Up 14.00% 176,046
http://finance.yahoo.com/quotes/FMCC,FNMA,FMCKJ,FMCKI,FMCCM,FMCCK,FMCCT,FMCCI,FMCKK,FMCCG,FMCCH,FMCCL,FMCCN,FMCCO,FMCCP,FMCCJ,FMCKP,FMCCS,FMCKO,FMCKM,FMCKN,FMCKL,FNMAP,FNMAO,FNMAM,FNMAG,FNMAN,FNMAL,FNMAK,FNMAH,FNMAI,FNMAJ,FNMAS,FNMAT,FNMFM,FNMFN/view/v2?info=view_updated
i can;t ban anyone
i do see a lot of truth in joe stocks statements. anyone with real money invested (like me, basis being a percent of all investable assets which changes for each person) should listen to him.
that said, I can moderate statements per terms of service http://investorshub.advfn.com/boards/Terms.aspx
but no further
welcome feral! i'm not as sure about this one as I was ACAS.
3 post limit till ihub approves you for 15 per day. unlimited if you buy subscription, which I don't think any of us have.
the video i saw linked was on a totally different topic. (well, it was about housing...but not so much F&F)
anyone help point me the right way?
this could be huge
joe technically right, the "net investment" is used by us and some in the media...when "net investment" is zero, there will still be billions of preferred at par value...and what will they do?????? AIG? or will congress pass the bill, and later, have to pass another bill to tell treasury what to do with those sr. shares????
there is a lot we don't know.....if we did, the jr. pfd would be 50 cents on the dollar today or more.
150 or 190 billion...it's a lot, and I agree with Joe, "hope" is not a good strategy (I might have left out the "grownups" comment)
anyway...there is no guidance that the government can't/won't suck these dry for eternity
i think it would be less painful to just get out ala AIG with a tidy profit, but politicos not really saying that right now....
i'd love to hear that...no archive found at cnbc.com
that would be quite a boom
because i'm skeeeered (as someone on YMB used to say...wasn't debil was it???)
seriously...the politicos have said they don't want us to profit.
i am nervous of a fannie blowout and then 4 days later DeMarco releases new rules and regulations and it's Aug 17th all over again.
as I said, co-dependent in a loving abusive relationship
i've never heard of anyone getting fleeced while in a casino without even placing a bet!!!! that is hilarious (if we can find a spot of humour in the august 17th drubbing)
brilliant. thx. appears reversal limited to a shorter time frame, and can only equal (it seems) the amount that might be used in the next few years.
i missed that link on DTA...what post?
we got a CPA knows DTA on this board?
that should end the debate
DTA's, I'm 90% sure, are all or none. they are making profits and will use them, or losing money and won't. they aren't like credit loss provisions.
i said look across the board. some are 1000...some 200 some 500
the MAS and CKJs trade high volume as usual, more than most days.
and, it is uncommon for any of the others to trade at all across the board...but the share volume is still low.
looking pretty retail so far today...just an hour in...light volume if you look at the spectrum
http://finance.yahoo.com/quotes/FMCC,FNMA,FMCKJ,FMCKI,FMCCM,FMCCK,FMCCT,FMCCI,FMCKK,FMCCG,FMCCH,FMCCL,FMCCN,FMCCO,FMCCP,FMCCJ,FMCKP,FMCCS,FMCKO,FMCKM,FMCKN,FMCKL,FNMAP,FNMAO,FNMAM,FNMAG,FNMAN,FNMAL,FNMAK,FNMAH,FNMAI,FNMAJ,FNMAS,FNMAT,FNMFM,FNMFN/view/v2?info=view_updated
here we go...CKJ up 65 cents
it's my medication. diagnosed with bipolar type II over a year ago. convinced it's part of why i took this dive in the first place. certainly explains my august 17th panic. i have meds sorting me out and keeping me fairly level now.......
Bitch slap coming? For once, I slept great, and have no excitement for the future. Just watching. Not selling. Just watching.
To re-post from yesterday:
I fear August 17th
just when we feel out of the woods, US Treasury beats us down...I feel like an abused co-dependent...all looks great, but when is the next beating going to come?!?!!? or are we finally going to have peace and happiness?
I fear August 17th
just when we feel out of the woods, US Treasury beats us down...I feel like an abused co-dependent...all looks great, but when is the next beating going to come?!?!!? or are we finally going to have peace and happiness?
my june-ish buy was $3.25...I started cost averaging in August, and it's all been downhill from there!
nice find though!
that's about when I first bought in.
all in good fun buddy....will be a welcome sight should you decide to do so
4cent isn't 10cent cause he doesn't quite believe this rally.
es la verdad?? (the truth?)
;)
look what else freddie's been up to!!
charts provided at this link: http://www.mortgagenewsdaily.com/03142013_oig_freddie_mac_management.asp
FHFA OIG Looks at Freddie Mac's $1.2B Lehman Brothers Loss
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Mar 14 2013, 1:08PM
The Federal Housing Finance Agency (FHFA) Office of Inspector General (OIG) has published an evaluation report detailing Freddie Mac's involvement in unsecured lending to Lehman Brothers just prior to that firm's bankruptcy. The last Freddie Mac loan to that firm resulted in a loss of $1.2 billion.
Prior to its filing for bankruptcy Lehman was the fourth largest investment bank in the United States with $639 billion in assets. Lehman traded and underwrote stocks and bonds, traded commodities, was active in the credit derivatives market, and became a major player in both commercial and residential securitization markets. Lehman sold mortgages to Freddie Mac and also served as one of its investment bankers. Lehman underwrote common and preferred stock offerings for Freddie Mac as well as various debt securities offerings.
In 2007 it underwrote more mortgage-backed securities (MBS) than any other firm. Its $85 billion mortgage-backed portfolio was equal to approximately four times its shareholders' equity and this high degree of leverage made it vulnerable to the increasing losses it was incurring in its residential housing and commercial property investments.
On June 9, 2008, Lehman announced a $2.8 billion second quarter loss and on September 10, 2008, it posted a third-quarter loss of $3.9 billion. Its increasing losses were reflected in the price of its common stock.
Freddie Mac had been lending to Lehman since 2005, typically what are known as "Fed Funds" or overnight loans. In January 2008 the nature of those loans changed to longer term, typically a month, loans which often were rolled over into new loans. In August 2008 Freddie Mac made two short-term unsecured loans to Lehman Brothers totaling $1.2 billion which were due on September 15, the day Lehman filed for bankruptcy protection.
Like other companies, Freddie Mac typically invests its cash in a manner intended to ensure that such funds will be returned to it so it can pay its own obligations as they become due. Choosing counterparties capable of meeting their obligations is not only a function of its financial condition and credit history but also a function of time. The longer the term for which money is lent, the greater the risk of default. Such assessments were the responsibility of the Credit Risk Management (CCRM) staff of Freddie Mac's Risk Oversight Division.
During 2008, CCRM's oversight of risk with the Lehman loans focused primarily on whether such loans should be limited to overnight (24 hours) or longer (up to 30 days) terms. Indeed, in 2008, some CCRM staff questioned whether Freddie Mac should be making unsecured loans to Lehman at all. However, those concerns, which would have reduced the extent of the Enterprise's exposure, were overruled at senior levels within Freddie Mac as were repeated recommendations that any loans be limited to shorter terms.
Freddie Mac was historically regulated by the Office of Federal Housing Oversight (OFHEO) which was replaced by the FHFA on July 30, 2008. No examination had been performed by OFHEO related to capital markets counterparties prior to the Lehman bankruptcy. Following the default FHFA examiners conducted a series of targeted examinations related to counterparty credit risk management and management of Freddie Mac's liquidity and contingency portfolio and made a number of findings regarding Freddie Mac's operations. It recommended that certain actions be taken to better manage counterparty risk and particularly to clarify that Fed Funds investments do not carry any implied government guarantee.
FHFA's Examiner-in-Charge at Freddie Mac has indicated that the monitoring of counterparty risk is a priority for the Agency and that "significant resources" will be dedicated toward the examination of such risk in the 2013 Examination Plan. During the second half of 2012, FHFA conducted several targeted examinations relating to various aspects of counterparty risk and now requires the GSEs to report on counterparty risk (quantitatively and qualitatively) on a monthly basis. Freddie Mac has amended its Liquidity and Contingency Policy to reflect that its activities are consistent with FHFA and Treasury guidance and suspends unsecured term lending. Second, the Capital Markets Counterparty Credit Risk Management Policy was revised to clearly define the roles and responsibilities of Freddie Mac staff involved in managing the Enterprise's counterparty credit risk program and defines Fed Funds lending as an unsecured investment.
OIG notes that FHFA and Freddie Mac are making attempts to recover the $1.2 billion lost in the Lehmann bankruptcy. Freddie Mac filed a proof of claim but it stands behind secured creditor's claims. FHFA, through the Office of General Counsel, has worked to improve the chances of Freddie Mac's recovery and it is possible that Freddie Mac may ultimately recover $1.2 billion but stands to recover no less than $251 million.
OIG says that while FHFA and Freddie Mac have already taken steps to address the shortcomings in Freddie Mac's risk management and control systems, it recommends that that FHFA should:
Continue to monitor Freddie Mac's implementation of its counterparty risk management policies and procedures
a. Ensure that the independence and decisions of the GSE's risk management staff are not overridden by business management staff, and
b. Direct Freddie Mac Internal Audit to audit the CCRM function annually.
Continue to pursue all possible avenues to recover the $1.2 billion in the Lehman bankruptcy proceedings.
Continue to develop an examination program and procedures encompassing GSE-wide risk exposure to all of Freddie Mac's counterparties.
this bill is interesting. it is so small and simple, I wonder if the leadership has already gained consensus in the House, and maybe even the Prez.
that said...this thing has a LONG way to go before being law. It has to get through the senate and house and get signed. frankly, it has to get out of senate committee first, which seems highly likely.
this is also perfect to tack on as an ammendment to a larger bill that is going to pass.
I say 50-50 this becomes law...maybe through the ammendment process.
volume more institutional?? traders or investors?? well...reading tea leaves, something I am very bad at, seems like the "market" kinda likes this news....[commons still under 30 though!]
http://finance.yahoo.com/quotes/FMCC,FNMA,FMCKJ,FMCKI,FMCCM,FMCCK,FMCCT,FMCCI,FMCKK,FMCCG,FMCCH,FMCCL,FMCCN,FMCCO,FMCCP,FMCCJ,FMCKP,FMCCS,FMCKO,FMCKM,FMCKN,FMCKL,FNMAP,FNMAO,FNMAM,FNMAG,FNMAN,FNMAL,FNMAK,FNMAH,FNMAI,FNMAJ,FNMAS,FNMAT,FNMFM,FNMFN/view/v2?info=view_updated
this is not good: "If Treasury were to decide to sell its preferred share investment without Congress having first reformed our housing sector, we would just be returning to a time where gains are for private shareholders and losses are for taxpayers," said Corker.
yet market says shares are up.
my deliberation continues.....
this investment has caused so much heartache....
of course, he might mean future shareholders rather than current shareholders (e.g., does his quote mean the long term view or short term view??)
i still might sell after fannie...last thing we need is another surprise from the treasury ala August 17th...a day, in our eyes, that will live in infamy!