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Check out the email trail and decide if Robert Steel wanted to have the GSEs recapitalized in March of 2008 or if he undermined the efforts of the Senate Banking Committee and the GSEs?
https://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2007-2008_Fannie_Mae_Timeline_and_Supporting_Documents.pdf
Sounds like just what Calabria was saying in his post. He probably has first hand knowledge of what actually went down since he was a staffer for Senator Shelby on the US Senate Banking Committee at the time. A week after the Barrons " For your eyes only" Memo comes out - Bear Stearns is forced out of business.
Here is the "For your eyes only" Memo
https://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
Thanks for the post Guido. I know you mentioned the recent post by Tim Howard regarding the CRT's - seems like the underwriting fees for the CRTs are more of the same in Washington DC. Do you or anyone else know what TH means about the excessive underwriting fees? Here is an excerpt:
"In the late spring of 2021, after it became apparent that the companies had essentially been looted, we started to investigate the details of how CRT transactions were underwritten. Our first shock was learning that the Wall Street underwriters earned fees that were multiples of the net values of CRTs to the companies. These Wall Street underwriters—you can guess the firms—were supposed to protect Fannie and Freddie, but instead they joined in robbing their clients. Of course, the CRT investors, primarily hedge funds and real estate investment trusts, were also clients of these Wall Street firms"
https://howardonmortgagefinance.com/ The CRT Charade January 16, 2024 Post
Seems like something that the FHFA OIG should investigate? How are the underwriters selected? How are the fees determined? Are there any conflicts or special interests or relationships at the underwriters that are essentially looting the GSES?
Potentially a great political issue for DJT and the GOP - Administrative Agency ran amok - using a Special Conservatorship status to benefit the politically connected and benefactors of selective favoritism.
Thanks Eternal Mountain.
Looks like we owe a big thanks to Wise Man for his reminder about the Michel Bloomberg Policy Statement to merge FNMA and FMCC!
https://themreport.com/news/government/02-18-2020/bloombergs-wall-street-plan-merge-fannie-mae-and-freddie-mac
We also need to Repeal HERA and SHUT DOWN FHFA
Seems like a crypto guy - has he followed the GSEs?
And the $ 34 billion of investor capital raised to issue the JPS should be paid back at PAR plus the Lamberth damages. Treat ALL shareholders fairly! The Growth Fund of America lost millions from being the largest holder of common and one of the larger holders of JPS. Mike Kelly and his banks doing the right thing lost $ 1bn investing in JPS and lost billions more of going concern value because his banks were shut down.
Good point jeddimack:
IMO we need a plan whether it is JB or DJT and then the politics will start. We should just keep on sharing the truth about what happened to shareholders at the hands of the USG. I would hope that something is included in the SOTU because it will give the GOP the opportunity to do the right thing. This was a back door nationalization via HERA and the Conservatorship and then an Unconstitutional Taking with the NWS.
I would urge a read of the Mike Kelly Complaint because it exposes the misdeeds of the USG at the time of the Conservatorship. The Lamberth Jury gave the verdict on the USG actions regarding the NWS. 8-0 from a DC Jury!
Thanks Guido! Great Post!
Arent the GSEs also collecting a surcharge tax on all mortgages - BO passed that legislation? Rather than lower the costs of home mortgages the BO Admin just used them as a piggy bank and no one has done anything sense.
Congress should repeal HERA and assign any NECESSARY supervision to the FED and UST. Maybe 10 to 20 Employees only?
When Congress repeals they should make it clear that they never intended give a Federal Agency "Special Conservatorship Powers" No DEI and no SPECIAL rights to take private capital. Congress intended the Conservatorship to be like the FDIC powers not "Special" - dangerous precedent set by SCOTUS that Congress should annihilate NOW.
Get rid of the Conservatorship by repealing HERA - keep capital standards - and selling the GSEs back to private investors.
SHUT THE FHFA DOWN!
Thanks DC Bill! Did you see the part about the Underwriters "looting" the GSEs based on the fees charged? Who are these Underwriters? Any friends or family benefiting from the " loot"?
Hi Rodney - Great Analysis. The $ 400 bn seems about right.
You can probably add another $ 10 to $ 30 bn for costs savings and spinning off CSS. CSS could also service private label MBS.
Vivek should just get rid of the FHFA! HERA was passed due to a self created crisis by the UST and the NEC. Move the Supervision for the GSEs to the UST and the Fed and stop playing Agency charades.
Calabria dug his own hole and Pence buried him - how about getting rid of the FHFA!
UST Treasury Secretary will do - dont you think? Janet Yellen or Vivek?
Hi Rodney - I also appreciate all that you have done for shareholders. Let me retract part of the previous post and just suggest a merger of FNMA and FMCC and spin off of CSS before an IPO for the benefit of common shareholders. I am fine if JPS get taken out at PAR and are paid the Lamberth damages. How does that sound? At least it should make some people think - wouldn't Ackman want to make this happen?
I believe Mike Kelly and Brydon Fischer are right and that SCOTUS should grant Cert and rule in favor of all shareholders. That is my fervent desire but I have been waiting since May 2008 and truthfully would be happy with just seeing my FNMAT trade PAR again after I get my buck or so from the Lamberth judgement. Is that too much to ask?
If the GOP can control the House and Senate the best exit would be to amend the Charters, merge FNMA and FMCC, spin off CSS and sell both CSS and the combined FNMA and FMCC equity as an IPO. Even if the legacy common only got 20% of the combined value it would be a home run for all. Dont you think Vivek would think of this? It is corporate restructuring 101.
Congrats Amelia!!!! - were you born in the Year of the Dragon? Hope you have a lot of good time to spend with your lovely mother! She raised a smart and successful professional woman! Congrats again!
Really interesting imbellish. Thanks for the cite.
How many FNMA Employees still come to the office?
“Like many other companies, we are continuing to embrace our flexible work environment by exploring office space options that support our workforce while being fiscally responsible,” a spokesperson told Bisnow in a statement, confirming the exit. “Per our charter, we will continue to maintain a presence in the Washington, D.C., metropolitan area.”
https://commercialobserver.com/2024/01/fannie-mae-exiting-713k-sf-dc-lease-early/
Thanks Skeptic - I thought the GSEs actually recorded the WS settlements as income. They gave all the income to the UST under the NWS but first they received the cash and recognized the settlements in their financial reports - is this wrong?
No disagreement on him being POTUS - never was chance for this election. I am talking about the DJT Campaign against the Administrative Estate and USG self dealing and potentially a Cabinet position if DJT is successful.
Perhaps he will just fade away but I rather doubt it. The guy is on a mission and he is smart and he worked for some really smart guys who run hedge funds.
Another Tim Howard excerpt:
In the late spring of 2021, after it became apparent that the companies had essentially been looted, we started to investigate the details of how CRT transactions were underwritten. Our first shock was learning that the Wall Street underwriters earned fees that were multiples of the net values of CRTs to the companies. These Wall Street underwriters—you can guess the firms—were supposed to protect Fannie and Freddie, but instead they joined in robbing their clients. Of course, the CRT investors, primarily hedge funds and real estate investment trusts, were also clients of these Wall Street firms
Who are the Underwriters for the CRT offerings?
Thanks for the Tim Howard post mrfidlsticks. Here is an excerpt:
This, of course, is not Fannie’s fault; it is another stupefying consequence of the company’s conservatorship under FHFA. The former director of FHFA, Mark Calabria, has admitted that CAS are a “looting” of Fannie, yet knowing this, the current director, Sandra Thompson, continues to use both carrots (capital credits) and sticks (CRT issuance goals that reduce executive compensation if not met) to encourage CAS and STACR issuance, even as the costs of these deals soar and their benefits dwindle, making the looting even greater.
Good Points Brooge. Dont you think the GSEs will be a campaign issue ?- Vivek has to be aware of the issue and the value of the companies - this really is an opportunity to showcase the self-dealing of USG officials and the run-away Administrative State. We will see - I am encouraged to see Vivek and DJT team up. If JB tries to spend GSE money or announces a recap - you know it will be a campaign issue and we all know what the Truth is. The Truth is that GSE investors were screwed before the unnecessary Conservatorship and have been screwed for the 15 years since Conservatorship!
Fair observations jcromeenes - no one is holding their breath - just their shares. I have been holding since May of 2008 when I bought FNMAT on the new issue at $ 25. The reason the JPS is trading at 10ct on dollar is that we have been screwed for over 15 years and screwed before the Conservatorship also. Ultimately the best thing we have going for us is that FNMA and FMCC are one of the most profitable financial companies in the world and are worth $ 200 to $ 400 bn - the questions are how much of this value is going to be taken by the USG? and for how long?
Great point DaJester - it does seem that SCOTUS may have consented to this but perhaps not. That is why the Wazee, Brydon Fischer, and Mike Kelly suits are important and also why the CFPB, Chevron and potentially Collins En Banc ( if it is appealed in the next month) are important.
Did SCOTUS give the FHFA total discretion over the equity of the GSEs also? Collins could be interpreted as giving the FHFA total control of just the ASSETS of the GSEs but did SCOTUS really intend to authorize the taking of private equity by the UST ? Maybe yes but maybe no and we will probably know at the end of the 2024 Term.
Thanks for your opinion Skeptic7. IMHO I believe the Lamberth damages will get paid because FMCC and FNMA have already expensed the amount of the damages in the Sept 30 fiscal quarter. The FHFA may appeal but ultimately the damages will get paid in less than two years - could be in the near future if there is no appeal.
Good points jog49 and you are right. My point is to lift us those who active take a stand against the back door nationalization and self-dealing by the USG. We have to believe that the judicial system in particular will finally result in justice and fair dealing and we have reason to believe because we do see those who have faced long odds finally get justice - such as the homeowner in Minneapolis who won her case last year.
Some plaintiffs get nonprofits such as the Pacific Legal Foundation to take their cases forward. We are fortunate to have lawyers like Hamish Hume and the investors in the Wazee Fund spend time and money in an effort that most would consider a waste of time and money. This is why I call them True Patriots.
We also have a political process, and I would call Rep. Ogles a True Patriot also. We need other politicians to join together and we as shareholders need to make sure the truth is fully known as the judicial and political process works its way out.
Of course, these are just one man's opinions and perspective, and many disagree.
The GSEs will be a campaign issue if JB announces a Housing Initiative at the SOTU. On one side will be those who support back door nationalizations that redistribute wealth via a run-away Administrative State and on the other will be those who support the Constitutional tenets of Separation of Powers and the power vested in Congress to spend the people's money on programs that have been approved by the legislative process.
Three cheers to Rep Ogles for his proposed legislation. It is a good start.
Great insight DaJester - great question and it really highlights how absurd the SPS is in the first place. How can it be that an investor gets a claim on the equity of the balance sheet for no consideration at all. How can it be that that claim based on no consideration given be senior to other equity investors who actually paid cash consideration for their shares?
Got to give a big Thank You to Hamish Hume and his team and also to the Wazee Fund for keeping up the good fight against long odds and with great expense to keep the legal actions going! True Patriots believing the system will finally work for the people against long long odds!
The issue is a run away Administrative State and USG officials who use golden revolving doors to enrich themselves. We probably need a new DJT Admin or someone like Vivek to look out for the peoples interests rather than themselves. Maybe Robert Kennedy Jr?
There is an interesting UST Visitor's log that ties into some of the 2011 discussions with UST. Check out who is visiting the UST on 2/24/11 regarding the GSEs.
JP and his current partner and maybe the reason why the NWS happened and why they have not exited.
This link used to work but for some reason does not work now.
https://www.treasury.gov/initiatives/wsr/Pages/dfa2_11.aspx
seems like someone is scrubbing history - probably a good thing since it may mean somethings up. Good opportunity for Parrrot Ryan Advisors
https://www.urban.org/author/jim-parrott
Good Points everyone on the excess employees but one should not overlook the fact that the GSEs get a ROA or return on assets from the equity they retain. If they have $ 100 bn and the ROA is 5% - that is $ 5 bn more to the bottom line. $ 200 bn - that is $ 10 bn more to the bottom line. The primary issue is that Congress needs to limit what they can do in Conservatorship and force the Admin to sell its equity and then use the equity and income to support political projects.
Here is the NYT link but I dont have subscription - good article. This also relates to the discussion with Kthomp regarding the role of USG officials and the assets of the GSEs in Conservatorship.
https://www.nytimes.com/2015/12/07/business/a-revolving-door-helps-big-banks-quiet-campaign-to-muscle-out-fannie-and-freddie.html
Good Morning Guido
Looks like someone took down the NEC Directors Blog. If you remember he wrote "Not Every Door is a Revolving Door" regarding the NYT article regarding the Revolving Door actors involved with the NWS.
Now the link rolls to a website in Thailand:
https://newslink.mba.org/servicing-newslink/2015/december/servicing-newslink-12-15-15/not-every-door-is-a-revolving-
Does anyone have another link or the Greta Morganstern NYT article?
Does anyone know what is the FHFA Notice that Tim Howard mentioned in his September Blog? He said that August 14th was the last day for comment - I thought I knew what Notice it was but now cant find it. It is probably a simple mistake but this is the new ERCF cap standard I thought was coming but cant find the Notice on the FHFA website.
Good Morning - in case you did not see this post by Imbellish yesterday regarding a 5 hour hearing of the HUD Secretary before the House Financial Services Committee - the link is on the post by imbellish that I replied to:
Rep. Flood mentioned Sandra Thompson and GSE officials are going to Columbia Nebraska but more important was Rep. Ogles questions on the GSEs and the benefits of privatizing the GSEs. Flood is at 4:53 and Ogles is at 5:12.
WOW!!!! Great work Imbellish!!!
Rep. Flood mentioned Sandra Thompson and GSE officials are going to Columbia Nebraska but more important was Rep. Ogles questions on the GSEs and the benefits of privatizing the GSEs. Flood is at 4:53 and Ogles is at 5:12.
Great Points Guido! The fact is that according to Dr. Susan Wachter some USG regulators pushed FMCC and FNMA to buy Alt A and Subprime. Since then shareholders have lost billions while the USG has made billions. This is why the USG should treat shareholders fairly and exit Conservatorship ASAP! Absolutely no justification for a cramdown!