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Hi Boston - thanks for your contributions to the Board!
Here you go:
https://www.responsiblelending.org/profile/michael-calhoun
A Consent Decree is the best we can hope for in the next 3 to 6 months. My vote is Thompson for FHFA Director and Calhoun as CEO of new affordable housing entity. Set up the entity in the next 3 to 6 months and enter into Consent Decree on confirmation. If Thompson is nominated she will probably be able to move quicker than Calhoun or another Nominee since she has the weight of an Acting Director.
Hi Skeptic - If the goal is to enter into a Consent Decree to raise capital and/or set up a jointly owned affordable housing entity as proposed in Calhoun's Brookings White Paper - dont you think there needs to be a confirmed FHFA Director? Perhaps others on this Board may have an opinion on how Washington works and what the Senate Banking Committee will want as part of their Supervision for the GSEs but the appointment of a permanent FHFA Directors seems critical. I agree with Glenn - perhaps others have opinions.
One of the cons is that it has actually been 13. One of the pros is that you know what the downside is - the common could be diluted further but the JPS can not. Calculate the option value and they are at compelling valuations but the problem is that price distribution is not Normal ( meaning normal distribution) but very event impacted with high likelihood of valuation gaps. The biggest pro is the liklihood of TINA - There Is No Alternative but people like Skeptic probably dont believe in TINA and it is hard to argue after 13 years and nearly 2 months - but who is counting?
Like looney tuned!! because we have to be crazy to endure so much for what is right and fair.
Fair Enough Skeptic - you are a person of your word. I have a price greater than 50 cents on 12/31/24 and you have 50 cents or lower but probably not zero? Different expectations but valid perspectives. I expect to be holding my investment on 12/31/24 - been so since I bought FMNAT at $ 25 on the IPO which I think was May 2008. What is an additional 3 years and 2 months for justice!!
Hi Skeptic - are you still a 50centptic? What date did you give me to compare prices - was it 12/31/23 or 12/31/24? I think the price will be higher than 50 cents by then - I am assuming you think its going to zero?
Yi seems like a high powered appointment. Seems like a real mover and shaker in DC. Maybe in line to become CEO at one of the GSE's? Senior advisor and then CEO? Senior Advisor seems like a temporary position to get something done.
Here is an article which handicaps new Admin appointments:
https://therevolvingdoorproject.org/rdp-personnel-update-1-22-20/
Another Brookings Connection
https://www.brookings.edu/author/charles-yi/
Robert - thank you once again for your dedication to the cause of the rule of law and fair dealing.
My apologies - did not mean to offend. I own both also for the reasons you stated but own more of FMCC for the reasons I stated. I also think there should be no bickering between common and JPS - we all are in it together. GLTA!!!!
Great observation!! Doesnt FMCC have a lot more CRT coverage also? If so it is encouraging to see the relative EPS performance because this is after sharing profits via the CRT and means less need of capital to exit Conservatorship as you stated.
Mike Kelly is like George Bailey. Hank is like Potter except this has not been a Wonderful Life for the last 13 years. Its like Hank as Potter kept the deposit money that Uncle Billy lost in the news paper and then framed George for fraud knowing perfectly well that he (Potter/aka Hank) set the whole thing up. In this case the newspaper should be the March 2008 Barron's edition that was the sourced at UST with all kind of assumptions that turned out to be dismally wrong. Justice for Mike Kelly!!
Talk about Good Karma!!
I am a cool aid drinking - American Pie eating - old red, white and blue FOOL!! - who still believes the Music aint dead and that fairness and the rule of law will someday prevail - hopefully in my life time!
Thank you to all those posters of good will!!
Hi Kthomp
See the comments from Robert on Calhoun Brooking's white paper excerpt - wondering if you have any thoughts on this and what they possibly could mean by " or other obligation " as a way to get the UST in a newly formed affordable housing entity.
Hi Kthomp,
Were you aware that the proceeds from the sale of the warrants have to be used for deficit reduction? Do you have any thoughts on how UST stake could be transferred to a new affordable housing entity without respecting JPS and common shareholder rights? See the comments to Guido and Robert.
Great points - maybe they need a little rider in the fine print of the Reconciliation Bill? All speculation of course.
What concerns me is the wording " or an obligation from the GSEs to the housing entity". Is this another screw the shareholder move? Seems like they have thought about it.
Thanks again for the points and your contribution to the Board.
Great Point - MRJ25
The DOJ Staff opposing all the shareholder lawsuits are holdovers and were appointed by past administrations. I remember the Sweeney oral arguments where the DOJ lawyer had clear philosophical anti-shareholder sentiment.
Just look at each DOJ filing and you seem the same names going back to the litigation around the NWS.
Thanks Guido - Can the proceeds of the warrants be used for anything but deficit reduction? It seems that this is how TARP was structured also?
This is Footnote 24 from Calhoun's Brookins White Paper:
24 If the warrants are sold by Treasury itself, the proceeds would go to the general fund for deficit reduction. See 12 U.S.C. § 1719(g)(2)(C). “The Secretary of Treasury shall deposit in the General Fund of the Treasury any amounts received by the Secretary under this subsection, where such amount shall be “(i) declared for the sole purpose of deficit reduction; and (ii) prohibited from use as an offset for other spending increases or revenue reductions.” Alternatively, Congress could mandate this use of the warrants. The TARP programs in which administrative modifications and waivers were made to the agreements include a similar provision regarding the disposition of the proceeds. See 12 U.S.C. § 5216(d). 25 12 U.S.C. § 1421 et seq.;
Maybe Kthomp has an opinion?
Exacamundo!! - American Pie!
Now for thirteen years we've been on our own
And UST grows fat on the NWS sweep
But that's not how it used to be.
Have the father,son and holy ghost caught the last train for the coast?
Is this the day the music has died?
Hi 5bagger,
The Brookins White Paper by Calhoun and Raneri is a good read. It may be a better idea to keep Thompson at the FHFA to placate Maxine Waters but put Calhoun at the head of the new affordable housing entity which will be jointly owned by the two GSE's and administrated by the FHFA.
This comes from the bottom of Page 8 - top of Page 9 of the Brookins White Paper:
Operationally, the value of the government GSE stock interests could be placed in an independent joint
affordable housing entity of the GSEs, similar to the organization of the GSEs’ Common Securitization
Solutions, which houses the GSEs’ common securitization platform that issues and services GSE mortgage
securities. FHFA should oversee this entity and approve its board members. The stock interests could be waived by Treasury and the GSEs could place equivalent stock, money, or an obligation from the GSEs
into the housing entity. If stock were transferred by the GSEs it could be held or eventually sold by the
new joint GSE affordable housing entity, with the income and proceeds used for affordable housing.24
Housing assistance could be implemented in a manner similar to the process used by the Federal Home
Loan Banks (FHLBs) under their affordable housing program. The FHLBs, which are also government
sponsored enterprises supervised by FHFA, direct funds to other entities for affordable housing programs,
rather than operating housing programs themselves.25
Well if you give me a free option I will take it. While not free buying JPS for 7 cents on the dollar is almost free. The GSEs have an Enterprise Value of $ 400 billion according to the CBO after all. What I dont know is the timing but it is clear that something has to be done some time. Could be more shenanigans and that is why prices are so depressed.
Thanks - love free options. Lets compare positions on 12/31/24. Time is on our side.
Hi Guido,
Thanks for thinking about this.
My suggestion would be not to mention when you purchased the JPS because the harm has been done to everyone multiple times including pre-conservatorship holders and those who have purchased JPS and Common and multiples higher than current prices
My other comment would to include the Ralph Nader letter because it really is an investor rights issue at the core.
https://nader.org/wp-content/uploads/2013/05/lew-5-18-13-11.pdf
Thanks again Guido!!
Hi Skeptic
NO WAY is almost always wrong in finance and investing. There is always a way and in this case the way is the central part of a paper by Michael Calhoun who is part of Brookins which is the same think tank that the UST Secretary was part of before taking the UST position.
Central to the Calhoun plan is a recap and release and stock offerings. Check it out - it is in the middle of Page 7!
https://www.brookings.edu/wp-content/uploads/2021/02/20210219_CRM_CalhounRanieri_FINAL.pdf
For what its worth I converted my IRAs to Roth IRA's yesterday. 99% GSE JPS - 1% FMCC. Lets check in at the end of 2022 and see about your NO WAY analysis. They is always a way and most importantly a way that upholds the integrity of US Financial markets.
Yes - Thank You Kthomp! Great Spreadsheet!!
It was my impression that GFA owned and held FNMAT and FNMA/FMCC Common since prior to the Conservatorship. I purchased FNMAT on the offering and thought they did also - my kids 529 plan are invested in AGTHX so I use to track there annual holdings.
It will be interesting to see if they come back to FNMAT after the 6 month time period because of the high coupon. Now we know why FMCKM has been trading so poorly.
FMCKJ looks interesting because of the high div rate.
Where is the bridge and what is it's cash flow?
Didn't Sweeney retire?
Isn't the Kelly suit Direct and/or Derivative?
This is paragraph 120 - isn't this a Direct claim?
120. Plaintiffs are therefore entitled to just compensation for the Government’s taking
of their property and/or illegal exaction in an amount to be determined at trial.
Thanks for the reply but wanted to point out the discrepancy.
Regarding the Statute of Limitations - am I correct that Kelly and Wash. Federal have the same law firm. I am speculating that Kelly wanted to wait and see the Collins decision before spending the money?
Dont you think it is unlikely that Kelly would have waited so long if they did not think the Statute of Limitations tolled?
Dont you think Collins actually makes Kelly's claim stronger if it gets beyond the Statute of Limitations.?
Thanks again for all your insight and time.
Interesting - Maybe keep the UST Letter in Tact with the change in Capital proposed. Keep Thompson at the FHFA and set up GSE JV - BBB Affordable Housing Solutions with Calhoun at the Head. Put the UST equity and SPS in the entity and start the restructuring process while negotiating settlements of the lawsuits? Crazy?
You are wrong Skeptic - Both the Washington Federal and Mike Kelley cases challenge the Conservatorship itself. Doesn't Bryndon Fisher also challenge the Conservatorship.
Here is the excerpt from the Oct 4 filing from the CFC asking that the Kelley case be assigned to Judge Schwartz who is currently presiding over the Washington Federal suit. Everyone should read the Kelley fact pattern - it is really like the movie A Wonderful Life but where Potter actually gets away with setting up George Bailey after he steals the cash from Uncle Billy. Hank kind of looks like Potter.
Here is the filing: See the words - THEY BOTH RELATE TO THE TAKING AND/OR ILLEGAL EXTRACTION BY THE UNITED STATES...:
Washington Federal v. United States, CFC No. 1:13-cv-00385
Under RCFC 40.2(a)(2), cases are directly related when: (A) they involve the same
Case 1:21-cv-01949-KCD Document 5 Filed 10/04/21 Page 1 of 4
010347-11 615662V1 - 2 - parties and are based on the same or similar claims; or (B) they involve the same contract,
property, or patent. This case and the Washington Federal case are directly related under subsection (B) of RCFC 40.2(a)(2). They both relate to the taking and/or illegal exaction by the United States of the same property interests arising from stock ownership in the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
I am assuming that new JPS could be issued with 3 to 4% so they would want to call the JPS anyway. New CET1 equity is needed and an conversion would provide the needed Tier 1 equity and lower the coupon for the JPS part of the new capital structure. They could just redeem high yielding JPS and issue new common also but JPS would probably negotiate for a conversion option.
Kelly has an extremely good fact pattern so we will see about the Statute of Limitations. Dont know how old he is but he may want to settle for a Derivative judgement and some direct settlement which could just be attributable to him and Washington Federal. The UST has a lot of gain and power to be creative but we all are running out of time to get things resolved - although if you are right potentially gigantic upside for common and that is why I own common and JPS. Definitely is looking to buy more common but it is hard to see the relative value vs JPS at these levels. At some point the optionality of the common is just to compelling to ignore but if Glen thinks it is $ 3 it makes it more difficult to by common .
Thanks Guido - I am assuming that all settlements will be Derivative and that the Warrants will remain but the SPS is written down to the original $ 1 bn. CBO Enterprise Value is $ 400 bn - Cap Raise needed at the end of 2023 is $ 100 bn - $ 35 bn JPS ( paid at PAR) - leaves net EV of $ 265 bn with 20% to common. UST owns $212 bn and public combined FNMA and FMCC common owns $52 bn. Brydon Fisher and Mike Kelley deserve $ 1bn each for bringing their suits. FNMA and FMCC common subject to dilution upon JPS conversion so exchange ratio is important if exchange happens.
Really Interesting Guido! This and Roberts recent post on her comments may portend something. Our best near term case would be some movement to move forward with Calhoun's plan because affordable housing gets cut from the 3.5 Trillion proposal. Lose $ 500 bn from reconciliation but add $ 1 trillion from a leveraged play on UST GSE ownership in newly formed GSE JV with oversight from FHFA. New entity would be same structure as the Common Securitization Solutions JV but Affordable Solutions would hold the $ 200 -$300 bn GSE UST ownership stake and then used to leverage affordable housing investments.
Why would charities and pensions invest in Madoff? Did his returns ever make any sense? We invested in FNMA because we had transparency and liquidity and knew that we were providing capital for the US mortgage markets. Dont you think greed was the motivator to invest in Madoff? Didnt everyone think they were getting some special deal?
You DESERVE DAMAGES FOR COMPENSABLE HARM!!!
You served our Country and risked you life defending it and now you are getting screwed by the government your fought to defend.
GO NAVY!!!!!
Kelly lawyer is the same as Wash Federal lawyer so you would think they know about the tolling of the statute of limitations.
Pages 13 to 16 of the Complaint is probably the best summary of Govt malfeasance.
http://www.glenbradford.com/2021/10/
Common Securitization Solutions was mentioned as a pro-type structure for an affordable housing entity in the Brookings Paper by Calhoun. It is jointly owned by the two GSEs and is under the supervision of the FHFA. The idea is that the UST stake could be placed in the affordable housing entity and the stake could be monetized or used as collateral for affordable housing initiatives under the control of the Administration via the FHFA.
Really interesting Guido! Mike Kelley was a real life George Bailey. Really believed in Community Banking and doing good for the community. Ironically a lot of it was in BO's back yard in the Back of the Yard's. Have not read the suit but he had a great banking reputation and probably knows the inside scoop of what happened behind the scenes regarding the NWS and now knows how Hank was able to set up his own institute at the University of Chicago.
To invest $ 1 Trillion dollars in affordable housing in the next 3 years.
Take the UST stake from the GSEs put it in a new entity supervised by the FHFA and leverage 4 to 5 times.
Really hard to see a path forward for Calhoun's Brookings plan for affordable housing without a settlement.
Thank you for the correction Guido. Also many thanks to Mr. Reid and Mr. Fisher for their efforts on behalf of shareholders.
I am assuming that a Derivative Settlement could be made without making any determination regarding the warrants but most likely via a full or partially forgiveness to effect an equity contribution to the GSE's. There will probably be less than 3 years left in JB's term after a new FHFA Director is confirmed - maybe a good reason to find some way to settle and eliminate the uncertainty in the capital structures necessary for a public offering.
Thanks Clarence - the other point is that the settlement for the Derivative suit in CFC does not involve shareholders directly at all. It would be between the UST, FHFA and the GSEs - dont see why the UST would not agree to a Derivative settlement if it would help fund affordable housing?
The CBO on Table 2 has the Enterprise Value for the GSEs at $402 billion at the end of 2022. Assuming a net capital raise (after 2022 retain earnings of about $ 120 bn) the UST be over $ 300 bn. Any Derivative settlement would accrue 80 cents on the dollar to the UST warrant position and in reality just make there warrants more valuable. Rather than a $ 50 bn warrant valuation a $ 100 bn Derivative Settlement would make the warrants worth $ 130 bn with only an additional $ 20 bn to common . This is one of the reasons why someone may want to hold common if they believed a Derivative Settlement was possible.