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Hi Robert - Appreciate all the contributions. Did you see the requested resignation of NLRCB Counsel? - more like FTC and first request since 1950.
Maybe Collins will be determinative?
https://www.msn.com/en-us/news/politics/biden-asks-for-resignation-of-nlrb-counsel-report/ar-BB1cW4vy?ocid=msedgdhp
Hi Shanon, - Thanks for mentioning the filing. Regarding the FMCC 8-K - is the Related Party discussion new?
Is there something going on because the UST has to exercise the warrants for 79.9% - arguably the UST owns more than 80% in substance. Just wondering if the Related Party discussion is new because the GSE balance sheet is quite large even for Uncle Sam.
Lambert is probably a DC swamp RINO. Sweeney has done the right thing so far but had to wait for SCOTUS. Look at the majority of the En Banc opinion in the 5th Circuit - POTUS45 appointments. Thomas is definitely conservative - we will see about the POTUS45 big 3. Roberts is definitely a RINO. New CFC judge and Chief Judge are POTUS45 appointments.
Hi Rumple - Thank you for your insights and sharing them with the Board.
Isnt the most likely remedy from SCOTUS the one you highlighted in the oral argument. Please correct if incorrect but 1. UST paid in full - SPSA = $0, 2. UST owes $ 29.5bn and 3. No future NWS?
A. If so how much of the $ 29.5 bn goes to FNMA and to FMCC common and JPS?
B. How much to the common and how much to the JPS?
C. Do JPS get unpaid divs since 2012 or could they possibly get more than that?
D. How would the UST pay the $ 29.5 bn?
E. Would the UST give up warrants to satisfy the $ 29.5 bn claim?
F. How much is the commitment fee?
G. When would the commitment fee be payable? Could it be retroactively applied?
Thanks Rumple - did not see the previous posts before responding. Hard to argue with Tim Howard - dont understand how this gets resolved but I am all for waiting for SCOTUS to decide next steps.
My assumption was that the new Amendment was intensely negotiated based off the detail and the comments that Yellen and Bidens people were advised. I assumed that the FA and Legal Advisors believed it was a credible plan. There sure will be a lot of legal and investment banking fees if things get settled and the cash is raised.
Hi Rumple - I dont see a easy way out of settlement and I would be happy with long term value in the $10 to $ 20 range with dividend income. Basically keep the stock without tax consequences for a long time and expect safe dividend income. It is the same reason I bought the JPS in 2008.
Practically what can we do? Settlement is a condition of the exit from Conservatorship except for $ 5 bn. Could we opt in to a law suit that will want to be part of that $ 5 bn? Maybe Appraisal rights under Delaware law?
For me the biggest issue is a fair resolution and that is why I hope we get a strong shareholder rights opinion from SCOTUS. I would think $ 10 to $20 with a 3% dividend would be fair and reasonable. Also - I am looking at everything from a FMCC common perspective - I owned both in 2008 but now I am just in FMCC because they were always cash flow positive through 2008 and to date and there a less shares outstanding. FNMA probably has a lot more upside but I like the dynamics of FMCC because they UST was probably overpaid more from FMCC on a per share basis. Dick Syron had a more conservative portfolio back in the day.
Hi Robert - Thank you for all your work in sharing your insights and research.
Perhaps you might find these insights at least intellectually interesting:
1. Regarding Humprey's Perhaps SCOTUS does not care what POTUS may want but comes at it from a need/desire to push back on the Administrative State especially with the possibility of socialist tendencies and future court packing. It may be interesting that at least 2 of the Amicus briefs focused on Humprey's - one of which was from the Pacific Legal Foundation by one of Gorsuch's old clerk. Perhaps Gorsuch is focused on property rights in the West and the impingment from Administrative agencies on rural property rights.
2. Do you remember how Dick Syron and Daniel Mudd were treated after 2008? Rob Khuzami (who ironically was previously General Counsel for DB Mortgage division that ended up paying a fine to the GSEs for wrongdoings) persecuted these guys and destroyed their careers. Mudd was hoodwinked by Mozillo from Countrywide to buy shitty loans but Syron was a guy just trying to do a good job and perhaps likely known to be held in high esteem in the Boston financial community? Do you think Breyer knows the inside scoop what happened to Syron? - Perhaps it was a topic of conversation in the social circles and it seems Syron and Breyer are contempories?
3. Epstein is a Hover Center and Manhattan Institute guy. He also was the neighbor to POTUS44 in Hyde Park when POTUS44 was a State Senator.
Perhaps hey know all the inside stories of each other and currently are adversaries since Epstein is fighting the POTUS44 Center which wants to take over a Lakefront site against the wish of some community activist. Would think Thomas and Alioto are aware of Epstein's views?
4. The recent amendment feels like a prepackaged reorg ? - since there are many intentional conditions and curious financial threshholds.
Seems like a document from a very lengthly multi-party negotiation. Perhaps Yellen and Powell are on Board if Congress does not do anything prior to Sept 2021. Kao probably has it right - remember he is Akanthos which is one of the litigants to either Collins or Lambreth
Thanks Rick - seems like they are setting up another lay up investment for $ 20 bnish from Buffet or the like. Provide incentive for private capital to go big and early as an anchor nd then underwrite the rest. Not that I think that would be bad - they dont need to screw the 20% common float in the process especially if the anchor is another of the politically connected chosen few.
Thanks for the reply Robert - seems like SCOTUS is probably our only hope for a fair resolution in light of the continuing corruption and thievery from the Washington political swamp.
I didnt see the discussion about Sotomayor - but it seemed that Breyer and maybe Kagan saw the need to hold the line on Administrative power. Perhaps we may see an opinion on this case before Collins - the commentator who wrote the article seems to indicate a unanimous type of consensus.
Hi Robert,
You might find this discussion regarding the FTC case SCOTUS heard yesterday. More oral discussion doubting the authority of the Administrative State. Kavanaugh had some interesting comments about how things work at the Executive Branch.
https://www.scotusblog.com/2021/01/argument-analysis-justices-doubt-ftcs-authority-to-compel-monetary-relief/#more-298579
Thanks Happy - I am not buying but will hold out for SCOTUS. Maybe Yellen is honorable or just another DC scumbag fellen. Hope you are right! GLTA
Donot you are right POTUS 45 failed because McNuchin failed. POTUS46 and BO ripped us off and it is the reason we are shareholders of one of the most profitable companies in the world but are getting screwed. POTUS45 is a schmuck - you seem to have faith in POTUS46 - hope you are right - until then once a crook - always a crook. If someone lies about their law school grades can we expect them to be honest about anything?
Golfbum - Great quote from Regan! We can not trust the Government to do the right thing unless SCOTUS forces them to and even then it will be hard. We all should be careful in investing in anything that is controlled by any governmental agency because they can change the rules after they take our money.
Time to own up - I was wrong - McNuchin failed to save us from the crooks in the BO/JB Administration that ripped us off in the first place. PROMISE NOT KEPT Hope is with SCOTUS to uphold fairness and the rule of law - why invest in anything that politicians can control in the future? It is clear that most just dont care about ripping off retail investors.
Time to own up - I was wrong - McNuchin failed to save us from the crooks in the BO/JB Administration that ripped us off in the first place. PROMISE NOT KEPT Hope is with SCOTUS to uphold fairness and the rule of law - why invest in anything that politicians can control in the future? It is clear that most just dont care about ripping off retail investors.
For FMCC - Common Equity and a firm underwriting commitment has to be $82.6 bn. How does FMCC get $ 82.6 bn and ALL litigation has to be settled and warrants exercised.
Thoughts:
1. Seems to leave a lot of room for SCOTUS to make big ruling without hurting UST. Leaving room for a big derivative claim and making the NWS ultra vires or invalid because of status of FHFA. Leaves a lot of runway to make the big push against the Administrative State ie limitation on Humprey's Executor?
2. Everything needs to be settled to get out of Conservatorship. Dont see a way around this even if this Letter is ruled invalid because it is prudent for a Conservator?
3. Dont see how UST can holde 80% of the GSEs without having a consolidation issue - maybe the thought is that the warrants can be used as part of the Settlement?
4. Why put the Congressional action date at Sept 30 2021. Hopefully all the grown ups ( Powell, Toomey and Yellen) were aware of this and will push Congress to act?.
5. Probably means the JPS will have to convert to have a chance to get to the $82.6 bn. JPS conversion will probably be part of the settlement. Probably conversion on the offering price?
6. Seems like a mind boggling firm underwriting committment. Maybe $ 40 to $ 50 bn for FMCC alone assuming $ 40 bn of equity and JPS conversion. It would be nice to get a big derivative settlement on behalf of shareholders?
7. SCOTUS will be very very important. Shareholders will have to settle or probably wait for years to ultimately force a settlement Common will depend on what type of derivative settlement is negotiated. UST has a lot of latitude to settle but will want to have to settle. SCOTUS is going to be very important - we need the big spank on socialism and nationalization?
Additionally, Treasury has agreed that the Enterprises can raise private capital and exit conservatorship once certain conditions are met. To facilitate Enterprise equity offerings, Treasury has committed to work to restructure its investment in each Enterprise. ?
News by Jan 20th - hopefully today.
I want to thank again all of those who expressed their viewpoints with good intentions regardless if they are advocating for JPS or Common. Maybe it is time to separate out comments intended to misinform or denigrate from those with honest questions and honest perspectives regardless whether or not it is from the JPS or Common perspective.
Thanks Rick
Maybe we should focus on the definition of "revolve" - to turn or roll round a center or axis" Perhaps a web based liberal news outlet spinning news and partial truths around a liberal center of thought and philosophy?
In any event I could be terribly wrong but we should know tomorrow.
I do not believe that Secretary McNuchin will sell out his values based on a meeting with Chairwoman Waters. If you ever saw Congressional testimony before Waters I think you would agree. I could see him reaching out to Toomey as previous head of the Senate Banking Committee and Water as Chair of the House Financial Services Committee but I dont think it will be the flip flop described. Probably a nuanced set up for Director Calabria to follow through on the current plan toward privatization. I will say that I was wrong tomorrow if this article turns out to be right. I dont see any rational basis to believe it.
Yes - thank you Gaby! Great insight and collegiality.
Kao seems like he is a really smart guy and is LA based so probably connected. Maybe we should all be in the same boat for a couple of days until we get to dry ground?
Amen to that!. I would add Tim Palagria maybe to the top of that list. While we may have disagreements about the relative value we all agree that the US Government screwed shareholders and that the GSEs are some of the most profitable companies in the world. Thank you to all of good will!
Yes - Good Points. I am hoping for a Texas Two Step.
1. Conditional write down of SPSA based off of private capital raise/retained earnings based off of 80% recapture via the warrants.
2. Consent Decree with GSEs for capital raise and exit conditioned on the same net equity/capital raise.
Wise Words! Thanks Tim!
Regarding Wachter - of course we are making a lot of path dependent assumptions but my answer would be Yes. Why wouldnt she? - she could take JBs old seat on the train to DC. Here is a video that Glen Bradford highlighted some time ago - Thanks Glen!
https://knowledge.wharton.upenn.edu/article/gaining-traction-fannie-and-freddie-flirt-with-re-privatization/
Hi Robert - Thanks for the insight on Professor Wachter.
It makes senses since JB is a colleague at Penn and is the Benjamin Franklin Presidential Practice Professor.
https://www.phillymag.com/news/2019/07/10/joe-biden-penn-salary/
Is it clear that the SPSA wont be written down or there will be some condition for the write down if new capital is raised?
There does not seem any way forward for public capital raising if the SPSA is not written down?
It is clear that the financial advisors efforts to prepare for the public offerings is now shelved? Why wouldnt it be prudent to raise capital and protect taxpayers when interest rates are at historical lows?
When the reporting mentions that there is opposition to reducing the USG "stake" - does it mean the SPSA and warrants or just possibly the warrants?
Why would the US Treasury agree to give up warrants without a negotiation? I can see why they could reduce the SPSA because 80% of the write down flows to the US Treasury via its warrant stake and because it paves the way for the public capital raising.
The decision to exist Conservatorship or a Consent Decree is only in the authority of the FHFA and not the UST. The UST has to amend the provisions of the NWS and any write down in the SPSA which would be conditions necessary to move forward on a Consent Decree.
Hi Donot - do you have a link for your statement that John Paulson was involved in "taking" the GSE's. This is patently false - you owe an public apology to John Paulson for such a fake statement. You should verify your sources first.
Thanks for the reply Amelia, I thought it would be good to get you on the record for any rationale behind your assessment. You are definitely right about how bad of an investment this has been. I bought FNMAT for $ 25 in 2008! - for my wife's retirement account nevertheless! You can imagine how this has been the most terrible investment in so many ways! Personally I think it is going to be 5-4 on something more broad to limit the power of an Administrator - perhaps a partial carving out of Humprey's Executor on some rational basis to separate the FHFA from the administration of social security, the post office and entities like the FTC. Regarding anything that wreaks of nationalization I am thinking it is 7-2 AGAINST - I am a cool aid drinker who will take Justice Breyer at his word where he railed against the idea during the Oral arguments. All I have left is hope and I am willing to wait 5 more years for something fair and reasonable - it is kind of crazy but I still believe that someone cares about how the US Government ripped off shareholders who were led to believe that investing in the GSEs was a prudent investment in May of 2008.
Hi Amelia, Why do you think there is a 50/50 chance of Nationalization based off a SCOTUS opinion? Which Justices would vote for this?
Agreed - there can be no movement on the CRP until the NWS and the SPSA issues or handled.
Perhaps there removal could be conditioned on a certain amount of private capital raised and a certain amount of retained earning? Is it possible that private money could be raised unless these issues are removed with absolute certainty?
SCOTUS unlikely to issue opinion for several months. The AGC timeline is probably the best estimate. Issue will be how broad they want to make the opinion. One part of the Court may want to undue or limit the Administrative State and limit the precedent of Humprey's Executor as Robert has highlighted - also could just be a narrow decision. There is probably no precedent for a ruling prior to March since it is unlikely to be a 9-0 or nearly unanimous decision. No decisions on any case argued in December yet - the unanimous decisions in December will most likely come first and the closer decisions will come next.
What is the point to doubt the timing? The Treasury Secretary testified before the House and Senate Committees and said he was considering taking an action to put the GSE on their way to a responsible capitalization based of a complex rule making deliberation process. The Treasury Secretary has been focused on desperately necessary COVID Relief and just finished conferring with our global financial partners. Why wouldn't it make sense that a negotiated settlement would be finalized now? The CRP rules were published in mid -December. There are solicitations for public comment regarding liquidity rules and a DODD-Frank living will which will complete the necessary financial regulatory structure post Conservatorship and provide for a reasonable and rational resolution process if the GSEs have problems again and put the US Taxpayer at risk. Next week makes total rational sense - we did not know about the global travel so perhaps it got delayed because of that. I think we all will have to say a big Thank you! to POTUS, Secretary McNuchin, Director Calabria and Director Kudlow for the public service and for their reasoned and deliberate process to meet the housing goals of the GSES while protecting the US Taxpayer. If McNuchin does not act - Yellen will have to pick it up soon or the FSOC process and Powell's change of opinion will just seem politically motivated. POTUS tried to use the bully pulpit to influence Powell - I doubt Yellen and Biden would want to be accused of doing the same thing. Powell has publicly said that he believed in the CRP process and the FSOC has completely signed off on the risk capital criteria and levels. Perhaps the best case for shareholders is that Powell is replaced in the future and FSOC thinks it is best to lower the required capital levels. Powell's term expires Feb 2022 so perhaps that is possible but the CRP rule will be finalized on February 16 and the newly constituted FSOC will have its hands tied until someone thinks its wise to take more risk in the GSEs.
Thoughts for Consideration:
Merrick Garland is a neutral to positive development for Shareholder Rights. Moderate Judicial philosophy that is not likely to do anything regarding the replacement of Calabria until it is legally certain. Is this after the SCOTUS decision or does the 5th Circuit have to make that decision on remand?
Sherrod Brown will want to cut the CRP capital requirements for risky or housing programs. Will this be a negotiation since the new CRP Regs will be finalized on Feb 16? Do you think he can get legislation through to override what Calabria will most likely have in place if he is replaced? Maybe a blessing in disguise since the Cap requirements were set so high?
Perhaps we should think of the stock as a 5 year option on a very complex resolution outcome for very very profitable companies. Downside $ 2 bucks upside $ 10 to $100. There is no way these stocks are going to zero like Wedbush claims. All possible outcomes include some type of legal settlement and no one settles for zero.
THANK YOU VERY MUCH FOR YOUR PUBLIC SERVICE!! POTUS, SECRETARY McNUCHIN, DIRECTOR CALABRIA AND DIRECTOR KUDLOW. VERY HARD JOBS WITH EXTREME PUBLIC SCRUTINY - JOBS WELL DONE!!
FNMA and FMCC make $ 54,794,521 every day of the year - 365 days in a year - assuming $ 20bn in annual profits.
How much is the UST and US Government entitled to? On what basis?
Not too many $ 2 stocks with this type of earnings behind them.
Make your choice - maybe wait until Jan 20th? Your downside is $ 2 and change - what is your upside? Is perpetual limbo an option? Wont there have to be some Administrative action to siphon off all the cash flows into perpetuity? Does the FHFA even have that power to do that? Once a rule is published in the CFR and becomes effective - how easy it to be unwound and how easy for FSOC to agree?
Just saying - the fat lady has not sang but perhaps you dont want to wait any more for the show or never did in the first place. There are no guarantees in life but prices will always fluctuate based off of fear and greed.
Hi Holden - Thank you for your continued involvement in disseminating information to others. While some have issues regarding the JPS - Common tradeoffs it will not be up to you or most likely anyone on the Board on how this tradeoff will be decided.
Regarding the Wedbush price target - it seems clear to me that is documents damages for a Takings judgement in the Court of Federal Claims. Only US Government Action can make the price of FMCC worth $0.
It is also curious that Wedbush is a LA based brokerage firm. The same City that the Growth Fund of America is located. It is close to the PIMCO offices in Orange County, the location of the some of the large MBS investors hedge fund owners of the JPA and the residence of the Secretary of the Treasury. Probably a close enough business community where true motives might me known?
FNMA and FMCC never had a better future business prospects than now. Shareholders have outstanding litigation before several courts including the Court of Federal Claims and the Supreme Court of The United States. It seems clear that the US Govt lied and harmed shareholders with out a reasonable Constitutional Basis. Has there been a better time to own FNMA and FMCC than now? There are really good reasons to not to own this stock and it is a free Country and there are always willing buyers at a price. I will continue to hold like I have since 2008. Time will tell if it was the right decision.