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Hi Ano,
Could you share your perspective on the derivative litigation.
What do you think about the possibility and potential timing of the derivative suits?
How many derivative plaintiffs are there?
Can any one of the plaintiffs settle all the derivative claims?
If there is a settlement of the derivative claims would that affect the SCOTUS Collins deliberations?
Thanks in advance!
Agreed - Ackman has a reasonable near term target. Perhaps we get a better settlement but Ackman's target is nearly 3.5 to 4 times where we are now - that is probably unrealistic but it is nice. Maybe in 5 years we can be 10 times higher than we are now - tax free (if we dont sell) with some divs?
Agreed
Thomas has been asking questions for a couple years now - especially now with remote hearings.
Assistant Solicitor General of the United States
Amicus
The SG is trying to figure out what the F-- there claim is - that is why this poor guy is having such a hard time. It was a mob like theft and this is America. If SCOTUS holds that this a direct claim - Washington Federal and all the direct claims dismissed by Sweeney can be reinstated
If Sotomayor votes for shareholders - I say put her on the commemorative coin that the SG mentioned it his hypothetical.
God Bless SCOTUS! This makes me be proud to be an American!
Hope Yellen wont be a Fellon.
Do you think she will have the stamina to finish her term? Do you think she will treat the GSE shareholders fairly?
Pacific Legal Foundation Post - SCOTUS AMICUS
https://www.dailyjournal.com/articles/360644-high-court-should-clarify-that-agencies-cannot-break-the-law-without-consequence
Author clerked for Justice Gorsuch at 10th Circuit
Hi Kthomp,
I think this will be an interesting point to observe during oral arguments. I am hoping and thinking that at least a couple of the Justices will want to take a swipe at the Humprey's Executor precedent.
The long term infrastructure of socialism will be the expansion of the Administrative State and unless future reform minded POTUS's can replace future agency heads the creep of socialism and unaccountable government will continue.
We shall see - perhaps we will be pleasantly surprised by the breadth of the policy discussions. Personally this case should be the amno to do some real damage to the Administrative State.
Good Idea! At $ 2.70 - UST FNMA stake worth approx $ 12.42bn (5.75bn X .8 X SP) and $ 2.6 FMCC stake worth approx $ 6.76 bn (3.25bnX.8XSP).
Every $.01 increase in FNMA is worth $ 46 million increase in intrinsic value for UST.
Every $.01 increase in FMCC is worth $ 26 million increase in intrinsic value for UST
Do these type of calculations make sense?
Assume $5 value UST FNMA Intrinsic Value is worth $ 23 bn. UST FMCC Intrinsic Value is worth $ 13 bn. Warrants worth slightly more under this interest rate environment because option value will increase by savings in cost of carry. At $ 5 - UST would have to give approx 83% of warrants to compensate for $ 30 bn overpayments.
If JPS are entitled $ 18 bn in upaid divs since NWS - they would get 1/2 of UST position or 40 % of the float. Common would get 1/3 of the UST position or approx 24 pct of the shares outstanding . Pro-forma UST approx 7% stake, JPS 40% and common 53%. FNMA Common would own 1 full share and approx 1.52 warrants. At $ 5 this would be worth $12.6 in value after settlement.
Even Ralph Nader believes shareholders deserve to be treated fairly!
[PDF]Department of the Treasury - Ralph Nader
https://nader.org/wp-content/uploads/2013/05/lew-5-18-13-11.pdf
Good One! Maybe he thought the preemption clause and immunity provisions of HERA gave him special privileges when dealing with the Fannie staff?
SM is just doing his job to protect the UST in a litigation matter in the Federal Court system - we will see how the Solicitor General tries to defend the NWS theft. Give it to Jan 20 and then judge him. Personally I want to thank SM for his excellent and dedicated public service. POTUS set out specific goals in his housing policy statement so I expect SM to support the DJT policy by the time he leaves office. PROMISES MADE - PROMISES KEPT. GOD BLESS SCOTUS!!
Hi Donot, Can you help my kids out and tell your friend JB not to screw GSE shareholders? My kids are invested in the Growth Fund of America via the Commonwealth of Virginia 529 plan. Not looking for a handout but maybe the expected returns from the GFA FNMA holdings will help my kids have the same opportunities as yours. Sounds like you have a lot to be proud of.
The Growth Fund of America ( which is a large FNMA holder) manages a large 529 plan via the Commonwealth of Virginia. My kids college is funded by this plan - if SCOTUS does the right thing and JB does the right thing, kids across America will have an easier time paying for College if they dont have access to college grants.
The Growth Fund of America manages a large 529 plan via the State of Virginia. My kids college is funded by this plan - if SCOTUS does the right thing and JB does the right thing, kids across America will have an easier time paying for College if they dont have access to college grants.
Hi Obi, I think you are right. Epstein is brilliant and is a brilliant Constitutional Scholar but he has a tendency to get out in front of his skis and handicap things he may not be fully aware of. Unfortunately he made some grossly miscalculated comments on CV19 early on and was crucified by the BO crowd. The BO crowd are not too fond of him because he is standing up for the local Chicago community concerns regarding Lakefront development for the BO Library.
Ironically they both were on the faculty at the University of Chicago Law School at the same time. Epstein was also an Interim Dean. BO may have been a part time Lecturer.
You can attend also! It is all virtual. SCOTUS Blog will have the link on the top of its page on the 9th.
https://www.scotusblog.com/
Yes - Epstein is one of the most brilliant Constitutional scholars out there. Also ex neighbor of BO in Hyde Park Chicago so he knows what happened to the GSES's under BO/JB well. Currently in the crosshairs of the BO/JB crowd because he is representing the effort to preserve the Chicago lakefront from overdevelopment by the proposed BO Library.
Thanks Robert. Your timeline seems like the best guess after McNuchin's comments during the last two days.
Do you expect anything before the SCOTUS hearing?
How does the FHFA get to an investible security for the capital raise. What are your thoughts about starting to pay out divs to common and JPS?
If the warrants stay unexercised the public common and JPS would be the only cash out the door - is there a way to pay dividends on new issued common and not on existing common? This would seem to violate Delaware Law?
Also - how do they avoid paying divs to the JPS if there is a dividend to a common security?
Thanks for the updates Holden!
Hi Rumple, Turning on the divies will bring everything in place. The JPS needs to get divies before common do. Once a common dividend policy is implemented the JPS will trade in line with the relative risk/reward of the two securities.
Great Point - Thank you Director Calabria, Secretary McNuchin and POTUS!! Promises Made - Promises Kept. Without DJT no Calabria but a Watt wannabe. Without DJT no Kavanaugh and no Seila ruling - remember Kavanaugh was the minority opinion at the Circuit Ct level. Without DJT SCOTUS would lean socialist so back door nationalization may have been ok.
God Bless DJT and shareholders will owe a gigantic thank you for upholding the rule of law and getting these entities out of Conservatorship under a Consent Decree.
We should root for Ackman to make gobs of money being long FNMA but you are right!
Hank Paulson wanted to take down the GSE's and he started to roll out his plans in March 2008 or earlier. Here is a memo from Jason Thomas from UST to Robert Steel who was the ex- Vice Chairman of GS. Ackman is a GS alum and the short thesis was likely well known to GS alumni. Not only were the GSE stock prices were under pressure while Paulson and others said that the GSEs were going to be fine while they stuffed the public with newly issued JPS shares but financials with any housing exposure were also being brought to their knees by short sellers. Curiously Steel became Chairman of Wachovia after it was forced into a merger at low valuations with Wells Fargo. Thomas is now a senior officer at Carlyle which is a well established Washington DC private equity firm.
Here is the memo from the Treasury Department of the United States of America to Steel giving him the heads up on the GSE hit piece the UST planted with Barrons on March 8, 2008.
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
Our hope is that Ackman can convince the same guys who made gobs from shorting the GSEs to go long now. Best of wishes to Ackman and all longs. Better than Ackman is the Growth Fund of America which is a widely held mutual fund including many 529 college fund investors that suffered from the GSE Conservatorship but now has the opportunity to recoup losses and possibly make more since they bought more common and JPS! Go Growth Fund of America!!
STOP THE STEAL! START THE DIVIDENDS! LIST THE COMMON!
CRP will depend on having a listed stock and a proven dividend policy. It will take time for settlements but Release, Consent Decree, SPSA Cancellation with UST LOC and Commitment/Guarantee Fee can be in place on 1/1/21. JPS and Common can go forward with their suits and warrants stay in place until settlement or judgements in force.
CRP will need dividend paying common and JPS so FHFA should start this policy on 1/1/21. Current FMCC RE is $ 13.9 bn so assuming $ 2 bn profit in Q4 - pro forma RE is $ 15.9 or $ 4.92 per share fully diluted. JPS Par is $ 14.11 bn with approx ave coupon of 5.75%
Start with $0.15 per share dividend on common which will be about 3%. Total common divs would be approx $98 million on 650 million shares currently outstanding. JPS total coupon would be approx $ 811 million. All together only approx $ $910 mill with $ 7 to $ $12 bn of Earnings per year as the CRP is implemented.
As settlements or judgements are implemented dividend policy would adjust as higher shareholder capital is realized organically, from derivative settlements or new capital. JPS could stay outstanding, redeemed or converted. New JPS would probably be issued at lower coupons so there is an incentive to redeem or convert.
Just a thought but it is important to have a working dividend policy and stock prices that support a listing and new capital raises.
FNMA and FMCC will be highly sought after stock holdings for index funds and other institutional investors once listed and once investors are confident in the independence of the companies.
Here is a discussion about the index fund holdings of JPM:
https://www.investopedia.com/articles/insights/052416/top-5-jp-morgan-shareholders-jpm.asp
S&P 500 Market Cap is $28.5 Trillion - FMCC will be $80 bn - 0.28% weighting. Index funds and Institutional investors who track the S&P 500 will purchase 40 to 60% of the float not to take basis risk against the S&P 500. If FMCC has $ 25 bn in RE by 6/30/21 and JPS is converted for $ 21 bn ( with warrant settlement), Institutions will need to purchase almost 100 pct of new equity issued. Dribble any shares from exercise of warrants into share offerings overtime.
Does it make sense to exercise warrants before stock offerings? Maybe get the stock listed and eligible to be included in S&P 500 first to access institutional demand. If these companies are going to have close to $ 200 bn in common equity they will be gigantic components of S&P 500 since it is cap weighted?
Good Summary Robert!
Regarding the Commitment Fee - is the rate constant or staggered with amount of capital raised. Holden suggested that the rate would go down as capital is raised. Amount of fee paid should also go down as capital is raised? Do you have an idea what the fee will be?
Great Job Guido!! Excellent Tweet! Thanks!
Wow! Awesome Post - Great Summary and Reference! Thank you!
Author bets on volatility rather than direction. Calabria, McNuchin and POTUS are about getting things done and time is limited. Maybe vote for direction and good volatility!
The SPSA have to be cancelled to move forward so we should assume this will happen after SCOTUS hearing if DJT continues with promises made - promises kept? Issue seems to be how big of a commitment fee is needed to replace the $ 200bn of credit enhancement? Anyone have knowledge about what type of fee was proposed in the pass and how that may effect pro-forma cash flow?
Also - Holden makes the point that the commitment fee may be scaled with capital raised or cash flow retained. Does this seem right? Probably makes the most sense to provide incentive for the GSEs to raise equity capital asap and mitigate the risk of future dilution for early CRP investors? As equity capital is raised - commitment fee rate will decrease and increase the ROI for early equity capital?
Didnt Michael Bright work for Bob Corker? Didnt Bob Corker make money shorting FNMA when he was Senator? Who is short the stock now? Isnt there a difference between the SFA headquarted in the Swamp vs Wall Street?
Thanks for the question FD. The follow up question is something that was raised in the recent response by Collin's attorneys. If JB has the power to replace Calabria, who must be the Acting Director under 12 USC 4512? It seems that it must be one of 3 subordinates who were picked by Calabria under current law ? Also we may want to consider how BO bitched about Watt not being confirmed - there is no guarantee that a new FHFA Director will be confirmed if the Senate stays Republican. Some extra wrinkles to think about.
Stop the Steal!! Is Janet Yellen going to be a crook?
Ralph Nader had it right but Jacob Lew decided to continue with the theft.
https://nader.org/wp-content/uploads/2013/05/lew-5-18-13-11.pdf
UST under Hank Paulson intentionally planted Barrons Article then proceeded to raise billions from JPS investors afterwards. Jason Thomas email to ex Vice Chairman of GS
"This is for your eyes only. I send it only to help inform potential internal Treasury discussions about the potential costs and benefits of nationalization" Sent March 8, 2008.
http://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
Thank you to DJT, Secretary McNuchin and Director Calabria for righting a wrong perpetuated by the crooked swamp!