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Common and JPS shareholders deserve to be fully compensated for the intentional theft started during GWII and blatantly carried out under BO/JB Here is a great article from Delaware Bay Company:
http://delawarebayllc.com/images/The_Case_of_the_Concrete_Life_Preserver.pdf
BAC bought Countrywide. Mozillo stuffed Fannie before making millions in the sale.
Good Discussion Regarding Timing of Capital Rule Implementation and possible end of Conservatorship.
Thank you to all!!
GLTA - including Common and JPS! We all will benefit from the fair and principled actions by Director Calabria, Secretary McNuchin, POTUS and SCOTUS!. Based on how shareholders were ripped off by BO/JB I am thankful to Director Calabria, Secretary McNuchin and POTUS for their hard work and efforts on behalf of the rule of law and fair dealing!
The other question to raise is if JB removes Calabria after the SCOTUS ruling - must JB choose one of the 3 Calabria deputies to step in as Acting Director until a new Director is Confirmed by the US Senate. There is no guarantee that the US Senate would confirm a new FHFA Director - especially one that the Majority does not want?
Thoughts - Ano, Obi or Kthomp?
Can JB Fire Calabria before SCOTUS Ruling? If so who would be the replacement? Check out the discussion on Page 11 under the B Header from the Collins reply by Thompsons law firm:
https://www.supremecourt.gov/DocketPDF/19/19-422/161278/20201119155421721_11-19-20%20Collins%20Merits%20Reply.pdf
There is an interesting discussion on Page 11 under Heading B which makes the point that 12 USC 4512 (c-f) requires that an Acting Director be one of three subordinates of any removed Director?
I wonder if Ano, Obi or Kthomp have any insight into this? This would seem to reinforce the thought that Calabria and/or his staff will be in place until the SCOTUS ruling is made. Also - it brings up a new point whether or not this part of HERA will also be invalidated if this is a correct point.
https://www.hhs.gov/about/news/2020/07/22/us-government-engages-pfizer-produce-millions-doses-covid-19-vaccine.html
$ 1.95 bn of US Taxpayer Funding - Part of Operation Warpspeed.
It is clear that the JPS will have priority over any future dividend payments but the point needs to be made that the resolution process must be fair and predictable to common and JPS shareholders alike. Here is the last two sentences from The Conservatorship of Fannie Mae and Freddie Mac co-authored by Director Calabria:
"...If Treasury and FHFA can conduct the conservatorships of the
Companies to strip out any value and prevent the restoration of regulatory and market capital despite their obligations under HERA, this manipulation of the process will dramatically affect
public confidence in the fairness and predictability of government’s participation in insolvency proceedings. These unprecedented deviations from settled insolvency practices and creditor protections undercut one of the critical foundations of a market economy, and could call into
Wedbush valued FNMA at $ 166bn. I am wondering if it just proves the point on how big the theft was by the BO/JB mob. $ 125 bn is less than $ 166 bn. Plenty of value to make compensation and pay damages. Dilution will happen but SCOTUS will have a say before it starts. POTUS is not a thief and obviously has no reason to perpetuate the theft by the mob and their cronies.
Does anyone think that the Solicitor General really wants to defend the largest theft/back door nationalization in financial history? Who did it - BO/JB and their cronies. It will be interesting to see how they try to defend this or how hard they try. If there ever was a time to whack a mole the ugly specter of socialism now would be the time for SCOTUS to bring out the grande gavel.
Wouldn't the best way to use the warrants is to cancel a portion of them with a Derivative settlement and assign a portion of them in a settlement for the JPS Direct claims? How much are the warrants worth? I think they have a value on the UST financial reports?
Banks cant hedge 30 year mortgage interest rate risk. They dont have the balance sheet. There is no competition for 30 year fixed mortgages.
Thanks Louie
Seems like whatever can be thrown back in the pot will increase the starting point assuming JB does not unwind the capital raise. Seems like a conservative number would be hard to unwind.
Key seems to be if Senate stays Republican since Toomey would be Banking Committee Chairman.
Thanks Kthomp
If the Enterprise Value used for the capital raise is greater than $ 112 bn isnt the capital raise accretive to common? $ 13.9/112 = 12.41% If the EV is $ 120bn then value of common equity is $14.89bn. Seems like FMCC could be worth $ 120bn - $ 150 bn?
$ 14.89/3.234 fully diluted is $ 4.60 to start assuming PSPA is cancelled?
Thanks
Ano - what was the amount of NWS overpayment for FNMA and FMCC according to the Collins plaintiffs?
Hi Kthomp
What was the NWS overpayment amounts that were mentioned by the Collins plaintiffs for FMCC and FNMA?
It looks like FMCC needs $ 80 bn of CE and $ 94bn of CE Tier 1. Overall $ 112 bn.
With $ 13.9 bn of net worth - FMCC needs $ 65 bn more of equity whether via a settlement or JPS conversion. JPS Par is $ 14.1 so need $ 50 bn more of common equity less settlement.
The $ 14 bn differential for Tier 1 Equity could come from new JPS?
The $ 8 bn differentia between total capital of $ 112 bn and Tier 1 could be COCO or other sub debt?
Conservatorship Capital was $ 52.5 bn and return was 18.7% for 3rd quarter. This would be 8.76% for the full $ 112 bn. This is before any leverage from sub debt or lower new JPS divs. Also no return on $ 112 bn of invested capital - seems like 10% ROIC is feasable?
Thanks for the reply Rumple
I am looking at this from the perspective of capital and regulatory efficiency. There should only be one GSE and new private competition can come in if it wants which is probably unlikely because private competitors could never hedge 30 year interest rate risk. That is why all the European entities have floating rate mortgages to the best of my knowledge.
If the entities are merged there could be another $ 1 to $ 2 bn annually saved in overhead and redundancy. It would also cost less to supervise.
The Consent decree could be set up where the operations are merged over a 3 year period at the same time capital is raised. This would make the equity stakes owned by the UST via the warrants and common worth more.
This is pie in the sky from a Washington swamp perspective but it is the right thing for the US homeowner and US taxpayer. More cost savings means less need for capital. Less need for capital means less guarantee fees to have and attractive investment for private capital and have prudently capitalized guarantor to protect the US taxpayer in the future.
Thanks to Director Calabria, Secretary McNuchin and POTUS! Time for grand settlement and bring home $ 150 bn to US Taxpayer. BO wanted to wind down for $0.
1. FHFA merges FNMA and FMCC under consent decree on 1/1/21. Release, recap and restructure combining FNMA and FMCC operations over 3 year period
2. Settle shareholder suit derivative action by returning 31% of warrants to GSES. Common get 51% and UST get 49%. Combined Enterprise Value is $ 300 bn now - $ 150 bn win for US Taxpayer - Commons start out with EV of $150 bn before cap raise
3. JPS converts to common at par plus accrued dividends - $ 50 to $55 bn of new equity - part of JPS Direct Claim settlement after SCOTUS ruling.
4. Start public offerings of capital. Common, new JPS preferred, COCO debt and sub debt.
Winning, Winning and Winning while upholding the Rule of Law.
Promises Made - Promises Kept! New CEO - Craig Philips, Nick Mulvaney, Ben Carson? Merge FNMA and FMCC as part of Consent Decree? Plenty of time to announce Consent Decree after SCOTUS hearing.
2020 had two Friday the 13ths March 13 and today.
Wedbush had Enterprise Value of $ 166bn for FNMA based off an adjusted EPS/EBITA of $16.6 bn - 10X multiple.
Thanks Navy,
Is there any news about buyout package for Brinkman? Although it does not seem very probable - great time to merge FNMA and FMCC and make this part of a consent decree and exit. Probably pull out a billion or two of annual cash saving? Merging FNMA and FMCC would be a bold Tumptonian move for efficiency and value to US Taxpayers and shareholders alike.
Hi Guido,
My logic is that POTUS/SM could cut a deal to cement a $150 bn plus win for the US Taxpayer and do the right thing. Wedbush values FNMA at $ 166 bn. Lets assume FMCC is worth $ 134 bn and total value is $ 300 bn. $ 150 bn win for the US Taxpayer as POTUS/SM exit or stay and commons have $ 150 bn in value and control. It is time to cut a deal and cut a deal that does not involve cash so the warrants are the means to an end.
I want to see SCOTUS rule and uphold the rule of law but I am thinking that a settlement of the Derivative claims can happen while we wait on the SCOTUS decision on the Direct claims. For me the path forward is to give shareholders and UST a win NOW and get these entities under shareholder control of their BODS under a consent decree by 1/1/21
Sorry if we disagree but thank you again for your contributions.
Hi Guido,
First of all - thanks for all you contributions and posts.
My point is that we need to get the SPSA out of the way and find a way to settle that does not involve cash from the UST. I dont see any political way forward whereby UST would just give up all its upside in a settlement.
What I meant would be a settlement whereby UST would have 49% via the warrants and public shareholders would have 51%. The common would start out owning half of the stock on a proforma basis with voting control before any settlement with the JPS and the future dilution from capital raises.
Settling the Derivative part of the litigation probably would not impact the SCOTUS proceedings. The derivative focused plaintiffs did file an amicus but they are not part of the oral argument of part of the questions presented as far as I know.
Going forward this would be a win/win because UST would still own 49% but common would end up with 51%. If this deal was offered back in 2008 I would have taken it.
Thanks Golfbum
First regarding Calabria we first have to realize that any new FHFA Director would have to be confirmed by the Senate. Depending on what happens in Georgia the Senate could refuse to confirm any replacement at the FHFA.
Regarding the Settlement, I am thinking that they could settle the derivative suits by terminating the SPSA and giving warrants back to the GSEs for damages. Maybe they would want to at least give 31% back so as not to be in a control position?
This would leave the JPS suit outstanding to be further negotiated. The Derivative suit settlement could be fast tracked and result in early termination of the SPSA.
Just some thoughts
SCOTUS grants expanded time for case. 90 minutes in total. Plaintiffs get 40 mins by themselves. 15 minutes to Amicus
https://www.supremecourt.gov/orders/courtorders/110920zor_1a72.pdf
Hi Robert,
Texas v California is going to argued on November 10th. Here is the summary from SCOTUS BLOG Merit Cases October 2020
Texas v. California, No. 19-1019 [Arg: 11.10.20]
Issue(s): (1) Whether the unconstitutional individual mandate to purchase minimum essential coverage is severable from the remainder of the Patient Protection and Affordable Care Act; and (2) whether the district court properly declared the ACA invalid in its entirety and unenforceable anywhere.
California v. Texas, No. 19-840 [Arg: 11.10.20]
Issue(s): (1) Whether the individual and state plaintiffs in this case have established Article III standing to challenge the minimum-coverage provision in Section 5000A(a) of the Patient Protection and Affordable Care Act (ACA); (2) whether reducing the amount specified in Section 5000A(c) to zero rendered the minimum-coverage provision unconstitutional; and (3) if so, whether the minimum-coverage provision is severable from the rest of the ACA.
DONOT said that they would be buying shares when JB won. Waiting for their buy orders to buoy the market.
WoW!!
Has FMCC retained $ 13.9 bn in earnings?
Has FNMA retained $ 20.7 bn in earnings?
What is the Par value of all the outstanding series of FNMA and FMCC JPS?
Do you think that the FNMA and FMCC JPS will be converted to CET1 equity?
If this conversion happens as of 1/1/21 what will CET1 equity be before considering the SPS?
Do you think the SPS will be paid back to UST in a settlement?
Wow - $ 34.6 bn in combined equity. Add JPS - over $65 bn. Conservatively will be over $ 70bn on Jan 1. We now need to know the capital requirements to come up with the right capital stack.
American Banker Article was November 13, 2019 - Is it relevant?
Collins En Banc Decision - September 10, 2019
American Banker Quote - November 13, 2019
FHFA Seeks New Capital Rule - November 19. 2019
SCOTUS Seila Decision - June 29, 2020
FHFA Releases New Capital Rule - June 30, 2020
SCOTUS Collins Cert - July 9, 2020
FHFA Comment Period Ends - August 31, 2020
Maybe a little too much water gone under the bridge? -
Thanks FFF.
My hope is the following:
1. Capital requirements published in the next couple of weeks
2. FNMA and FMCC get advice from JPM and MS on how much common and other equity needed to meet capital requirements and timing. Calabria starts to negotiate terms of consent decree which incorporates capital raise and proforma capital structure for exit from Conservatorship on Jan 1.
3. Everyone gets direction regarding the direction of a ruling from oral argument comments at SCOTUS on Dec 9th.
4. Settlement negotiations begin with expectations of SCOTUS remanding the case back to the 5th Circuit.
5. Consent decree and exit from Conservatorship on Jan 1.
6. SCOTUS Opinion in May to June
7. Parties reach final terms of settlement in June - to July
8. Capital raises start mid 2021 on foundation of new capital structure from settlement. SCOTUS issues opinion but 5th Circuit litigation is settled.
Hi Kthomp.
Prospective shareholders should know that they can not be treated like current GSE shareholders and this is why we need a ruling on the NWS from SCOTUS. As current shareholders we should want this because it will reduce the implicit risk premium for pricing new shares and lead to less dilution everything else being equal.
You may know better than me what is the potential scope of a ruling but the USA will be much better off if there can be some limitations regarding the treatment of property rights under the succession clause and backward relief from unconstitutionally structured agencies.
Agreed Callme! I have been holding since May 2008 and I want to wait for the SCOTUS to rule. SCOTUS needs to rule to make back door nationalizations clearly unconstitutional. We can not give the Administrative State power over cash flow from public private partnerships.
If this was done by a fully private corporation there would have been criminal charges long ago.
Hi Guido,
Read this memo from Treasury before you watch it again and see what you think about Hank. The line most telling was the part about how the most aggressive investors seek out the most fearful investors. The problem was the shorts and the swamp had inside information and had their guy as Treasury Secretary.
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
This memo was written on the Saturday that Barron's ran the article. It was sent to the the guy who recently resigned as Vice Chairman of GS. It was before the run on Bear Stearns. Unfortunately for a lot of innocent people Hanks vendetta got out of control.
I would encourage everyone to read this memo from Treasury to the ex Vice Chairman of GS prior to the run of Bear Stearns. The fact is that Paulson wanted to destroy the GSE's and he caused a financial collapse because the smart money and swamp knew what the plan was and they kept shorting everything they could as long as they could. BO was being advised by the swamp and the smart money and they all made much more money than they ever could have imagined because of Hank's vendetta.
This is a memo written on the same day the Barron's article was published so you know it was a plant.
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
I dont think the UST has a chance so orals will go bad or at best raise a great deal of uncertainty.
FNMA and FMCC dont need HERA in place to be governed properly since everything regarding safety and soundness could be built into Consent Decrees and the FHFA could rely on the BOD's to enforce the safety and soundness mandates until Congress acts to remedy HERA. The OFHEO framework will do for all the other FHFA duties until Congress remedies HERA.
The fact pattern here represents an egregious overreach and demands a punitive action against the UST. Seila did not demand a strong punitive remedy. Dont know enough about Free Enterprise but perhaps this is where I am wrong.
Nothing Blanket about you being wrong about the application of Corporate law. We have been disagreeing on these points for months. Calabria has given every indication he wants the BODs to take responsibility for the GSE s ASAP and the Consent Decrees is the perfect opportunity.
Hi Kthomp,
I will take the other side of that argument. I think UST and FHFA wait until oral arguments and consider taking the GSEs out of Conservatorship on Jan 1 in case SCOTUS invalidates HERA if orals go bad for the UST.
The case is too important to prevent future back door nationalizations and to push back against the creep of the Administrative State.
Also - I think you have been consistently wrong on the application of Corporate law and the issues regarding the intention in HERA to use the fairness standards in the resolution process proscribed by the FDIA as it pertains to the ultra vires acts of the FHFA as Conservator.
Time will tell and it is your decision to sell or not before then.
Good luck to Common and JPA alike.
Great points Ano. Dont you think it is clear that the intent of Congress was clearly Unconstitutional.? This is different from the ACA because the ACA was amended in 2017 and Congress in fact intended the ACA to survive the manldate.
Here it is clear that Congress intended to pass legislation where the governance was Unconstitutional. I am thinking that Thomas will not let the opportunity to push back hard on the Administrative State by overturning Humprey's Executor as precedence - any thoughts?
Calabria should bring the GSE's out of Conservatorship on Jan 1 and let them raise capital under Consent Decrees it it is possible that HERA will be voided. It will be interesting how the line of questioning regarding multi-director agencies without removal goes during oral arguments. I am thinking Gorsuch will look to the PLP Amicus where his former clerk is advocating for the overturning of Humpfrey's. I can see Barrett and Alioto joining. To me this is the interesting facet of this case because this may be the best chance to neuter the Administrative State.
Wow - Really Interesting. Just think if we include the Anniversary Date of the NWS - 8 years old plus 2012 rip off date = 2020. Anniversary Date of Conservatorship - 12 years old plus 2008 Ultra Vires Activity Date = 2020. Same for Unconstitutional provisions of HERA! Maybe the stock price should be $ 20 or $ 20 plus $20 to make it all fair and restore karma !!!
Yes - Thank you Senator Toomey for your public service. He seems to understand basic and fair dealing and the importance of the rule of law. We should not get ripped off by our own Government.