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Thanks Robert. The provision in the Proposed Rules is the flexibility to build Countercyclical Capital Buffers which are initially set at zero. In this case DJT could order McNuchin to work with Powell and use of the Fed CVD19 facilities and loan the GSE's the capital to absorb any CV19 losses plus an administration fee. This should not be a windfall for the GSEs but they should not be stuck with any CV19 losses.
The smart move would be an alternative initiative and fund a refinancing boom whereby UST paid all related refinancing costs to take advantage of the low interest rates. Maybe this fee was done in anticipation of such an announcement because otherwise the GSEs would be stuck with a massive amount of new exposure with a lot of CV19 exposure. This would be the big bang and be a massive win for homeowners and the economy.
Maybe nothing but idle speculation but we will see. On the surface the increased fee seems to be anti-stimulative which does not seem to make sense from a political point of view so that makes me think it is the thud before the big bang.
How about " We want your house" policy. From RealClearPolitics today.
https://hotair.com/archives/john-s-2/2020/08/13/seattle-gentrification-protesters-give-house-give-black-people-back-homes/
Great Post Robert - Zandi, Parott and Bernstein are predictable enough that it could be a perfect set up. Also - remember that under the proposed capital rules there is a provision which allows the Fed the flexibility to provide capital for systemic reasons. This would be a perfect opportunity to highlight the genius of the proposed capital rules. We will see but my guess is that Calabria is a couple steps ahead of the three stooges.
Right on Robert! FNMA is like the Bailey Savings and Loan for the good old USA!. The MBA and Washington DC crowd wants everyone to borrow form Potter like Banks. Bedford Falls home ownership or Pottersville rentals and slums - SCOTUS must choose to uphold the rule of law and prevent the back door nationalization of our housing lifeblood. Public/Private Partnerships for the good of all when property capitalized and privately managed.
Hi Donot,
Watt was appointed by BO and controlled the FHFA until the start of 2019. Calabria was appointed last Spring. Your scorecard should end with the BO/JB appointment term
Are you assuming the NWS overpayment is about $ 30 bn. How much of that was Watt and how much was paid in 2019? That should be the start of your scorecard. In fact you should add back in all the net worth accrued to the GSE's post 2019. So lets start with plus $ 25 billion going to plus $ 45 bn under Calabria. BO/JB $ 25 to $ 30 bn stolen from GSE's DJT - plus $ 20 to $25 bn retained by GSES and Counting upward. Dont see how your BO/JB combo can be anything but crooks?
Regarding the the Justice Department litigation - check out the background of all the Staff Attorneys on the SCOTUS briefs - they all worked for judges appointed by Democrats. Justice is just now becoming more balance in their staff positions.
Finally - how about which FHFA Director cost taxpayers money to settle sexual assault allegations by FHFA staff. BO/JB $ 1 million
DJT - $0
Remember the BO speech where he complained that Watt was not getting confirmed? How did that work out for the taxpayers and the FHFA staff?
Eight Year Anniversary of NWS and Third Amendment - August 17, 2012. FNMA Enterprise Value now worth $ 166 bn according to Wedbush. UST has been fully repaid and overpaid by $ 30bn. FMCC Enterprise Value - $120 bn?? 8 years - over $ 300 bn in value for US GOVT and Private Shareholders. Time for POTUS, UST and FHFA to go for the WIN/WIN/WIN/WIN and settle with common and JPS shareholders while making billions more for the US Taxpayer!!
Do you mean like the Minnesota Twins or the GSE Twins? Just kidding the Twinkies are 10-2 though. Wishing you and Lotto profits as great as your faith in the rule of law and fair dealing.
Thanks MannSinger. Are you sure Ackman reduced? Could it be that it has something to do with his total return swap holding structure? Regarding American Funds - the Institutions tab have them owning 22% of the float and adding 5 million plus as of 7/31?
http://finra-markets.morningstar.com/MarketData/CompanyInfo/detail.jsp?query=22%3A0P0000023H&sdkVersion=2.56.0
Not sure if this is right but wanted to follow up since it may be just the way the holdings are reported with Morningstar?
Talk about a disaster - what if he did wind down Fannie and Freddie - who would have been making 30 year loans now? This guy would have given away almost $ 300 bn in Enterprise Value at the same time. This is the guy who gave us Mel Watt for whom the FHFA settled a sexual assault suit for $ 1 million. Check out the video around the 21 minute mark:
Thank you 2Invest. I hope Vinson and Elkins gets to argue - there is only 1 hour allotted but time is usually efficiently allocated by the Chief Justice.
Talking about a bad investor! - this guy wanted to wind down two very profitable companies worth $250 to $300 bn today.
Agreed - plus even with a generous settlement with the common and JPS it would mean a multi-billion payday for the US Taxpayer.
He could also point out how BO/JB just wanted to wind down the GSEs and give the business to the MBA crowd for nothing. FNMA alone is worth $ 166 billion today according to Wedbush.
Hi 2Invest,
The Calabria paper is cited three times in the Amicus brief filed by Blackwells in Collins v McNuchin. On pages 10,12 and 16.
See: https://www.supremecourt.gov/DocketPDF/19/19-422/120707/20191030091202201_Final%20Blackwells%20amicus%20-%2019-422%20-%20PDFA.pdf
I am not sure if Vinson and Elkins will get a chance to participate in Oral Argument but the paper is definitely part of the Court Record. Personally I think it is a compelling rationale for a fair, equitable and rationale resolution of Common and JPS claims and to make the case that the NWS was ultravirus to its duties as Conservator.
Thanks Navy, The question should be why didnt BO/JB and Valerie Jarrett address the issues of equitable housing policy for people of color and the inner city in during the BO/JB administration? The answer is that they didnt care and let BO/JB turn the GSE's into a piggy bank to fund Obama Care.
Where was Chairwoman Watters then? Why didnt she push for a settlement in 2013 and work with the finance community to bring capital to disadvantaged communities and people of color? Nearly a decade later and now make the case?
The cap rule date seems consistent with what is out. Comment period ending on Aug 31 and final rule out within 60 days or so.
Regarding the SCOTUS argument date - Only the October sitting has been confirmed and Collins/McNuchin is not on the calendar yet according to SCOTUS blog. There will be a November and December sitting so perhaps another 15 or so cases argued before end of year.
This is the best of my understanding
Thanks again- final follow up
How can the GSEs raise money if there is no exit or independent BOD? Too much risk of govt intervention as you said - dont you think?
You probably dont agree but I would expect that the BODs become functional with separate legal representation before the end of the year. FNMA and FMCC counsel will be part of the settlement negotiations as they pertain to the capital structure of each institution. Thoughts?
Final thank you!
Thanks! As Follow ups
If we have a cap rule then do you think we can get a Consent Decree and exit before late Jan 2021?
If we have an exit - what is the political risk of a Dem Congress since the GSEs would be out of Conservatorship and under BOD control once again?
Thanks FFFacts
I think we need to be aware of the fact that Director Calabria has only been on the job since April 2019 and that the staff at the Justice Department handling the NWS litigation are BO/JB holdovers.
It is cleat that Parrot, Zandi and the gang do not want to let the GSEs' to be out of government control and want to perpetuate the bank door nationalization under the guise of Conservatorship.
Dont you think that it would be most likely that JP will appoint a new FHFA Director that would open the door for the Washington DC MBA establishment like Terry McCaulife and KBW network to make money on the further subjugation of the GSE's.
The potential delay in a final capital rule is concerning - we need final capital standards to enter into Consent Decrees and the exit from Conservatorship.
FNMA traded at $ 6 and if there is a PSPA cramdown - Wedbush says its worth zero.
UTS will receive $124 bn more in profit.
FNMA is worth $ 166 bn
This report just strengthens the hand of the JPS and Common Shareholders in settlement talks.
Got to go
It assumes JPS convert at 40% of Par. Clearly not going to happen. Remember worse case just wait for SCOTUS - got to be better odds and definitely a better case
Hi Louie,
Dont we have to ask ourselves why Wedbush would say that FNMA is worth $166 bn and the common shareholders will get zero? Probably to keep the stock price down going into the settlement.
Perhaps this is am unintended gift to give to David Thompson and Vinson and Elkins to be included in their briefs before oral argument to SCOTUS. It clearly is a takings because the stock price will go from as high as $ 6 to zero. It is not loss profits but the loss in the value of the stock price - I think this was the problem with AIG and Hank Greenberg won the case but no damages. Clearly it is an enterprise worth $ 160 bn or more and if UST goes forward with as SPS cramdown - the UST will have takings liability due to the SPSA and the ultra vires actions of the FHFA.
It would be good to get Ano to chime in.
Great Point Justice. Hi Ano - dont you think that David Thompson and Vinson and Elkins can use the Wedbush report in their brief to SCOTUS to show the potential damages from a constitutional taking by UST and the ultra virus actions of the FHFA in the 3rd Amendment. These seem like direct damages to Common Shareholders - $6 per share or about $9 billion to FNMA alone. For JPS it is 60% of Par or $ 18 bn. For FMCC isnt about $.5.5 bn. A good case for about $ 30 bn in direct damages for takings, bad faith and violation of the FHFA's role as Conservator under HERA.
Wedbush values FNMA at $ 166 bn based off a 10 multiple. Do we know what Nomura had for an enterprise value. Wedbush is another validation of the underlying value of the FNMA business model. It assumes that JPS convert for 40% and Ackman will take zero. What do think - are you going to take 40% for your JPS?
I will take the other side of that perspective.
Cap rules will be decided by year end.
Watt was appointed by BO/JB to perpetuate the theft from the GSE's. The NWS has been shut off under Calabria.
Watt sexually assaulted an FHFA employee. Perhaps shareholders weren't the only one he was fornicating. My bet is that Calabria will not do either - literally and figuratively.
Remember he was confirmed in April 2019 so he has only been on the job less than 16 months
Exactly!
Now the other lawyer who lied about his law school grades and commonly plagiarizes other peoples speeches and ideas is a different story. Talk about not having the mental capacity to do a job!
Agreed - Ginsburg already lost the Constitutional argument in Seila. Although I doubt it - she may actually think the NWS was grand theft. Her late husband was a big time tax lawyer and undoubtedly knows how important the sanctity of contract law is - especially in the proper functioning of our capital markets.
February 6th 2020 - start of latest bout of cancer.
Yes - I believe she is doing an extraordinary job. Look at her opinions and listed to her interviews and questions during oral arguments. She is extraordinary.
Shout out to Justice Ginsburg with best wishes! She runs circles around 99% of Americans with her dedication and extraordinary intellect. We may not agree with her judicial philosophy but that is why there are nine justices. You can not find someone more dedicated to her vocation - 87 years old and fighting cancer to continue to do what she fervently believes. A real patriot.
Got it - Thanks for the clarification.
181 Million Shares purchased by Institutions in first quarter? This report shows Vanguard, BlackRock, Fidelity and State Street as major FNMA owners - does this make sense?
https://eresearch.fidelity.com/eresearch/evaluate/fundamentals/ownership.jhtml?stockspage=ownership&symbols=FNMA%2EOB
Which one is Joe Biden? He definitely was in the room - kind of hard not to after 47 years.
Great - if that happens - look forward to the trade confirmations!
Hi Kthomp
How do you handle the Biden political risk around a conversion. Would you convert to common if Biden wins?
What is your critical path?
Before or after a consent decree?
Before or after the election?
Do you convert if Biden wins but before any new stock offering?
Shout Out and big Thank You to Tim Pagliara and Investors Unite!! Tim is a real patriot standing up for the rule of law. Where would we be without him? A big Thank You to David Thompson also - what an awesome attorney and advocate!!
Thanks once again Ano!
Did you understand the last sentence regarding the "pooch"? I have never heard that saying before.
Thanks Guido and Louie,
M&G is a subsidiary of Prudential Insurance in the UK. Gigantic company which probably understands FNMA very well because they probably invest in the MBS and may have invested in the JPS at one point or now. Very sophisicated.
Hi Kthomp,
Calabria had a lot to say about the Conservatorship at Cato - He even co-authored a White Paper which is cited in the Blackwells Amicus Brief:
https://investorsunite.org/wp-content/uploads/2015/01/Krimminger-Calabria-HERA-White-Paper-Jan-29.pdf
He says that the resolution procedures are suppose to mirror the FDIA resolution procedures.
Trump appointees believe in the Rule of Law, Power of the Presidency and DO NOT WANT BACK DOOR NATIONALIZATIONS. It has more to do with Judicial philosophy but politics and judicial philosophy usually go together.
DOJ is fighting shareholders partly because it is their job as advocates and partly because the staff at DOJ are most likely ok with a back door nationalization of the GSE's
Three staff DOJ lawyers listed on the CERT petition:
Mark Stern - clerked for Robert Vance on 11th Circ. Carter Appointee
Abby Wright - clerked for JP Stevens on SCOTUS - democrat
Gerald Sinzak - clerked for Justice Ginsburg on SCOTUS
So goes the GSES - so goes the future of the US. NO BACK DOOR NATIONALIZATIONS. SANCTITY OF CONTRACT - SHAREHOLDERS RIGHTS AND FAIR DEALING MUST BE UPHELD FOR THE FUTURE OF OUR MARKET ECONOMY.
Thank You POTUS for making the Judical Appointments to get us to SCOTUS Cert!!
Collins was 9 - 7 Decision
5 Trump appointees voted Yes!
Willett - Trump
Ho - Trump
Engelhardt - Trump
Duncan - Trump
Oldham - Trump
5 of the 9 yes were TRUMP !!
3 BO appointees voted No!
Graves - BO
Higginson - BO
Costa - BO
3 of the 7 no were BO !!
SCOTUS Selia was 5-4. Two Trump appointees voted yes!! Two BO appointees voted no.
Objectively - where would we be without DJT? It is clear we would not have won in the 5th Circuit - Seila or have CERT with SCOTUS. A big thank you to DJT!!!