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Hi action8101,
if Calabria and Mnuchin enter a 4th amendment, in which the NWS is terminated, the SPS is written off and, if necessary, the sum exceeding 10% dividend payments is refunded or otherwise settled, then almost all the lawsuits will dissolve into thin air. In Sweeney's court, the USA is sued. The current and future shareholders will not care about that.
In addition, JPS holders have not been entitled to dividends since 2008, as FnF were and are not sufficiently capitalized. It is nonsense to derive any means from missing dividends to exert pressure to treat preferred shareholders favourably.
GLTY
Hi obiterdictum,
Argumentum ad populum? Great! As always, your analyses are first class and didactic.
But what have we learned from the privatization of Sallie Mae?
This is what I thought when I followed your links provided here:
- A full privatization of the GSEs would be a lengthy process.
- The announcement of the privatization has boosted the price of Sallie Mae's shares. The market has valued the arising opportunities higher than the resulting disadvantages.
I think that also with FnF the advantages would outweigh. Here are a few basic approaches:
- FnF could get in mortgage originators business. This would significantly increase profits.
- FnF could create competition for banks wherever they consider it lucrative.
- FnF could bring their structures and business model to the whole world. New IMBS(International MBS)...
- As one of the rating agencies recently announced, the MBS rating would be downgraded by one notch if the GSEs were fully private. This would not be far-reaching and would probably be passed on to the consumer.
- FnF would have to pay more interest on their short-term loans, but with the high core capital to be expected, one purpose would have already been found.
That should do it for now.
GLTY
Hi folks,
waiting for a settlement?!
You are right: Calabria and Mnuchin will settle all the lawsuits that are in the way of Recap and Release. A 4th amendment is coming. Then: claim over.
GLTA
Hi nats1,
"So, there is some wonder if part of an amendment is ruled vacated, will the rest of the agreement be vacated as well? How far and deep into HERA and into FHFA actions should a retrospective remedy and relief reach?"
I believe I have read that the Supreme Court has already ruled in such cases that all decisions must be reversed. But that is under reservation.
"Well, the conservatorship and the SPSPAs are not directly linked. Those are two separate matters."
That's correct. But dreams must be allowed.
Fannie would then have an estimated 70 billion dollars in one fell swoop and would be allowed to keep its profits. Then I would be able to confidently wait until Calabria gives the green light for release.
Good night
Hi brooge,
you didn't miss a thing.
Fannie drops and CC and Co. are not at the run?! Strange? No. Look at the JPS. Today we were eaten by external ones. When all the news is out, even the ladies from the Middle East shorten us.
Thank you, action8101, you're welcome.
And to your question, when I was on vacation, a clear: yes. Alongside the CSP and the UMBS.
GLTY
Thank you, obiterdictum,
then we have to wait for the District Court to rule on Count 1.
And if the Supreme Court grants the Collins petition, is it theoretically possible that not only the NWS, but the entire SPSPA will be dissolved? That would be great: Good bye warrants, good bye all the 10% dividend, hello recap money money money and good bye conservatorship.
GLTY
Hi RumplePigSkin,
Trump can fix FnF so that nobody can shake it anymore. No new president either. Here are 2 ways:
1. Release before Recap
2. Receivership to complete Recap and Release there
For point one, it is sufficient for Fannie and Freddie to comply with the minimum capital requirements. If retained earnings are not high enough, you can sell preferred shares. Once released, it is only possible to put the companies back into conservatorship if one of the required reasons listed in HERA is fulfilled. Back in 2008 it was the "consent of the board of directors". Well, in a rogue state this is always possible. But in the USA you need a doomsday mood.
Point 2 Calabria himself brought into play in a 2015 or 2016 article. We existing shareholders would simply be taken into the new companies. This step could not be reversed. The only thing that would still be possible would be to actually liquidate the companies. Then all shareholders would perform excellently if Mnuchin or a court had eliminated the SPS before.
Don't worry about it. It is not worth it. It is also to be expected that there will be sufficient capital to fund the necessary capital raises.
GLTY
Hi obiterdictum,
I have a question to ask you: Collins recently asked the Supreme Court to take over the case. This is about Count 4. Is it possible that if the case is accepted, Count 1 can also be heard? I think that both the plaintiffs and the defendants have a strong interest in it.
Does the Treasury Department have any channels, such as national or presidential interest, to get the Supreme Court to accept the case in its entirety?
Thank you
Hi navycmdr,
not the treasury, but the Justice Department represents Mnuchin in court.
Mnuchin would certainly prefer a court to eliminate his SPS problem.
GLTY
Hi car123,
what you're writing applies as soon as we win in court. What I have written already applies.
GLTY
Mnuchin misleads with the buffer
Fannie Mae is allowed to keep the next 22 billion dollars it will earn. In return, the SPS's liquitation preference increases by the same amount that the company is allowed to retain.
By doing so, Mnuchin keeps FnF's dividend payments frozen until the full capital buffer is reached. But at the same time, the value of his preferred shares increases.
That reduces the dividend table, which the FHFA regularly updates, ad absurdum.
This is how Mnuchin should proceed:
FnF continue to pay the NWS. With this money received, Mnuchin buys SPS from FnF.
I hope that the lawyers and judges will calculate correctly when the SPS is retroactively eliminated. Then none of this will matter.
GLTA
Hi YanksGhost,
how do you come up with such nonsensical stuff?
Thanks, Mr Michael.
One more thing: The Letter Agreement was signed shortly before the NWS became due. Mnuchin could have easily swept another 5 billion dollars. But he didn't. That's a good sign.
GLTY
Hello folks,
the value of the senior preferred stock is right at $120 billion. Once Fannie has built its $25 billion buffer, it gets to $142 billion. (145 minus 3 for the existing buffer).
It is almost impossible that Mnuchin can even get the $120 billion for the SPS. $142B certainly not. Thus this buffer is to be regarded as a free gift!
Mnuchin could modify the SPS and sell it afterwards. The problem: Fannie's core capital would be zero. A sale of this SPS would make a capital raise nearly impossible, since the SPS would eat up a large part of the company profits.
Mnuchin could convert the SPS into common stock. Then he would come up with almost 99% of all common shares. But with the warrant he already owns 79.9%. And these figures are only correct before a capital raise in which further common shares are issued.
Mnuchin would have to wait about 7 years until Fannie would have recapitalized by retaining its profits. Then he could sell the SPS at full value - and also the warrant. For us, there would still be $10 per share in it if we assume a market capitalization of $200 billion. But I don't think Mnuchin will go down that road. In view of the en-banc ruling, this approach would be inappropriate.
GLTA
Fannie Mae is the most important company in the world. Then comes Freddie Mac. Everything else is just cold coffee.
Microsoft is currently the most expensive company in the world. Do you think that Bill Gates could simply decide that the company would be shut down now and all Windows computers would be finished? Hardly. The Microsoft framework is in place, with or without Microsoft.
Every company is replaceable. Only Fannie and Freddie won't when they're free again. The only way to make them replaceable, similar to the Microsoft example, would be to insure their securities by the government so that Fannie and Freddie could go bankrupt if necessary. This is being worked on (half-heartedly), it needs Congress, and it won't come. A large proportion of FnF's securities have a term of 30 years. We take them out of conservatorship. Within this hostage we could have been made dispensable. Soon no more...
With such 2 heavyweight world champions it is not easy to just change one thing. And the world will look closely. Therefore I hardly believe that we will be ripped off at the end.
GLTA, Fully on the road again...
Senior preferred shares? Never heard of it! Sounds like communist stuff.
Greetings from Venice, Fully on vacation.
You' re very welcome, Mr Michael.
GLTY
Hi Letgoofmyfannie,
Hi matmig,
that's not my specialty. I say PPS $2-5 next week.
"Care to take a stab at a near term price target? "
" And I thought you suddenly got smarter. So, the wise posts were obi? "
OBI NUMBER 1
The Collins En Banc ruling
The Collins En Banc ruling can be summarized as follows:
16 judges have analysed 4 allegations. Thereby a number of majority opinions were formed. The result: We won 2 points, lost 2. I have listed the 4 allegations below.
Hitchkock and his 2 co-plaintiffs want to reach an end of the NWS and all 4 points pursue this goal. In addition, the plaintiffs are seeking relief and proposing 2 variants:
1. All payments in excess of the originally agreed 10% dividend to the Secretary of the Treasury will be set off against the SPS and the excess amount of $16 billion will be used as a tax benefit for future corporate profits.
2. All payments in excess of the originally agreed 10% dividend to the Treasury would be returned to F+F, in excess of $135 billion, allowing the Treasury Secretary to retain his Senior Preferred Stock (SPS).
What exactly have we won now?
All or almost nothing. That remains to be seen. Because the ruling provides that the case will be referred back to Judge Atlas' district court. She now has to judge again, on exactly those 2 points that we won. She can do that in a speedy manner or she can open a trial. The former could be completed within months, the latter could take years, but does not have to.
How is that possible? Won is won, so why go back to the lower court?
This is actually quite simple: Judge Atlas had hidden behind HERA's "Courts are not allowed to interfere in the operational affairs of the FHFA" clause and simply rejected the plaintiff's request. That, according to an En Banc majority of 9 of the 16 judges, is not correct. The plaintiffs had plausibly shown that they had a right to sue. It could not be denied because it went beyond the operational activities of the FHFA. Atlas therefore had to investigate the action in two respects:
1. Did the FHFA exceed its legislative authority when it agreed the NWS with the Secretary of the Treasury? What is the remedy? There are two underlying laws: HERA and APA.
2. An En Banc majority found that the FHFA was unconstitutionally structured because its head could not be fired by the US President without a reason under HERA law. The District Court should correct this and find a remedy for the plaintiffs.
We do not have much to hope for from point 2, since the majority of En Banc judges agreed that it would be sufficient to have HERA revised by the legislator as a remedy. There is no further compensation in this.
However, the situation is quite different with point 1: An En Banc majority writes that point 1 has the potential to satisfy all the plaintiffs' claims.
"...Shareholders could theoretically obtain full relief under Count I alone,...", page 42
As I wrote on another board, my hopes for an En Bac victory were exactly on point 1, because in HERA it is written that the main duty of the FHFA is to ensure that the companies maintain "adequate capital" to be "sound and solvent". A 100 percent capital drain is incompatible with this. And a majority of the judges now share this view. HERA is now finally seen as a whole and individual passages that were previously interpreted as allowing the NWS are now seen in context. This also leads to the fact that the "may - should" confusions are removed.
My conclusion:
We have won! It is only a question of time.
This is because the judges of the District Court do not really have a free hand. The reasoning of the En Banc judges is strong. And all judges must now deal with these arguments in all cases; especially the district judges.
For me, as well as for lawyer Thompson, it is clear: The NWS will end! The argumentation of the plaintiffs in point 1 - exceeding the authority - has now been taken over by the En Banc judges. The lower court will understand this as a judgement directive.
And ask yourselves what kind of remedy is appropriate here: If the NWS is not legal, can the Secretary of the Treasury still keep all the money? Hardly! I my view this is not possible. One of the two remedies proposed by the plaintiffs will be granted. I do not see any other solution. And both variants would be a huge success for us, whereby variant 1 would be clearly better, since one would have to pay less of the 10% dividend, and shorter.
What about the stock price?
What do you think? Victory in the medium term or have to wait again, what weighs heavier? Has everyone understood that we have won? Is Fully right on the point?
I think we have a turbulent time ahead of us.
Will there now be a settlement with the plaintiffs? Counter-question: Does it look as if anyone in the administration is in a hurry?
GLTA
PLAINTIFFS' ALLEGATIONS
• In Count I, they allege the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(C), (D), affords relief because FHFA exceeded its statutory conservator authority under 12 U.S.C. § 4617(b)(2)(D).
• In Count II, they allege the APA, 5 U.S.C. § 706(2)(C), (D), affords relief because Treasury exceeded its securities-purchase authority under 12 U.S.C. §§ 1455(l), 1719(g). Specifically, they allege that Treasury purchased securities after the sunset period, failed to make the required “[e]mergency determination[s],” and disregarded statutory “[c]onsiderations.”
• In Count III, they allege the APA, 5 U.S.C. § 706(2)(A), affords relief because Treasury’s adoption of the net worth sweep was arbitrary and capricious.
• In Count IV, they allege FHFA violates Article II, §§ 1 and 3 of the Constitution because, among other things, it is headed by a single Director removable only for cause.
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf
Hi obi, you can keep posting under my name. Password:
THANK YOU
Hi brooge,
capital buffer is a faster way to recap than NWS ending. It can start instantly while an end to the NWS would mean: recap start 2 quarters later.
GLTY
Friends of the warrant, watch out,
the two warrants could help with the recap:
" 2. Recapitalizing the GSEs
Issuing shares of common or preferred stock, and perhaps also convertible debt or other loss-absorbing instruments, through private or public offerings, perhaps in connection with the exercise of Treasury’s warrants for 79.9% of the GSE’s common stock; "
https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf
Just exercise or exercise and sell? I leave that interpretation up to you.
Preferred shares are welcome, too.
GLTA
Hello friends of the plan,
here's the best part: Mnuchin is willing to eliminate the SPS if Calabria wants it to. Excellent! And it looks like we're not the only ones waiting for En Banc.
"Recapitalizing the GSEs
Potential approaches to recapitalizing a GSE could entail...(e)liminating all or a portion of the liquidation preference of Treasury’s senior preferred shares..."
https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf
Here we go. I am fine.
GLTY
Hi kthomp19,
I think the more common shareholders you get to invest a part in JPS, the more likely it is that there won't be a two-thirds majority for conversion.
If there will be a conversion, it is likely to take place one to two years after the release in order to consolidate the share price and avoid a conflict of interest between the two shareholder classes.
Can you give me a reason worth causing such a conflict of interest? Please bear in mind that the lawsuits will have been resolved by then. IMHO
GLTY
Not that G. will be the only one at whole #Fanniegate to be convicted.
Conservatorships? Wait, I'll get it right away. Weren't those the new eco-friendly bags at Costco?
Dilution? Never heard of it.
Hi Patswil,
I think starting tomorrow, two words will slowly begin to fade away from our vocabulary:
1. Receivership
2. Net Worth Sweep
GL
8,2%
Your folk music is well received. Especially the missing song #7.
You're right, kthomp19, the treasury spokesman isn't as exact as you. By the way, these are the fewest.
Incidentally: If both statements are correct, the company was rejected.
Hi TLIPK5269,
that's just a rumor from our Mr. Weinstein.
This is what the Treasury spokeswoman said about it:
"In an emailed statement, the Treasury spokesman said Wednesday that there is no merit to any report that Treasury is currently in talks to contract or hire any firm to serve as a financial adviser to the department on matters related to Fannie and Freddie."
https://www.bloomberg.com/amp/news/articles/2019-09-04/treasury-discussed-hiring-houlihan-to-advise-on-fannie-freddie
GLTY
Thank you, bahstonwedsocks,
good news!
Hi RickNagra,
Scoop: Delay delayed.
well...
Hi 401kobessive,
Yep, I said that right here five months ago.
GLTY
For sure, we all have a "kick the can down the road" phobia. But the guy who did the gas told me that the road works have already started. Makes can-kicking nearly impossible now.