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Probably not - but my kid's 529 the Growth Fund of America was the largest shareholder in 2007 and I purchased FNMAT at $ 25 in May of 2008. Lots of people lost lots of money while the UST started the Nationalization process. Just illustrates why the Common Shareholders and JPS should be treated fairly after 15 years of Conservatorship.
No Name wants us to totally discount what TH stated over and over but have us believe what a Mike Pence appointee in a DJT Admin said about what a DJT US Treasury Secretary my have said? Is that correct No Name ?- totally disregard the opinion of TH but believe that what Calabria wrote in his book about what McNuchin may have stated or believed as controlling the future actions of the JB UST?
Daniel Hornung mentioned on GlenBradford.com
https://www.nmhc.org/globalassets/meetings/speaker-headshots/bios/daniel-hornung-bio-and-headshot.pdf
Same role as Jason Thomas had in the GWB NEC - hope we fare better than we did with Jason Thomas.
From Chicago so is Sandra Thompson at the FHFA.
Interesting post of GlenBradford.com
https://www.glenbradford.com/2023/11/my-recent-gse-notes/
Good Morning LuLeVan,
Yes - I can see where they do some large private placements but I would think there would be a lot of interest from domestic buyer's like Ackman's SPAC and BlackRock for example. The bottom line is that the GSE MBS asset portfolio is probably the most diversified most secure fixed income portfolio in the world. Do we know if the investment advisor contracts are still in place - at some point the GSE Board's will have to get involved and have some semblance of normal Board process. This raises the issue of the scope of authority of the Conservator to "conserve and preserve" vs a potential legal or Constitutional challenge. Does anyone know if there is a big common holder other than Ackman out there? Is the support for common all small retail or is there someone out there who either wants to use their common stakes to enhance their JPS holdings return or more likely intending to do a Texas two step with a large JPS and a large common whereby they first use their common stake to enhance their JPS returns and then pile into maximizing their common stake.
Of course all of these queries are very low probability and extremely hypothetical based off of Mr. Market's valuation of GSE JPS and Common.
Hi LuLeVan, Something to consider if FNMA and FNMA were ever to come public again is that they would be included in the S&P500 and other capitalization weighted indicies. Normally Index funds and other asset managers end up owning 40% or more of the capitalization of index components since they may holdings for index funds or funds benchmarked to the S&P500. Citigroup capitalization is approximately $ 80 bn and Bank of America is in the $ 225 bn range. Both GSEs would have market caps greater than Citigroup and together greater than Bank of America. The point is that there would be natural demand for approximately $ 100 bn of equity just from index funds on the exit from Conservatorship.
Thanks for posting LuLeVan - Freddie was cash flow positive before the GFC and every year thereafter. There was no definitely no need to put Freddie in Conservatorship. Your analysis of Tim Howard's post is exactly right - the only question is why doesnt the JB Admin act now for the win/win that TH has highlighted?
Really Interesting - Thanks Eternal Patience for the post. This is probably good for us at the margin - seems to allign with DJT Rand Paul Letter.
Good Morning and Thank You Clarencebeaks21! I haven't had the chance to fully consider your two replies yet but Thank You for your contribution to this Board. At first glance it doesn't seem the 5th Circuit Opinion regarding 4617(f) will be material. Did you see Kthomp's reply regarding whether or not the authority of the Conservator to "preserve and conserve" applies only to assets rather than equity? Is there a challenge regarding the equity v assets angle?
Commenting on this post in October since ACE Trader referenced it: Interesting piece of information regarding the American Funds - my kid's 529 College Fund was invested in the Growth Fund of America since 2001:
During her deposition, Fannie’s Chief Financial Officer Susan McFarland said that she “did not think that Fannie Mae was in a death spiral in mid-August of 2012” that would have prevented it from paying Treasury’s 10% cash dividend.[xix] In April 2012, Treasury Under Secretary for Domestic Finance Mary Miller told Secretary Geithner that she had met with officials from the Capital Group in Los Angeles (a financial services company that manages the American Funds) who “indicated that it had done a fair amount of work analyzing the sufficiency of the PSPAs and thought that they provided ‘adequate protection’ for investors.”[xx] Fannie Mae’s Chief Executive Officer Timothy Mayopoulos maintained a similar viewpoint and at an August 6, 2012, executive management meeting, stated that Goldman Sachs had “confirmed that foreign investors seem to have little concern regarding the PSPA’s upcoming expiration date.”[xxi] On August 7, 2012, a Treasury official observed that “home price, delinquency and refi trends” at the GSEs were “all very positive.”[xxii]
Good Morning Skeptic7 - the reason I mentioned disinformation is that it seems based on the pattern of your posts that you actually are supportive of GSE shareholders although you say would be happy to see shareholder's get the justice they deserve. Going back to the Seinfeld reference Newman pretended to like broccoli but when he actually was forced to eat broccoli, he spit it out. Do you own any GSE common or GSE JPS? If not - why are you a poster - you definitely have every right to post as you please but to the extent you say you have goodwill toward GSE shareholder rights and you do not - that is disinformation. There is a difference between being skeptical and being sadistic - is your intent to be helpful to the GSE shareholder cause or do you get financial payment or some personal agenda in pervading doubt and discord?
Hi LuLeVan,
Turning on the divs for the JPS is a great way to settle the JPS suits if the UST ever wanted to. The conversion of the JPS would really help meet CET1 goals by bringing in $ 30 bn of common equity. The GSEs can always issue more JPS over time but the question is at what interest rate? The 5 pct series are looking pretty good now.
My question is why whatever Calabria reported about McNuchin relevant? Calabria was a Mike Pence guy who now is irrevelant in GOP politics and McNuchin has not come out in support of DJT in past years to my recollection.
Class Action is related to 2007 shareholders but could be relevant to other legal issues?
From Page 94 of 10Q:
https://www.freddiemac.com/investors/financials/pdf/10q_3q23.pdf
Freddie Mac also wrote off Lamberth damages in 3rd Quarter - From Pages 94-5 of 10Q:
. On September 28, 2018, the District Court dismissed all of the claims except
those for breach of the implied covenant of good faith and fair dealing. The cases were consolidated for trial.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14
Freddie Mac 3Q 2023 Form 10-Q 94
Court rulings have limited the Plaintiffs’ damages theories to those based on the decline in Freddie Mac’s and Fannie Mae’s
share value immediately after the Third Amendment. The Plaintiffs have asserted losses based on the decline in value of
Freddie Mac’s common and junior preferred stock from August 16 to August 17, 2012. During the trial in October and early
November 2022, the Plaintiffs requested that the jury award $832 million plus pre-judgment interest as damages against
Freddie Mac. The jury in that trial was not able to reach a unanimous verdict and on November 7, 2022 the judge declared a
mistrial. The retrial started on July 24, 2023. On August 14, 2023, the jury returned a verdict against FHFA, Fannie Mae, and
Freddie Mac awarding compensatory damages of $282 million to Freddie Mac junior preferred shareholders and $31 million to
Freddie Mac common shareholders. The jury declined to award the Freddie Mac shareholders prejudgment interest. In 3Q
2023, we recorded a $313 million accrual in other expense on our condensed consolidated statements of income for the
adverse judgment.
https://www.freddiemac.com/investors/financials/pdf/10q_3q23.pdf
Does anyone know about this Class Action scheduled for trial in October of 2024? It is at the District Court level in the 6th Circuit. From FMCC 10Q
Putative Securities Class Action Lawsuit: Ohio Public Employees
Retirement System vs. Freddie Mac, Syron, Et Al.
This putative securities class action lawsuit was filed against Freddie Mac and certain former officers on January 18, 2008 in the
U.S. District Court for the Northern District of Ohio purportedly on behalf of a class of purchasers of Freddie Mac stock from
August 1, 2006 through November 20, 2007. FHFA later intervened as Conservator, and the plaintiff amended its complaint on
several occasions. The plaintiff alleged, among other things, that the defendants violated federal securities laws by making false
and misleading statements concerning our business, risk management, and the procedures we put into place to protect the
company from problems in the mortgage industry. The plaintiff seeks unspecified damages and interest, and reasonable costs
and expenses, including attorney and expert fees.
In August 2018, the District Court denied the plaintiff's motion for class certification. On April 6, 2023, the Sixth Circuit reversed
the District Court's September 17, 2020 decision to grant the plaintiff's request for summary judgment and enter final judgment
in favor of Freddie Mac and other defendants. The Sixth Circuit remanded the case to the District Court for further proceedings.
The District Court scheduled the trial to begin on October 21, 2024.
Exactly as I thought - Hellow Newman!! You must have realized that you can't control information via the mail these days so you decided to spread disinformation and skepticism via IHUB.
That explains everything! Well - Hello Newman!!
From 10Q Adjusted Assets $ 4.56 Trillion X 2.5% = $ 114 billion. Issue is Liquidation Preference otherwise $ 114 bn - $73.7 bn = $ 40.3 bn if ERCF revised down to 2.5% as TH suggests. We should be at $ 114 bn or more in 2 years at current earnings run rate. Also - FNMA earns a ROA on the cash related portion of the $73.7 bn which adds to interest income.
Thanks LuLeVan I think Sandra Thompson has referenced this at some point.
From Note 13 in 10Q:
Senior Preferred Stock Purchase Agreements Litigation
A consolidated class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action
Litigations”) and a non-class action lawsuit, Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac
shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the
Notes to Condensed Consolidated Financial Statements | Fair Value
Fannie Mae (In conservatorship) Third Quarter 2023 Form 10-Q 114
District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock
purchase agreement with Treasury.
Plaintiffs in these lawsuits allege that the net worth sweep dividend provisions of the senior preferred stock that were
implemented pursuant to the August 2012 amendments nullified certain of the shareholders’ rights and caused them
harm. Plaintiffs in the class action represent a class of Fannie Mae preferred shareholders and classes of Freddie Mac
common and preferred shareholders. On September 23, 2022, the court issued a summary judgment ruling that
permitted the plaintiffs in these lawsuits to present to a jury their claims for breach of the implied covenant of good faith
and fair dealing. The cases were consolidated for trial and a trial commenced on October 17, 2022, but resulted in a
mistrial after the jury could not reach a verdict. A second trial commenced on July 24, 2023. On August 14, 2023, the
jury returned a verdict for the plaintiffs and awarded damages of $299.4 million to Fannie Mae preferred shareholders.
On October 24, 2023, the court awarded these shareholders prejudgment interest on the damage award, to be
determined as simple interest, accruing from August 17, 2012 until the date on which judgment is entered at a fixed rate
of 5% over the Federal Reserve discount rate as of August 17, 2012. We have determined the prejudgment interest
through September 30, 2023 is $192 million. The parties will have an opportunity to file an appeal. We evaluated the
jury verdict and the court’s award of prejudgment interest and have established an accrual for each, reflected as
expense in “Other expenses, net” for the three months ended September 30, 2023.
From Note 13 in 10Q:
Senior Preferred Stock Purchase Agreements Litigation
A consolidated class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action
Litigations”) and a non-class action lawsuit, Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac
shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the
Notes to Condensed Consolidated Financial Statements | Fair Value
Fannie Mae (In conservatorship) Third Quarter 2023 Form 10-Q 114
District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock
purchase agreement with Treasury.
Plaintiffs in these lawsuits allege that the net worth sweep dividend provisions of the senior preferred stock that were
implemented pursuant to the August 2012 amendments nullified certain of the shareholders’ rights and caused them
harm. Plaintiffs in the class action represent a class of Fannie Mae preferred shareholders and classes of Freddie Mac
common and preferred shareholders. On September 23, 2022, the court issued a summary judgment ruling that
permitted the plaintiffs in these lawsuits to present to a jury their claims for breach of the implied covenant of good faith
and fair dealing. The cases were consolidated for trial and a trial commenced on October 17, 2022, but resulted in a
mistrial after the jury could not reach a verdict. A second trial commenced on July 24, 2023. On August 14, 2023, the
jury returned a verdict for the plaintiffs and awarded damages of $299.4 million to Fannie Mae preferred shareholders.
On October 24, 2023, the court awarded these shareholders prejudgment interest on the damage award, to be
determined as simple interest, accruing from August 17, 2012 until the date on which judgment is entered at a fixed rate
of 5% over the Federal Reserve discount rate as of August 17, 2012. We have determined the prejudgment interest
through September 30, 2023 is $192 million. The parties will have an opportunity to file an appeal. We evaluated the
jury verdict and the court’s award of prejudgment interest and have established an accrual for each, reflected as
expense in “Other expenses, net” for the three months ended September 30, 2023.
From Page 119 of 3Q Form 10Q:
District of Columbia (In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action
Litigations and Fairholme Funds v. FHFA). Fannie Mae is a defendant in two cases in the U.S. District Court for the
District of Columbia, including a consolidated class action. The cases were consolidated for trial, and on August 14,
2023, the jury returned a verdict for the plaintiffs and awarded damages of $299.4 million to Fannie Mae preferred
shareholders. On October 24, 2023, the court awarded these shareholders prejudgment interest on the damage award,
to be determined as simple interest, accruing from August 17, 2012 until the date on which judgment is entered at a
fixed rate of 5% over the Federal Reserve discount rate as of August 17, 2012. We have determined the prejudgment
interest through September 30, 2023 is $192 million. See “Note 13, Commitments and Contingencies” for additional
information.
Maybe not the lawyers but the accountants have already and written it off! We should see a similar write off with interest tomorrow by FMCC most likely.
Didn't they already make a reserve for legal settlement costs? Does anyone know ? - because it does not seem they are offsetting a reserve here but just a straight write off against quarterly earnings.
Thanks for all the work and analysis clarencebeaks21. Seems really tough doesn't it with the DC Circuit Opinion and denial of Cert by SCOTUS? Thanks for separating the takings and illegal extraction analysis also. Makes sense and it seems like the timing of the Tyler decision is our best hope to overcome the precedent set in the DC Circuit?
FNMA wrote off $ 491 million for Lamberth Class Action in 3Q. What was the prorated jury award? - FNMA has already calculated the interest and written it off against earnings.
From the Financial Supplement footnote on Page 5:
Other expenses, net
Other expenses, net includes $491 million of expense in the
third quarter of 2023 relating to a jury verdict and an award
of prejudgment interest for Fannie Mae preferred
shareholders
https://www.fanniemae.com/media/49476/display
Good Morning SREZ,
Where do you think McNuchin said he wanted to write down the JPS? and what legal fallout are you referencing? Did Kthomp really say what you are stating in your post - seems like a curious post at 1:30 am EST regarding and week old post by Kthomp the day before blow out earnings by FNMA?
The lost of dividends was the by product of the UST and NEC deciding to Nationalize the GSEs in March of 2008.
Jason Thomas NEC Special Advisor to GWB in Memo to Robert Steel Under Secretary of the UST March 8, 2008:
Cover Email:
Attached is the document used as the sourcing for today's Barron's article on the
potential collapse of Fannie Mae.
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.
Thank you for your discretion,
Jason Thomas
From Page 13:
"As shareholder capital gets wiped, the government will have no choice but to seize the company and
place it in conservatorship or receivership."
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
By the way - I bought FNMAT at $ 25 underwritten by Merrill Lynch on May 8, 2008. No one in the public markets knew about the internal UST discussions that were ongoing while billions were raised from public investors in the US Securities Market.
Compound interest since we should have been receiving dividends all of this time and reinvesting them. Do you know if the GSEs had a dividend reinvestment program in place?
Hey No Name - are you a graffiti artist in addition to being a big-time bankruptcy expert? Wondered what writings you are referring to?
Hi clarencebeaks21,
Regarding your interpretation of Collins - what are your perspectives regarding the recent Collins Opinion in the 5th Circuit:
1. Can common shareholders bring a Constitutional takings suit against the FHFA if the cramdown is implemented since it would be arguably outside the Conservator's power to "preserve and conserve"?
2. Can parties with standing challenge the FHFA affordability programs based on a MQD basis if the FHFA continues to use the GSEs as political piggy banks?
3. Doesn"t this part of the Collins Opinion directly conflict with the District Court Opinion in Bhatti regarding the scope of 4617(f)?
Here is the excerpt from Page 14 of the Opinion:
FHFA is wrong in trying to turn count I into an APA claim because Collins
specifically said that “the unconstitutional restriction on the President’s
power to remove a Director of the FHFA” is what could “inflict compen
sable harm” on plaintiffs. 141 S. Ct. at 1788–89. Count I of the complaint
was therefore properly brought directly under the Constitution and was not
barred by § 4617(f).
This analysis is buttressed by the nature of the majority opinion in
Collins. The plaintiffs brought both statutory and constitutional challenges
to the third amendment. See id. at 1775. The majority dedicated nearly four
pages to explaining why § 4617(f) barred plaintiffs’ statutory challenge to the
third amendment. See id. at 1776–79. Yet the opinion did not mention
§ 4617(f) when discussing whether plaintiffs could show that the unconsti
tutional removal restriction caused them harm. See id. at 1787–89. If
§ 4617(f) barred consideration of constitutional claims, one would expect the
opinion would have noted that. It would be strange for Collins to leave open
the possibility of retrospective relief based on an unconstitutional removal
restriction, give examples of when such relief would be available, and remand
the case for resolution of that issue if the entire question was outside our
ability to review.
Therefore, § 4617(f) does not bar count I of the amended complaint
seeking relief directly under the Constitution, and we may finally proceed to
the merits of plaintiffs’ contention that HERA’s unconstitutional removal
provision caused compensable harm.
Thanks LuLeVan - looks like great links. I do think there will be more litigation if there is a cramdown and I don't think someone like Ackman will just stand by and let the common get crushed. The JPS may benefit some from a cramdown but the real benefactor will be the UST which in essence be a Constitutional Takings. The MQD issues are also topical and ripe as a basis to challenge any cramdown.
Hi LuLeVan - do you have a link for the Susan Wachter reference? She seems important since she is part of UPenn which has the JB connections and because she has longstanding respect regarding Housing Policy.
Good Morning Skeptic,
I am glad you are happy to be wrong again about Judge Lamberth not trying to set aside the Jury Verdict. He is not acting like the Company Man you have made him out to be fortunately.
Hope more future developments will make you even more welcome and happy!
Good Morning LuLeVan
What do you think about a Constitutional challenge for a Taking or a MQD challenge?
Good Morning Guido
Maybe Lamberth used the part about charging interest to come up with his decision?
What did you think about the part where McNuchin said something to the effect that Calabria " was not bad looking" ?
Good Morning Skeptic7,
Are you still expecting a JNOV from Judge Lamberth?
Good Morning Kthomp,,
What are your perspectives regarding the recent Collins Opinion in the 5th Circuit:
1. Can common shareholders bring a Constitutional takings suit against the FHFA if the cramdown is implemented since it would be arguably outside the Conservator's power to "preserve and conserve"?
2. Can parties with standing challenge the FHFA affordability programs based on a MQD basis if the FHFA continues to use the GSEs as political piggy banks?
3. Doesn"t this part of the Collins Opinion directly conflict with the District Court Opinion in Bhatti regarding the scope of 4617(f)?
Here is the excerpt from Page 14 of the Opinion:
FHFA is wrong in trying to turn count I into an APA claim because Collins
specifically said that “the unconstitutional restriction on the President’s
power to remove a Director of the FHFA” is what could “inflict compen
sable harm” on plaintiffs. 141 S. Ct. at 1788–89. Count I of the complaint
was therefore properly brought directly under the Constitution and was not
barred by § 4617(f).
This analysis is buttressed by the nature of the majority opinion in
Collins. The plaintiffs brought both statutory and constitutional challenges
to the third amendment. See id. at 1775. The majority dedicated nearly four
pages to explaining why § 4617(f) barred plaintiffs’ statutory challenge to the
third amendment. See id. at 1776–79. Yet the opinion did not mention
§ 4617(f) when discussing whether plaintiffs could show that the unconsti
tutional removal restriction caused them harm. See id. at 1787–89. If
§ 4617(f) barred consideration of constitutional claims, one would expect the
opinion would have noted that. It would be strange for Collins to leave open
the possibility of retrospective relief based on an unconstitutional removal
restriction, give examples of when such relief would be available, and remand
the case for resolution of that issue if the entire question was outside our
ability to review.
Therefore, § 4617(f) does not bar count I of the amended complaint
seeking relief directly under the Constitution, and we may finally proceed to
the merits of plaintiffs’ contention that HERA’s unconstitutional removal
provision caused compensable harm.
Yes - Set the captives free! Its not too late for Sandra to let our companies go.
Glenn, What is the significance of this post on your website?
https://www.glenbradford.com/2023/10/miracle-1/