well thx anyway. :) if anything earth shaterring, let us know?

Housing Market Still Needs Fannie Mae, Says Chief Economist Doug Duncan

Video interview at this line too:
http://finance.yahoo.com/blogs/daily-ticker/housing-market-still-needs-fannie-mae-says-chief-143351459.html


No matter what indicator you look at, the housing market is improving. New and existing home sales are rising. So are home prices. Even foreclosures are declining. In the latest housing data release, the National Association of Home Builders Wednesday reported that the housing recovery has spread to 70% of the 361 metro markets tracked by an NAHB/First American index compared to just 3% in September 2011.

Fannie Mae, the government-sponsored enterprise which buys and packages mortgages into securities for investors, says its own survey of consumers shows increasing optimism about the housing market, and the broader economy.

“We ask one question that nobody else asks,” Chief Economist Doug Duncan tells The Daily Ticker. “Is it a good time to sell a house [because] five out of six people who buy a house have to sell one first. That’s been a steady climb month over month.”

And the rebound in housing “will be the support” for the broader economy, says Duncan.

Some analysts like David Stockman worry that the housing is forming another bubble financed once again by extremely low interest rates maintained by the Federal Reserve. Duncan says that could be the case in some selected housing markets where prices are rising at a faster rate than the local economy is improving and building exceeds demand, but it's not broad based. He expects home price appreciation will slow as a result of some overbuilding.

Related: This is Housing Bubble 2.0: David Stockman

Fannie Mae's chief economist says there are also concerns about low Fed rates—near zero now vs. 1% during the previous housing bubble--contributing to a finance bubble.

“The Fed’s balance sheet is four times the previous high and a big buildup of that has been mortgage-related,” says Duncan. “Their explicit intent is to put a cushion under the decline of house prices...and to see some appreciation so people feel wealthier…. and that will increase consumption.”

The Fed has succeeded in its goal but there’s no financial bubble yet, says Duncan.

Related: Existing Home Sales Slip in December, But Housing Remains Strong

Fannie Mae is also helping the housing market recover and Duncan says it will "continue to play an important role in the housing market, providing liquidity” since private capital is not easily available.

plz give us a summary dp?? can't listen at work...

rosen...only person on ignore was ebano on yahoo.

i love everybody here!

got a link rosen? date?

can someone post crapo link? i'd like to read...looked at the thread, can't seem to find it...thanks

4cent...can you post the link for those quotes?

thx...and why did he call it receivership?? does he not know what he speaketh about?

OT (sort of) how decimalization adversely impacts penny & small cap stocks:


SEC Rethinks the Penny Tick in Stock Trading
Text Size
Published: Monday, 4 Feb 2013 | 7:15 PM ET
By: John Carney

Senior Editor, CNBC.com



Remember when stock market regulators ditched fractions and started rounding to the nearest penny? Well now, regulators are reviewing the move to see if it still makes sense.

The Securities and Exchange Commission on Tuesday will host a roundtable to review the move to decimalization, which was basically the introduction of the metric system for the stock market after more than 200 years of using fractions.

The move from fractions to decimalization didn't happen overnight: Beginning in the 1990s, the SEC began a campaign to undermine the old system. At first, the SEC helped push through changes at the exchanges that lowered the minimum tick size from 1/8th of a dollar to 1/16th, and later to 1/32 of a dollar. The market makers and other Wall Street types were making too much money on the spreads, the SEC argued. Push down the tick sizes and you'll make markets more efficient and fairer for ordinary investors, the argument went.

By April 2001, decimalization was the rule at every stock exchange. A further rule pushed the "tick"—the minimum price change for bids and offers of shares—down to one penny. This has been the pricing rule for stocks ever since.

Some of what the decimalizers wanted has been accomplished. Markets have moved toward becoming more liquid, frictionless, and heavily electronic. The hated market makers and specialists have been nearly driven from sight.

Perhaps not surprisingly, the story of decimalization doesn't stop at these accomplishments. A paper released by Grant Thorton in 2009 described decimalization as a "death star" for U.S. equities markets, adding that it had eliminated nearly all of the economic incentives for trading in small-cap stocks.

A task force formed in March 2012 found that decimalization had created an environment that favored the stocks of companies with highly liquid, very large capitalizations at the expense of smaller companies. In other words, once again, a rule that was created to favor the "little guy" or "ordinary investor" wound up giving big businesses an advantage over smaller businesses.

The market changes not only biased the system in favor of big companies, they biased it in favor of short-term rapid trading over long-term fundamental investing. So high-frequency traders dealing in highly liquid large caps get a boost, while long-term investors who want to "do their homework" are penalized. Not exactly what we were promised when the tick went to a penny.

The task force also found that the IPO market for smaller companies had been badly hurt by decimalization. The lack of traders using fundamental strategies to trade smaller stocks made them less appealing to the trading desks of investment banks, which in turn made investment banks less desirous of underwriting IPOs. Analyst coverage shifted away from smaller stocks to larger ones, in part because of the effect of decimalization on trading and in part because of the global analyst research settlement of 2003. Less coverage and fewer companies coming to market further diminished market interest in these stocks, the task force argued.

In April 2003, Congress passed the JOBS Act which ordered the SEC to examine the effects of decimalization, particularly with regards to small-cap trading and IPOs. The report from the SEC was, well, highly inconclusive. The SEC reviewed the academic literature on decimalization and concluded that "though there is literature on the types of benefits that lower spreads bring to the market, there is less available information related to how lower spreads may have negatively impacted capital formation, especially with respect to the complex, competitive dynamics and economic incentives of market intermediaries who provide liquidity."

The SEC's report concludes that there just hasn't been enough research done to isolate the impact of decimalization from the impact of other market changes. This isn't surprising. It's very hard to isolate the impact of one regulatory change from another. Each one likely feeds on the other. Was it Sarbanes-Oxley? Or the Global Settlement? Or Reg NMS? Or decimalization? The answer is probably: yes.

Perhaps the lesson of this is that long-evolving market practices aren't easily understood by regulators, which means that regulators are unlikely to anticipate the consequences of forcing changes on those practices. What's more, the regulatory superstructure itself is so complex that its hard to anticipate how one reform will interact with the existing body of regulations—much less regulations that haven't yet been put in place.

There will be three panels Tuesday. The first will center on the impact of tick size on small- and medium-cap companies. The second will center on concerns about the broader market. The third on possible alternatives to tick sizes.

There is not a panel on the limits of the ability to regulators to understand the consequences of their attempts to improve the world.

i copied the whole article...the writer was a member of the editorial board, and expressing her opinion...that is clear at the end. if a news story, journalists aren't supposed to explicitly pontificate on what should be done like she did.

bill to end Fan and Fred and scrutiny of FHA and the Federal Home Loan Banks.

this is why the price stays low...nobody has a crystal ball. here's the whole article:

http://online.wsj.com/article/SB10001424127887323701904578274092231967824.html?ru=yahoo&mod=yahoo_hs

The Obama administration announced proposals in February 2011 to wind down taxpayer-backed mortgage giants Fannie Mae FNMA -0.36% and Freddie Mac FMCC -0.35% . But nothing happened, thanks to White House indifference and a few antireform Republicans on key House committees. Two years later, a third agency, the Federal Housing Administration, is teetering on the brink of its first-ever taxpayer bailout. What is to be done?

"We need to move fairly quickly but in a thoughtful manner," says New Jersey Republican Rep. Scott Garrett during a recent visit to The Wall Street Journal editorial board. He emphasizes the word "thoughtful" so as not to scare those who worry Congressional reform could derail the tentative housing recovery. The chairman of the House Capital Markets and Government Sponsored Enterprises subcommittee ticks off a long list of to-dos, including a bill to end Fan and Fred and scrutiny of FHA and the Federal Home Loan Banks. "We have an opportunity to get something accomplished in this two-year cycle," he says.

Mr. Garrett's optimism may be in part due to the new chair of the House Financial Services Committee, Jeb Hensarling, who has made housing reform a priority. But it may be an uphill climb. Republicans lost seats in the House in the 2012 election, and California Republican Gary Miller, a prominent defender of the housing lobby, is now vice chairman of the Financial Services Committee. The smoke signals out of the Obama administration aren't encouraging. Then there's the uncomfortable fact that Fan and Fred are now paying their profits to the Treasury, which makes them an attractive pot of money for Congress to keep around.

Mr. Garrett acknowledges that "comprehensive reform may be a bridge too far," but at least some Republicans are willing to take a stand. Mr. Hensarling announced a "series of hearings" Wednesday focusing on "the financially troubled Federal Housing Administration, the FHA's outsized role in the nation's housing finance system, and the need to create a sustainable mortgage finance system." That's a good start, and an effort House Speaker John Boehner and Majority Leader Eric Cantor should support—loudly and often.

Freddie Mac generated a record $28.8 billion in volume for its multifamily business in 2012, a 42% increase compared to $20.3 billion in 2011. The previous multifamily business activity record was $24 billion in 2008.

During 2012, 54% of Freddie Mac's total loan purchases or credit enhancements were refinances and 40% were acquisitions. Freddie Mac purchased about $650 million in seniors housing mortgages and more than $1.7 billion in student housing mortgages last year, and it recorded the lowest delinquency rate in two years, at 19 basis points as of Dec. 31, 2012.

"It was a phenomenal year for us and the sellers and servicers in our network," says David Brickman, senior vice president of Freddie Mac's multifamily business. "We achieved record volume while maintaining strong credit discipline and providing essential liquidity to the growing multifamily mortgage market. In the fourth quarter we completed about 33 percent of our yearly volume - approximately $10 billion in multifamily mortgages."

http://www.mortgageorb.com/e107_plugins/content/content.php?content.13202#.UQly22dZ1Cg

[FYE 2012 data dripping in ahead of earnings...I wonder what % of $28 billion falls to the bottom line??? If I recall, it isn't that huge...anyone have time to look up 2011 total comprehensive income and divide by the above 2011 multifamily volume? will give us an early look into net income for 2012...a % of it anyway, before derivatives, single-family, etc. For that matter, if someone can find 2011 multi-family volume [article says $20.3bn] and divide net interest income by that, we can figure a portion of operating earnings, within a small range] that multi-family contributes before the 10-K comes out.

[2011 income/$20.3bn = x%......income (whether net interest or net income, or maybe operating income...net interest or EBIT might be better to eliminate derivative swings, etc.)...anyway, after solving for X....X%*$28.8bn = 2012 income (or should, roughly, approximate)]

ace...wasn't me..i'm not art guy. i love going through museums, I like what I like, and I bought a few thousand in pieces that "moved" me...but I could have been robbed blind, or my taste may not line up with critics...I'm no hound, just the equivalent of an internet message board lurker...I appreciate, but don't get too vocal about it

salt, SA, camaro...i reiterate a post earlier today...the shares aren't moving cause.....:

it's just that damned sweep of all profits...will it continue in perpitutity? if so, when do they have to bring F&F on the government books? only if they own 80% of common from what I understand. so, if they never redeem the preferred, can they just milk them forever?

that's why the share price stays low.

if people KNEW a government exit were on tap in the next couple years, preferreds would trade at 40 cents, 60 cents EASY

we know the end game on F&F survival IMHO...but not the end game for government involvement

newjericho...i think he is asking for the total dividend payment, and what it would take to cover it. every preferred dividend payment is recorded on the financial statements every quarter in the 10-Q and 10-Ks

i don't have time to look up...but see a 10-K or three from pre-2007...the financial statements will report dividends paid from retained earnings. take a look at free cash flow, which is the cash available to service debt and dividends...when we get back to that level (minus sr. preferred) might give you an approximation. the Board declares dividends when they think that the business can operate as normal (e.g., revenue stream and expenses stable and interest payments well covered) and maintain growth capital expenditures (or operating CAPEX) at levels needed to sustain the business...any leftover cash gets declared as dividend. If the cash can't be spared, then the board won't declare a dividend.

that's a long answer to say, you can get to a "level required" by looking at either net income or, better, free cash flow, and see what the level was when paying jr. preferred. remember, they also paid millions on common, so the level required to pay jr. would be less. there probably is a baseline, but before 2007, it was exceeded by a huge margin.

good luck...it's all hypothetical until sr. preffered disappears anyway

it's just that damned sweep of all profits...will it continue in perpitutity? if so, when do they have to bring F&F on the government books? only if they own 80% of common from what I understand. so, if they never redeem the preferred, can they just milk them forever?

that's why the share price stays low.

if people KNEW a government exit were on tap in the next couple years, preferreds would trade at 40 cents, 60 cents EASY

we know the end game on F&F survival IMHO...but not the end game for government involvement

beta --settlement conference jan. 11th, GE already threw i the towel, 15 to go...i wouldn't think a capitulation a year before trial is so glacial....

indeed...only 6.8 cents on the dollar though...all the fifties need to run some more to catch CKJ at 7.4 cents on the dollar.

time to change your name four cent? not so easy on ihub maybe...and if you do, you'll get all the multiple ID conspiracy theorists on YOUR back LOL!!!

8:42AM Freddie Mac issues monthly volume summary for Dec 2012; total mortgage portfolio decreased at an annualized rate of 12.9% in Dec (FMCC) 0.29 : Dec 2012 Highlights:

http://finance.yahoo.com/marketupdate/inplay#fmcc

The total mortgage portfolio decreased at an annualized rate of 12.9% in Dec.
Single-family refinance-loan purchase and guarantee volume was $22.5 billion in Dec, representing 67% of total mortgage portfolio purchases and issuances. Relief refinance mortgages comprised ~ 32% of total refinance volume during Dec 2012 based on unpaid principal balance (UPB).
Total number of loan modifications were 6,288 in Dec 2012 and 69,581 for the twelve months ended Dec 31, 2012.
The aggregate UPB of our mortgage-related investments portfolio decreased by ~ $5.6 billion in Dec.
Freddie Mac mortgage-related securities and other guarantee commitments decreased at an annualized rate of 12.6% in Dec.
Single-family seriously delinquent rate remained flat at 3.25% in Dec. Multifamily delinquency rate decreased from 0.24% in Nov to 0.19% in Dec.
The measure of our exposure to changes in portfolio market value (PMVS-L) averaged $363 mln in Dec. Duration gap averaged 0 months.
On Sep 6, 2008, the Director of the Federal Housing Finance Agency (FHFA) appointed FHFA as Conservator of Freddie Mac.

here's the best story of apple...primarily in the 80s, but does touch on all times from before the founding to 1997 when Jobs came back (I'm currently half way through the book...the author got interviews with the board, the C-Suite, Gates, got memos from microsoft to apple that had never been disclosed and more...) :

http://www.harpercollins.com/browseinside/index.aspx?isbn13=9780887309656

i've never seen this before, but the publisher (probably cause the book is so old) lets you read much of it online

claims against GE, Morgan Stanley and Credit Suisse.

Bloomberg reports MS and CS are also out of the law suit...no indication if there was a settlement...maybe discovery showed there wasn't much of a case? don't know...

the article:

http://www.bloomberg.com/news/2013-01-23/ge-settles-fhfa-suit-over-freddie-mac-mortgage-bonds.html


GE Settles FHFA Suit Over Freddie Mac Mortgage Bonds
By David McLaughlin & Clea Benson - Jan 23, 2013 2:17 PM CT


General Electric Co. (GE) settled a lawsuit filed by the Federal Housing Finance Agency over losses on mortgage bonds sold to Freddie Mac, the regulator said.

FHFA, which oversees Fannie Mae and Freddie Mac, sued GE and underwriters Morgan Stanley (MS) and Credit Suisse Group AG (CS), saying mortgage loans backing about $550 million in securities didn’t live up to their promised quality.

“This settlement resolves the dispute between FHFA and GE consistent with FHFA’s responsibilities as conservator of Freddie Mac,” Alfred M. Pollard, FHFA’s general counsel, said in a statement. “FHFA is pleased this lawsuit has been resolved and appreciates the work of Freddie Mac in this matter.”

Pollard didn’t disclose the terms of the settlement. A spokesman for Fairfield, Connecticut-based GE couldn’t be reached for comment.

The case against GE is among a group of lawsuits FHFA filed against banks over mortgage securities sold to Fannie Mae and Freddie Mac.

The agency said in a court filing yesterday that it was dropping claims against GE, Morgan Stanley and Credit Suisse.

The case is Federal Housing Finance Agency v. General Electric Co., 11-7048, U.S. District Court, Southern District of New York (Manhattan).

I'm holding as long as no whiff of another major action, or as long as Congress mellows out (e.g., no more public whippings of CEOs and DeMarco on CSPAN like they so callously did last year).

I expect the shares to grow in value as long as the government is quiet and the companies continue to grow and kick ass...which they are...especially freddie who is not as deep in the hole (then again, Fannie has the larger lawsuit settlement to consider and larger loss reserves that could be reversed...so "she" could make up some ground there).

I'm holding for a while. as said often on YMB...not so much here, it is still "hero or zero". not a bad strategy to be diversified, ever.

I've read all that...but I believe inaction will demand action once the press starts reporting how much money the government is making on Freddie (fannie has a LONG row to hoe...so I'm not in Fannie). when the public sees the government milking it for a profit, they will wonder why they are owned by the government, see them as indispensible, and I hope, execute the Millstein plan.

that's why I'm still in.....

but, the words used by officials are dire and should not be forgotten. it is why your share prices are so low...and with the momentum building, they should be much higher. they are not. joe stocks' quotes tell you why. if you don't listen to those brooding quotes, you do so at your own risk...

why i'm on a message board!

good find...didn't come via yahooo

nor google alerts...though that should be shortly

link:

http://www.reuters.com/article/2013/01/23/us-ge-fhfa-idUSBRE90M18R20130123

you are correct joe. investor relations handles all communications with jr. equity (that means jr. preferred and common)

an executive is not barred from communicating with an investor by law, but it is illegal for them to share any information that has not previously been made public. I have actually met with the CFO of Virgin Media in England (trades on NYSE) with a small group of analysts (I was along for the ride for reasons that will take too long to write). anyway, nothing was shared by the CFO that was not already public, but there was a chance for a mutual fund manager and equity analysts from another firm to clarify comments that were previously made. It was a fine line. But suffice to say, unless you are a portfolio manager at Oppenheimer funds, like this guy was, I actually saw him on CNBC a year later, you don't get to have those kinds of conversations.

in sum, there is no way we will get F&F executive attention. there is no way you would get such attention even if they were released from C-ship. We are small fry.

You can write them, but you won't get an answer.

and PS- it is sad to say, big institutions get the attention of big swingin' d***s (BSD's) and can get a slight edge on information that is non-public. the system is fair, but not quite. nothing material was said in my two meetings that day (the other was in London with the CEO of Central European Media...owner of television stations in the old Soviet bloc...also on the NYSE). The big guys do get mid-quarter updates that the plan is humming along, customer churn is not increasing much more than stated on the analyst call, things like that. Nothing hugely material, no pre-earning discussions, etc. But those guys do have a slight edge over us little guys...just a slight one. Maybe good for another 1-2% return on top of what we could do...at best (sticking my finger in the wind obviously)

i agree on a shareholder advocacy group. I wish I could help, but as a full-time investment banker and father of a four year old and a new born, I don't have the time.

I wish I did...bad stage of my life to take on any more huge commitments like this effort would have to be.

I continue to applaud joe stocks for his continued efforts. at least somebody is trying and I wish him all the success he can find.

the g-fee raise (over 10 years to tax homeowners for a one year extension of the payroll tax cut) passes straight through GSE to the Treasury...same as when you pay your sales tax at McDonald's...it never appears on Micky-D's P&L as revenue.

when analyzing F&F financial statements, you have to ignore the 10 basis point g-fee raise that covered the payroll tax cut by taxing new homeowners. all other g-fee raises are going straight to the bottom line...and I am SO looking forward to the 10-K to see just how much it bolstered the 4th quarter!

as far as I know, conservator has authority to release from conservatorship when solvent...i think that's the only power FHFA has without congress stepping in, save the 3 part plan on strategic goals that they state they are pursuing in every quarterly filing...

Am. Banker: unlikely that they will be recapitalized in a form resembling either agency.

an opinion piece from a u. maryland professor. I'm pretty sure we've heard from him before, and he's softening his stance, but i wonder if the above quote means "unlikely to be recapitalized" or "unlikely in prior form, but will still be recapitalized somehow..."

anyway, i throw it out to you dogs to grab the bone and debate it:

PS -- BTW, where are the first four in this series? anyone want to dig that up? i have to carry on with my day....

http://www.americanbanker.com/bankthink/while-we-wait-for-housing-reform-we-can-prepare-the-gses-1055968-1.html


GSE Reform Needn't Wait for Congress

Fifth in a series.

Congressional wrangling over fiscal issues looms large in shaping the eventual endgame solution for Fannie Made and Freddie Mac, and it does not bode well for reform this year.

That's a shame. With both government-sponsored enterprises turning a profit and the housing market showing signs of recovery, this would be the perfect time to finally address what to do with these housing agencies – were it not for the political realities. Alas, the ever-widening ideological split over government's role in markets, and the absence of political will to tackle this issue (unlike, say, gun control) will likely result in a continued stalemate on GSEs.

But that does not mean we cannot take steps to reshape the underlying structure of the securitization process, which does not depend on rebooting the GSE charter.

With the Federal Housing Finance Agency's initiatives to align various critical aspects of each agency's activities, such as representation and warranty policies, there is at least a good chance that the conservator will succeed where legislation has not. The GSEs' current status as twin guarantors is, after all, an accident and an anomaly. Before the government took them over, the existence of two separate agencies promoted overly aggressive competition in the market, leading to deteriorating credit standards. Differences in seller, servicing and other policies created inefficiencies for lenders and contributed to market idiosyncrasies like the longstanding differences in the pricing between the two agencies' mortgage-backed securities.

The agencies today in conservatorship provide a glimpse of what the future could be. The GSEs establish credit and servicing standards, and they aggregate, pool, and issue securities under the watchful eye of the FHFA. These core ingredients form the basis of a utility for the secondary market that would be inefficiently delivered other than by a single entity for a variety of reasons, including the need to maintain consistency in the securitization process. Separating securitization process redesign from the lightning-rod issue of the credit guarantee would allow progress in reforming housing in the near term.

The FHFA's current course appears to anticipate such an outcome. Continuing to realign core activities is the right approach this year, as in the absence of tangible policy it will, over time, effectively diminish the need for separate entities to provide these services. Even if their charters can't be merged without an act of Congress, the FHFA could integrate the securitization systems, master contracts, and other operational aspects of the GSEs.

This framework of a single entity responsible for a securitization platform could accommodate a variety of guarantee options which can await future debate. In the meantime, preparing for eventual structural wind-down of both GSEs and architecting alternative forms for a new entity should be a key part of the FHFA's agenda this year.

The public stigma attached to Fannie and Freddie in the wake of the mortgage crisis makes it extremely unlikely that they will be recapitalized in a form resembling either agency. And so far limited political will to define what the mortgage secondary market should look like leaves us with a pragmatic solution: Accelerate efforts to strip the agencies of their structural individuality as quickly as practicable.

Next: Reforming mortgage servicing practices.

Clifford V. Rossi is the Executive-in-Residence and Tyser Teaching Fellow at the Robert H. Smith School of Business at the University of Maryland.

with at least $25,000 relationship, wells fargo investments gives you 100 free trades per year unless it's a penny stock like I found out with FMCC and FNMA common stock. preferreds all trade commission free for me...

yup....he's been banging that japan drum for at least two years

he usually talks about europe or japan collapse due to debt burden. but, this is probably about his new mortgage insurer. if you speaks about GSE's let all of us stuck in an office know plz :)

it's your language kissing. 4cent and I deleted for "vulgarity". i think you can look at your own posts and see why deleted, and I even think that you can appeal to ihub admin. i don't have time to look that up, but I seem to recall that when reading asst. moderator rules.

fag=cigarette in england, but that's not what you meant, so, with that and your cursing, you were censored.

note...this is not FHFA case, it's the DOJ prosecution which is a separate matter....

Mortgage cases to test US use of once-obscure fraud statute

http://www.reuters.com/article/2013/01/17/doj-firrea-idUSL1E9C2BYE20130117?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

LIVE FROM REUTERS' INDIAN BUREAU! (a [sarcastically] GREAT source of news in my American Capital (ACAS) experience)

By Aruna Viswanatha

Thu Jan 17, 2013 3:26pm EST

Jan 17 (Reuters) - Banks are testing U.S. authorities' use of a once-obscure statute to bring more cases tied to the financial crisis, arguing the government is twisting the law beyond what it can do.

In a motion to dismiss a federal case alleging mortgage misconduct, Wells Fargo said late Wednesday the government was essentially trying to argue that the bank defrauded itself under one of the laws at issue, FIRREA.

Bank of America is also fighting a recent lawsuit from the U.S. Attorney's Office in Manhattan alleging some $1 billion in losses to Fannie Mae and Freddie Mac , partly by arguing those institutions also don't qualify as affected firms under FIRREA.

Courts are expected to weigh in later this year on the issue in both cases. If they side with the banks, it could limit a key Justice Department tool promoted as a way to bring big civil cases against misconduct that fueled the 2007-2009 crisis.

FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act, is a federal civil fraud statute passed in the wake of the 1980s savings-and-loan scandals. It covers fraud affecting federally in s ured financial institutions.

While it has only appeared in a few dozen cases, its low burden of proof, broad investigative powers and long statute of limitations encouraged the Justice Department to dust it off for potential cases, especially after criminal inquiries failed to yield major prosecutions.

The DOJ, led by the Manhattan U.S. Attorney's office, has used the statute in big bank cases in the past year, including against Citigroup, Bank of New York Mellon, and in the $25 billion settlement with five top banks that resolved allegations of mortgage servicing abuses.

While those cases resulted in settlements, rulings in the cases against Bank of America and Wells Fargo could lay out clear markers of just what is covered by the law.

'WILDLY EXPANSIVE READING'

The U.S. in October sued Bank of America, accusing it of violating FIRREA and other laws when it caused taxpayers more than $1 billion in losses by selling thousands of toxic mortgage loans to the government-sponsored Fannie and Freddie.

When Bank of America filed a motion to dismiss the case in late December, it said the government was turning the law on its head.

The alleged fraud was directed at Fannie and Freddie, which are not themselves federally insured financial institutions, the bank said.

The DOJ's allegations instead hung on other federally insured institutions that were preferred Fannie and Freddie stockholders who suffered losses as a result of the loans. "This interpretation ... is limitless and absurd," the bank said.

"This is a wildly expansive reading...(the law) was not intended to increase civil penalties for all fraud that, through intermediaries, might remotely touch a financial institution..." it said.

Bank of America also said the Justice Department did not describe a scheme to defraud, as the statute requires, but only that Countrywide violated contracts with Fannie and Freddie.

Oral arguments on the motion are scheduled for April 18.

'AFFECT YOURSELF'

In seeking to defeat an October lawsuit that alleges more than 10 years of misconduct related to government-insured loans, Wells Fargo too attacked the Justice Department's theories under FIRREA.

The original complaint did not specifically identify a federally insured financial institution, the bank said in its Wednesday filing.

"The United States has now tried to cure this defect by alleging that Wells Fargo is the 'federally insured financial institution' that was 'affect ' by Wells Fargo's own alleged violations...No court has accepted this 'affect yourself' theory of liability, and it is wrong."

The DOJ built its case against Wells Fargo in part through information gleaned from four FIRREA subpoenas, according to court documents. The law allows civil prosecutors to obtain information prior to filing a lawsuit, which most civil laws don't allow.

The bank also argued it was already absolved of much of the liability through an earlier $25 billion, multi-bank deal.

The government has until Feb. 13 to respond to Wells Fargo's motion.

kyle bass in the F&F pond, but not invested, again:

http://online.wsj.com/article/SB10001424127887323968304578247420300756916.html?ru=yahoo&mod=yahoo_hs


The approvals by Fannie and Freddie put in place a new deadline: NMI has told investors it will file to list its shares within six months of winning the blessing of the two mortgage lenders, allowing the stock to trade publicly. That will give the investors, which include hedge funds and mutual funds, a chance to cash out if needed.

Those investors include hedge-fund manager Kyle Bass, who made $500 million by betting against subprime mortgages as the housing market crashed. An NMI spokeswoman said Bass's Hayman Capital Management LP is one of the largest investors, but she declined to name other shareholders.

and you were post 3000!!!

it's cheap! 5cent on the dollar!

50%!!! http://finance.yahoo.com/q?s=FNMFO&ql=1

what the hell is that series? trading at $5,000? anyone done research on that? redemption value, etc?

it almost never trades, but that's a huge jump today

cool on CCP...still less than CKJ

man CKJ carries quite a premium...my arbitrage strategy broke down because my other holdings never get more expensive than CKJ, so I can't rotate back in! I was trying to build RV by rotating, but in the last year and a half it hasn't worked...