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Your blogs were great Bill! Very inspiring and welcoming over the years as we all had to contend with (and still do) the governmental overreach here.
That's right Nagoya1! "Never again!" O'Bummer, gave us a yuge gift by delisting to the pink sheets thus eliminating competition to buy into these financial juggernauts from institutional investors that are constrained by fiduciary rules from investing in pink sheet stocks and equities selling below $5/share.
Seems that the government is likely to settle by 2024, this could be accelerated by a favorable federal court ruling giving the shareholders a bargaining chip. However, the current situation allows the federal government:
(1) 100% control over the gses' with zero liabilities on their balance sheet.
(2) Little clarity as to engaging in an instant recap given so much litigation uncertainty.
(3) Cover to help the little guy by forcing the gses to subsidize mortgages to their targeted voter base, thus delaying and diverting much needed capital for a capital rebuild and big corporations/evil hedge fund guys be damned.
Last term, SCOTUS ruled in Cedar Point Nursery that governmental takings can be temporary with the appropriate damages allocated to those whose property was temporarily taken. Isn't it one possible scenario that eventually the courts rule that the NWS was a temporary taking and order a return of the unconstitionally taken sweeps above and beyond the 10% "interest"?
Wouldn't this scenario preclude the federal government from permanently owning the gses and adding $7T+ of Liabilities on the federal government balance sheet?
But for the unconstitutional HERA provision he would have fired Mel Watt from the start and ordered FHFA to release these two great American companies from conservatorship.
Interesting legal angle, did hera violate shareholders implied contractual rights by waiving liability to the Board of Directors for giving away our company for nothing?
Was that hera provision an unconstitutional taking of private property?
Seems pretty clear to me that the current administration is not into assisting big corporations and evil hedge fund guys. They are allegedly for the little guy and the optics of giving up 100% control of 2 of the largest corporations in the world would prevent them from diverting much needed capital from the twins to their targeted political voter base. Of course the PIMCOS, TBTF banks, the NAR, the MBA, the NHBA, et. al. will all be egging on Sandra L Thompson to divert more gse funds to her political voter base while maintaining the EXPLICIT gubmint guarantee.
I think you have been right all along Navy, the Judicial Branch will have to intervene to provide some form of relief to the beleaguered shareholders unless Sandra L Thompson is really serious about the exit from the now 14th year of CONservatorship which was really the intent of hera when passed in September 2008 (i.e., NOT PERPETUAL CONSERVATORSHIP/NATIONALIZATION).
We'll see what happens but I like the posture of the Takings Case, Lamberth, and of course the 5th Circuit.
Happy New Year to you too!
Well we do have the US Constitution on our side BUT it seems so far the gubmint has had the federal courts on their side. We'll see what happens.
Did Spock lose it when the Captain said he didn't have emotions for the loss of Spocks Mother, he must have spent too much time with Worf !
That's A LOT OF MORTGAGES and a nice stream of fairly predictable cash flows from g.fees !
HeeeHeee! The only tax loss harvesting of your free lottery tickets is going to be selling your Fannie Mae for Freddie Mac. I know you aren't leaving until the fat lady sings.
See you next year and the year after that and the year after that and the year after that and the year....
I was describing the insanity of new investors wanting to be involved with a public/private partnership with a governmental partner that has engaged in spurious and likely unconstitutional self dealing (e.g., the 2012-2019 Net Worth Sweep) for the last 13+ years, not to mention the "offer you can't refuse" by the government in 2008 to the gses' board of directors.
This could: (a) impede the ability of the federal government to realize yet larger extractions from the gses (b) take years of fighting it out in the courts to decide whether or not the existing shareholders rights have been violated and (c) at a minimum will provide a strong note of caution to prospective institutional investors that their new partner will likely take their investment if times get difficult.
Nice find! The status quo appears unsustainable long term.
Here's a crazy idea, why not just right the ship and return the twins to their rightful owners?
HERA was not passed to nationalize the gses.
Great analysis, thanks for taking the time and contributing! There's no question that the 5th Circuit is probably the best Circuit for the shareholder Plaintiffs to have their claims for relief from the unconstitutional removal restriction in HERA.
I believe going forward procedurally the EnBanc Panel will decide whether or not to entertain granting a Summary Judgment for either the Defendant or the Plaintiff or kick it down to a trial judge to do a factual determination of damages.
If the later, what could be foreshadowing is which trial judge is assigned the case.
If there is a trial it could take awhile. Also there will be the losing side appealing to the 3 judge panel, then subsequently to the EnBanc Panel, and ultimately a Writ of Certiorari to the SCOTUS.
Ideally for the Plaintiff shareholders, a majority of the EnBanc Panel of Judges would opine that this federal government overreach has gone on far too long and provide the beleaguered shareholders with a bargaining chip to help end this decade plus governmental fiasco via a Summary Judgment.
Of course the government would appeal the Summary Judgment but the SCOTUS could deny the Writ of Certiorari.
Seems to me that the Congress when writing HERA assumed that the "conservatorship" would be temporary and that after the gses were rehabilitated they would be returned to their rightful owners.
A perpetual conservatorship designed to shake out funds from two private corporations for the exclusive benefit of the federal government is contra to the legislative intent of Congress when they passed HERA and attempting to do so could run into opposition from the Judicial branch of the federal government.
We'll see what happens.
"NMHC/NAA retain the viewpoint that rent control exacerbates housing shortages, causes existing buildings to deteriorate and disproportionately benefit higher-income households. NMHC/NAA urge lawmakers to reject price controls and pursue alternatives such as voucher-based rental assistance to better address critical affordable housing shortages."
Notice on the map WHERE rent controls are preveleant. Do you think a majority of Americans believe that rent and price controls are good?
https://www.nmhc.org/research-insight/analysis-and-guidance/rent-control-laws-by-state/
The current administration almost guaranteed would spend it on some type of "equitable housing program". But isn't it true that the US Constitution clearly separates the power of the government purse (i.e., the Legislature decides how to spend) from the Executive Branch of government? Does the FHFA as a "conservator" under HERA get to decide where the government "investment" in the gses goes?
The letter DOES give the 5th Circuit some latitude to right some of the injustices inflicted on the shareholders. Putting the shareholder Plaintiffs in the position they would have been in had the sweeps to treasury not taken place under Watt could be one potential ruling, that is a fairly certain number.
Where it might get difficult is determining the financial damages to the shareholder Plaintiffs from not exiting conservatorship. What do you think the dollar damage would be for that? Determined by the trial court?
It will be interesting to see what if anything the 5th Circuit does with the Collins SCOTUS decision coupled with the letter. We've been burned so badly by the courts already...
Do you think that the current administration can spend money raised from monetizing the UST's "investment" in the gses:
(1) Any way it wants
(2) Only on programs that FHFA determines is in "the public it serves" best interests
(3) Only into the General Operating Fund of the UST
"Stegman said that federal agencies such as the Federal Housing Finance Agency (FHFA) could facilitate the transition by providing funding..."
Sure, just go out to the magic money tree (i.e., the gses in CONservatorship) and they can subsidize all types of goodies at the expense of rebuilding much needed capital after 8 years of "Zero capital is okay with me!" Mel Watt and over 9 years of transferring every dime of earnings to the US Treasury.
A preview of the upcoming death by 1,000 cuts philosophy by the current administration and FHFA Director?
"Tim Rood, Uncannily prescient even predicting the latest boom, years ago!", Neil Cavuto.
Great find again Navy, thank you for all your vast contributions and Merry Christmas to all! That includes you too, F&F, "You old building & loan!" !
The facts speak loudly: After 8 years of Mel Watt Capital equals ZERO, after 2 years of MC Capital was $45B.
Freddie November monthly summary: The total mortgage portfolio increased at an annualized rate of 12.0% in November. Single-family refinance-loan purchase and guarantee volume was $52.7 billion in November, representing 60% of
total single-family mortgage portfolio purchases and issuances. The aggregate unpaid principal balance (UPB) of our mortgage-related investments portfolio decreased by
approximately $6.4 billion in November. ? Freddie Mac mortgage-related securities and other mortgage-related guarantees increased at an annualized rate of 12.7% in November. ? Our single-family delinquency rate decreased from 1.32% in October to 1.24% in November. Our multifamily
delinquency rate decreased from 0.10% in October to 0.09% in November. ? The measure of our exposure to changes in portfolio value (PVS-L) averaged $56 million in November. Duration gap averaged 0 months. ? Since September 2008, Freddie Mac has been operating in conservatorship, with the Federal Housing Finance
Agency (FHFA) acting as Conservator. ? As of November, our maximum exposure to Fannie Mae-issued collateral that was included in Freddie Mac-issued resecuritizations was approximately $108.8 billion, and is not in Table 4.
"It was just shocking to me that governments were treating people like they don’t really own their property,” says Christina Martin, an attorney for the Pacific Legal Foundation, a libertarian public-interest law firm that led the team that secured the state Supreme Court ruling. “They have a right to seize property to get paid for what they are owed, but they don’t have the right to keep anything more than that.” The group has challenged similar practices across the country, Martin said, including in Nebraska, Massachusetts, New Jersey and Minnesota."
https://finance.yahoo.com/news/unfair-unpaid-property-tax-money-100011495.html
"From the start, I would have fired Democrat Congressman and political hack Mel Watt..."
"Another Obama/Biden scam in legal trouble was when they allowed the FHFA to steal the retirement savings of hardworking Americans who had invested in Fannie Mae and Freddie Mac."
"My administration was denied the time it needed to fix this problem because of the unconstitutional restriction on firing Mel Watt."
Redwood Trust, Edward Pinto, Alex Pollack, the WSJ, and a host of others are simply the financial establishment advocating for more Private Label Security issuances.
These are the same clowns that brought the world economy to its knees in 2008 with their garbage in, garbage out loans and the twins were forced to vacuum up all these PLS. Of course the legal settlements obtained from the TBTF banks and others went straight to the UST as a result of the Net Worth Sweep.
One former POTUS recently recently described the Net Worth Sweep as a "scam", "socialism", and some other descriptors, do you know to whom I refer?
"Redwood Trust Inc. has long been a major player in the private-label securitization market, and it sees a looming problem brewing in the housing industry.
That issue is about boundaries — specifically, the line drawn between the roles of private industry and the government in the housing market.
Redwood completed more than $1 billion worth of private-label securitizations involving jumbo and business-purpose loans in the third quarter of this year alone, U.S. Security and Exchange Commission filings show. The company, through its Sequoia program, has been particularly adept at working in the jumbo loan market — securitizing some $30 billion worth of high-balance loans across 76 private-label deals since 2008, according to company officials.
That’s why the company is concerned with the expanding conforming-loan limits set by the Federal Housing Finance Agency (FHFA), which oversees the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. In particular, FHFA’s recently announced 2022 conforming loan limit of $970,800 for single-family homes in high cost areas of the country has caught Redwood’s attention."
https://www.housingwire.com/articles/conforming-loan-limits-draw-scrutiny/
https://www.housingwire.com/articles/forbearance-rate-dips-to-1-67-in-november/
"Meanwhile, Fannie Mae and Freddie Mac loans in forbearance declined 16 basis points to 0.76% in November."