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Surprising that they ran this on Christmas. He understands that it is likely that the new structure will involve 6-12 home loan re-insurers. He is going to keep turning up the heat while Ackman works behind the scenes. Vinegar and honey strategy.(Berkowitz-AKA vinegar, Ackman-AKA honey) Love it. Course the gov't is going to delay as long as possible.
Merry Christmas! I hope y'all have a good one. One day at a time. One day at a time.
I also love page 79 where he(Allison) explains that C-ship is NOT receivership(the gov't in their defense is trying to muddy the waters even though they know better).
When the congressman asks if the shares are worthless, he(CEO Allison) replys that they are trading at a little over 2 bucks.
Thanks, SA.
I had never seen this testimony until today(page 70-72 is where I concentrated)
They think that they can revise history and claim that "they wiped out FNF preferred and common holders".
the head of the FHFA said that "there could be residual value" in sworn testimony.
If they would have paid 'em like JPM did w/ Bear Stearns, it would be true. Unfortunately(or fortunately for some) they didn't.
I like how this is right after C-ship. Hard to say that the "shareholders knew it was a complete wipeout" when clearly they believed that there could be residual value.
I am sure there may be another example or two(but not many after 2010 when the de-listing made it clear they wanted speculation tamped down)
No disagreement with that post. I was only saying that I think they could raise 300-350 (I was assuming common stock raise in secondary mkt)even with the Sr. pref continuing to be outstanding. depends on the structure. the GSE's were highly profitable from the 70's through 2005. In normal times, I would expect them to continue to be profitable.
That would be one way. They could probably raise 300-350 billion between the two in the secondary market even with the Sr. Preferred if it was sold. If they sell the Sr. pref., that money will go right to the gov't IMO.
Of course, settlement has to be part of any deal. They are just in delay mode.
FNF could raise 200 billion in 2 months if done correctly.
I agree with you stock analyze.(on the warrants) The final settlements will include a cancellation of the warrants. There will likely be a capital raise in the secondary market right after settlement.
I wouldn't be surprised if Millstein is involved. He seems impartial and super intelligent to me. He understands that investors need to make money, first and foremost. Everything else is ancillary.
He is pragmatic, rational, calm and intelligent. He has a big ego, too(who doesn't).
As they say in baseball: "There is always the game within the game"
The game is called: Delay as long as possible.
Judge Sweeney granted the governments motion to extend to March 3, 2014 its date to respond to Washington Federal's objection to their motion to dismiss.
Its a game of delay and stall. Delay. push it out. ask for more time. Instead of working out a solution the government is going to push this out as long as possible. They claim, they have other matters to deal with Holiday schedules and other responses on their other requests for dismissals in the other cases that all make this one so hard to respond to. They claim they have to orchestrate their response between agencies.
Richard Epstein called it. I agree with him. This can take up to 3 years. In the meantime, the preferreds may actually start pricing in the possibility of dividends in arrears. I think it is very possible.
First page.(from a poster YMB)
IN THE UNITED STATES
COURT OF FEDERAL CLAIMS
WASHINGTON FEDERAL, MICHAEL )
McCREDY BAKER, and CITY OF AUSTIN )
POLICE RETIREMENT SYSTEM, )
)
Plaintiffs, )
) No. 13-385C
v. ) (Judge Sweeney)
)
THE UNITED STATES, )
)
Defendant. )
DEFENDANT’S MOTION FOR
ENLARGEMENT OF TIME
Pursuant to Rule 12(a)(1) and Rule 6.1 of the Rules of the United States Court of Federal
Claims, defendant, the United States, respectfully requests a 60-day enlargement of time to file
its reply in support of the United States’ motion to dismiss. Our reply is currently due on January
2, 2014. The request for enlargement, if granted, would extend the date to March 3, 2014. This
is defendant’s first request for an enlargement of time for this purpose. Plaintiffs have stated that
they oppose an extension of time beyond 45 days.
What do you guys think about this?
here is the Wasington Fed response courtesy of Bryndon Fischer(as usual)
https://docs.google.com/viewer?a=v&pid=forums&srcid=MDUxNDQwNjExMTIwMzQzNjc3NDIBMTA2MjY0NjIzMzA1MjMyOTg2MDEBZ21GUVY5WW5VYzhKATQBAXYy
I don't expect a squeeze. A run can happen easily, though. there is no float in the preferreds, either.
I hate that this can last a while with delays, delays, delays, appeals and crap.
why do you think a squeeze?
They will. FHFA will just say "we didn't discuss the timing of the DTA with FNF" over and over....
A reasonable person knows that it is not only a valid issue, it is a huge one.
It's like talking about the loan loss reserves. We know that many of them will get reversed. When is the question.
Just because it "isn't discussed" doesn't mean it "isn't relevant to the conversation or situation"
Handing over all profits into perpetuity for no compensation is just stupid. No reasonable person, shareholder or entity would do it.
Period.
All about a reasonable person and what they would do and expect out of it. that is why this case is so simple and the gov't will try to make it complex.
They questioning will go like this: Did you know that the gov't promised to back the MBS debt of FNF?
Are you aware of these statements that the gov't will back the paper issued by FNF? (statements by Paulson, Geitner, lew, etc)
Did you know that FHFA's responsibility is to "conserve and preserve?"
How would the gov't back the debt issuance of FNF without keeping them out of r-ship?
if the company went into r-ship, would the debt be backed?
If FHFA didn't enter into this, would they have put it in R-ship? When?
You don't know? Ok. No more questions.
Agree. They knew the profits were going to continue to stay positive. They knew the DTA was in play. They waited till about 4 years after C-ship to change the rules??????
I call B.S.
Only reason to change the rules is to use it as a piggy bank.
The conservatives wanted to destroy it, the libs want to use it as a pawn for politics and funds coming to treasury.
Both were wrong how it was handled.
Now... If they would have done a full sweep to begin with, I would have never bought the stock.
They would have sued on 9-8-08 or soon thereafter for a taking with zero compensation.
This isn't Doc Brown and Marty McFly, though.
I am no attorney but it looks like most of the defense is going to be around the flavor of:
"I did the reasonable thing by giving up all the profits because the gov't gave us this great compensation of a future backstop some day even though we knew full well that w/o FNF there is no mortgage market"
It looks like this is going to all center around the reasonable person argument on the 3rd PSPA.
IMO, it isn't reasonable to give away all future profits forever for a backstop when the implicit backstop was already there!!!
Not sure how anyone in their right mind will believe that they didn't know the profits(and hence the DTA) would be recognized. Hell, the guys on here(YMB) were talking about it in 2010-2011, right?
How can people "in the know" claim they didn't know and that makes it alright?
I can't help but think of Ollie North in the Iran Contra Affair?
Question at trial:
Prosecutor: Did you arrange an exchange of weapons for hostages?
Ollie then leans in and speaks to his attorney for 30 seconds, pops his head up and says:
Ollie North: I do not recall.
Question after question for what seemed like hours, Ollie did the exact same sequence. He simply couldn't remember.
He got convicted but never served time...
the whole friggin 3rd is illegal when put in context of the massive profitability announced months later.
agree
correction.... even without knowing that massive profits were coming...
illegal to take any property w/o compensation.
I just pray to god that when they start talking settlement that a cool, logical head is in there. Millstein is the only one. He knows FNF. He knows real estate. he knows complex re-structuring. He has a well documented, thought out plan..
I still think it will take longer than 2 years.....
I hope not. As we all know, hope is not a strategy.
The constitution and holding on, is!
Yes. you and ski brian and david have been the most positive. I think 20c is more cynical like I am when it comes to timeframe. 3 years ain't bad. Epstein was talking longer but I think he underestimates counsel representing shareholders.
I think dividends in arrears is more possible than most think. I think it will go back to Jan. 2013 at a minimum.....
For the record. I don't disagree with either of you that it is more profitable(I am assuming a loss by the gov't in court) to exercise. I just think that the case is so strong that ultimately the gov't will buckle.
they won't cave until it is clear they will lose.. At some point, Fairholme may ask for dividends to be paid due to the extrodinary circumstances. Delay. Delay. Delay(that is the gov'ts whole strategy. It won't be to win the case. They can't win, IMO. That is why I think it will never get exercised. AIG's warrants were at friggin 50 bucks and FNF's were @ .000000001???
Not fair. AIG was "illiquid as bad as FNF" IMO
We wouldn't own this w/o assuming that the actions taken were unconstitutional.
Given I have owned it since '09, I think it was clear(to all of us) that they were going to "conserve and preserve" until 8-17-12.
In '09, my thinking was 10 plus years. (I think most on here thought the same....)
Of course, with the lawsuits taking 3-4 years, that puts it @ 2016-2017.(7-8 years)
I also know that Ackman doesn't have any plan on the table that we know of. He alluded to being "on the same side as the gov't", assuming conversion with that statement.
they'd probably make more money if they do it Ackman's way. I am sure he is showing how they can exercise and do a capital raise and make WAAAYYY more money. Problem is, I think the gov't would rather have ALL the profits and then declare moral victory against the speculative capitalist pigs and trash the thing (because the banking lobbies are just that rich) than actually figure out that everyone wins with re-capitalization, rebuild and reform. (the three "re's")
Just think. If they settled and released and did a capital raise. The shares in FNMA could easily be 20 assuming 80% ownership by the gov't (and a breakup into 12 pieces for both companies like the FHL banks)
The gov't would own 80% of a 120 billion dollar company, IMO. that's 96 billion for us home players. That is just FNMA. Not counting FMCC(FMCC would probably be another 50 billion)
That is what makes sense. I just don't think it will happen due to politics. This is a full on court game.(with a full court press to delay as long as possible) Then they will claim "that it was already agreed upon to to the wind down"
Maybe once they know that Olsen, Fairholme(Boies?) is going to eat their lunch, they do it.
Just my opinion, 20 cents. I always respect your thoughts since they are relevant and to the point.
20-
What do you think about dividends in arrears? How far back?
In my opinion, more huge news....
http://www.bloomberg.com/news/2013-12-17/s-p-increases-fannie-freddie-subordinated-debt-ratings-to-aa-.html?cmpid=yhoo
They treated players differently. In the AIG case, the warrants were cancelled(I believe)
according to the March 2013 release, they paid 25 million for em...
http://www.insurancejournal.com/news/national/2013/03/01/283339.htm
Don't think that Berkowitz won't use this to illustrate the unfair/different treatment given to different institutions in '08.
http://www.dailyfinance.com/2013/03/01/aig-repurchases-warrants-from-us-treasury/
The only thing they could do is sell the warrants. But.... Why sell the cow when you get all the milk(and by extension butter, cheese) for free?(for now, until resolved in court)
Makes no sense for them to exercise. It is a lose/lose for them(in their eyes right now). They lose the sweep(the sweep would have to be abandoned for), they have to take the debt onto the gov't balance sheet.
They also can't sell the warrants without them having value(possible future divvies)
Ackman understands that there is no mortgage market w/o a gov't implicit or explicit guarantee. There hasn't been since 1938. Back in the depression I think you had to put something like 50% down and pay it off within 7-10 years.
If we go to something like that, my 130,000 house is worth 40,000-70,000. Not that I care about that, but everyone would freak.
Any changes could be catastrophic. They know it damn well.
They figure, "why not take our chances in court?"
JMHO on all this stuff.
I agree that opinion is quickly shifting regarding the common. i don't think i will ever buy. I am pretty sure i will cry about missing a 100 bagger.(for a 40 bagger) talk about greed!
I agree that the "winddown" is just that.(a defacto r-ship) Although the gov't will argue that it isn't until they say it is.... We all know that FNF with gov't guarantees will exist in some form in the future. Why disrupt this model? Why not put extra regs in place to protect the taxpayers and revert these entities to their original purpose?
30 minimum. I will cry that I didn't ever own the common!! I will cry in public on this board!
Valueline investment survey. Most public libraries carry it. It is/was an invaluable information source for me.
It is fairly expensive to have it delivered to your home. I get the introductory rate for a year(it was like 290-390 bucks)
I used it for a couple of years. Library is the best for me, though. free at the library. The librarian at the desk will show you right where it is.
They carry 10 or more years of revenue, earnings, dividends, cashflow, debt levels, etc..... it is not a tip sheet.
The analysts are objective an not paid shills.
I made more money usisng valuline (percentage wise) than anything else.
I think that the whole warrants thing will play out with the current litigation.
I think that the final settlements may include dropping the warrants. It sounds crazy, but it actually seems likely to me.
I don't think they will/intend to exercise or sell for now. They want all the profits.
yep. he is one in 50 million. I read the article earlier. he will likely lose it unless he changes to preserve more capital.
take us for instance in this situation. I put less than 10% of my net worth in prefs.
I completely believed in it. the market was telling me I was wrong. I bought enough to change my life if it worked. If it didn't work, I lose 10%...
I see these guys all the time. they never make hay in the long run. I think it is best to stick to value line, small cap situations in valueline that are profitable.
the best part of doing your own research is "if the situation hasn't changed, don't leave the investment". much easier to believe your own research.
just my opinion watching people lose money over the years.
most thought I was crazy buying these preferreds. (I am sure you guys got those looks, too)
now it looks "crazy like a fox"
i know you have had it as long or longer than i have.
I agree with all of those points on r-ship and c-ship. The toughest thing to do at this point is:
hold on!
if they ever decided to go the r-ship route, treating the bondholders with deference would cause MAJOR issues.
That is why I think the common and preferred will both see monies. I don't own the common shares but many on here correctly point out that they have 8-10 bagger potential vs' only 4 for preferred.
i only own preferred. this post is not a recco to buy or sell any securities. jmho....
Holding on when you are already up about 10 fold isn't easy.
Chrisanj-
I don't think receivership is even a consideration due to the need for a solid MBS market. Geitner promised that the securities issued by fnf were good. r-ship would stop interest on the bonds and possibly put the whole market at risk.
The chinese and other foreign funds would pull out(is what the fear is)
They can't destroy the common and preferred w/o r-ship.
that is the conundrum.
r-ship will also ding the bonds and have them in flux for too long.
of course the gov't also said that the company was strong right before c-ship.
Just my opinion.
I think it is way too optimistic to assume it will be released w/o a court judgment.
certainly not in 9 months. I hope i am wrong, though.
The more likely scenario is that they have to pay divvies in arrears in the fairholme case 3 years from now. the preferred shares may start pricing in this possibility/probability since it is only 2 billion a year. since fnma made a ton in '12 and '13, the odds are good given victory in court.
i could envision fnmas going to 11-13 in the next year as attorneys start talking about it.
the gov't won't let this "free money" go without a fight in court....
JMHO
The truth is starting to come out and positive articles now seem to outnumber negative ones 1.5-2 good for one bad. This still has to play out in court and could take 3-4-5 more yrs.(unless the gov't gets good terms and what they want outta the deal)
18 months ago, the general public thought it wouldn't be repaid. I saw posts on here/yahoo talking about the DTA's and loan loss reversals long before accountants did(2011-12). I still think that many of the reserves taken will be reversed. It was clear that Freddie was much more aggressive on loan loss reserves and will reverse more. IMO...
Public opinion is starting to shift. It is clearly shifting.
i think we have a ways to go. At least things seem stabilized at "meh"
“By August 2012, they were still publicly traded companies. Treasury realized they were profitable and they randomly changed everything that was put in place,” Pagliara said.
My thoughts:
Of course.... We know it isn't/wasn't random at all. There are witnesses. This will be the biggest part of the case for all of the litigants. Once the facts come out, rule of law will prevail. It is smarter for them to settle.
There are witnesses. They will dig and find them. They likely already have them and know who they are. They may already have sworn depositions.
he speaks in a bit of a similar manner!! Not that close, though.
I read all 42 pages. Difficult to assert that a one sided contract with no way out was fair, just or reasonable given that FHFA(DeMarco) obviously knew that F&F were going to be profitable after 4 years of guaranteeing mortgages when no one else would. The housing market was in an amazing recovery. They had to have known that profitability(reversal of the massive loan loss reserves, DTA, profits off G-fees and spreads) was going to be enormous.
The more I look at F&F, the more I think that they worked as intended. They just need to be forced less by congress on what they buy. They need to be more tightly regulated. They need to be allowed to rebuild capital. They need to have reserves set aside for a housing decline of 30-40% and 20-30 years to build up that capital base. They need explicit backing until the capital base is built up. They need to raise the G-fee one or two more times by 15 bps to cover the capital needed.
off the topic, here:
I saw that they "raised the G-fee" but when I read the fine print, it expired in a bunch of places and they re-instituted it in places where foreclosure laws are tougher.
That's my swingline stapler
Last time I did not receive a piece of cake
I ordered a Mai Thai and you brought me a pina coloda
the first one is the "moving desk scene" where he threatens to set the building on fire.
also apparently... The FHFA just didn't exercise sound judgment in their decision making when deciding to hand over all profits into perpetuity.
These are my words.....
They were a "willing market participant and decided to beg the treasury to please take all of the profits" almost 4 years after c-ship where the FHFA said that they were going to: "conserve and preserve the assets until the companies were in a safe condition"
Imagine: you are the head of FHFA and now starting to stare down the barrel of immense profits. You advise the gov't of this. Then this new agreement comes into play.
There are witnesses (accountants) who told DeMarco that the profits were coming. Those witnesses will be called. No doubt they knew 6-12-18 months before as most companies in america.
They will find the witnesses.
This is all my conjecture....