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Got
So - on the core issue (not the takeover of rights ..) the anti injunction section
Treasury is asking SCOTUS to decide that the EN BANC - despite their rationale - could not rule in our favor as 4617 f still stopped that. (MY memory is that the logic of that court was something like the conservator was acting in such a way so outside the scope of conservator that the prohibition did not foresee such and did not injunct such ?)
Basically.
See en banc decision Section V(A) pages 15-16 for the fundamental argument made by an enbanc majority to override 12 USC 4617(f) and against the Defendants arguments that 4617(f) prohibits court action
A
HERA’s anti-injunction provision limits court action against FHFA’s conservator or receiver powers:
Except a provided in this section or at the request of the Director, no court may take any action to restrain or affect their exercise of powers or functions of the Agency as a conservator or a receiver. 4617(f)
To interpret this provision, we consult its plain meaning and its past judicial interpretations (including in predecessor statutes).
The Supreme Court instructs that plain meaning comes first: “Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.” Under the anti-injunction provision’s plain meaning, we may not grant any relief that interferes with—“restrain[s] or affect[s]”— FHFA’s conservator powers. Logically, then, we may still grant relief against action taken outside those powers. The anti-injunction provision deflects claims about how the conservator used its powers, not claims it exceeded the powers granted. It distinguishes improperly exercising a power (not restrainable) from exercising one that was never authorized (restrainable).
If respondents (Collins et al.) responds negatively to the writ. Then the case will be turned down?
The Plaintiffs-Appellants will oppose the writ.
The question to ponder is how convincing will the opposing arguments be for the Clerks and Justices?
Cannot even begin to speculate until the Plaintiffs-Appellants respond.
What is the chance 60/40 or 50/50 to turn down the case ?
Cannot determine what SCOTUS Clerks and Justices will think about Treasury et al.'s petition for writ of certiorari.
The Plaintiffs-Appellants (Collins et al.) have not yet filed a response to the writ.
A response is due November 29, 2019
https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/19-563.html
Hi obiterdictum,
Hi Fully Diluted.
obiter, went there first. Couldn’t find it in the 119 pages. Looked through the MBA org’s comment, still couldn’t find it in the 30 plus pages. I am using a phone. Thanks to Rick for providing the 3.24% or 190B.
Rick's numbers are accurate.
See the proposed capital rule numbers at pages 33329-33330
FHFA Proposed Capital Rule see pages 33329-33330
https://www.govinfo.gov/content/pkg/FR-2018-07-17/pdf/2018-14255.pdf
Source:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=151932681
Watt Capital Rule?
FHFA Proposed Capital Rule see pages 33329-33330
https://www.govinfo.gov/content/pkg/FR-2018-07-17/pdf/2018-14255.pdf
Dear Obiterdictum - Shareholder Law Queries
First I would like to thank you for the tremendous amount of time and effort you have contributed to this board. It has been quite impressive and appreciated.
Thank you.
If you would, what shareholder law do you think will apply to FMCC and FNMA shareholders.
An answer depends on the type of shareholder rights, claims, demands, powers, privileges, etc. that are sought, contested or violated and what domains of law (e.g. statutory, common, civil, tort, contract, corporate, criminal, etc.) that are most applicable to address these.
I know they are federally chartered entities and exempt issuers but there must be some choice of law applicable for determing shareholder right?
What right or rights are of concern? This needs to be specified.
Would it be Delaware or someother state?
Depends. It aslo could be federal statutory law or the US Constitution. What specific issue is on hand?
I am thinking that the Boards would approve a recapitalization plan based off the advise of the paid advisors and then bring it to a shareholder vote.
Something like this?
PLAN OF RECAPITALIZATION
https://www.sec.gov/Archives/edgar/data/1119721/000109560104000003/a0024031.htm
This could include an exchange offer to the Junior preferreds with a conversion formula. Any thoughts?
Like this?
EXCHANGE AND RECAPITALIZATION AGREEMENT
https://www.sec.gov/Archives/edgar/data/1058444/000119312506113868/dex101.htm
If the UST converts all or parts of the warrants then the outcome would be a forgone conclusion that whatever UST wanted would past.
Consider: https://www.treasury.gov/initiatives/financial-stability/reports/Documents/December%202012%20Warrant%20Disposition%20Report.pdf
The remaining issue would be minority shareholder rights to challenge but this would depend on a choice of shareholder law. Any thoughts?
Can the exercise of the Treasury warrants for Freddie and Fannie common stock be challenged in a court of law?
Yes.
See: When the Government Is the Controlling Shareholder https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1315&context=faculty_scholarship
Thanks again for your time and any perspectives you may have
FOFreddie.
You are welcome.
Obit
Hi obiterdictum,
Hi Fully Diluted.
even though it's not very important, I'd like to respond to that line you made:
Street #CatsofCosenza in Calabria, spotted at least five in the pile pic.twitter.com/9it2wLQv8r
— Mark Calabria (@MarkCalabria) June 25, 2019
Thank you Obi!
You are welcome RF
Much ado over nothing has been made about Calabria's statement regarding a shareholder wipeout. He said "If the circumstances present itself to where we have to wipe out the shareholders, we will." but didn't say what those circumstances would be.
Below is a link to a video wherein the circumstances for a shareholder wipeout is given by Calabria.
Atlantic Housing - Building for a New Age - October 24, 2019
https://ytcropper.com/cropped/cG5db1db6aa5aa8
Thank u Obi for the replies (as immaculate as ever).
You are welcome Ricky foo.
#2 was an absolute threat when Corker and REP buddies were gunning for us (likely as faces for TBTF banks)
Yes. There were others as well such as Garrett/Hensarling and Maxine Waters.
But that seems over
Yes.
#1 seems in contradiction to what seems like 6 profitable quarters to come barring major upset and an accumulation of cushion capital
Not a contradiction since there is no intention or suggestion that such proceedings are on the horizon.
Both proceedings are methods by which shareholders can be wiped out.
There are no current economic, financial, or political conditions and circumstances that contribute to the enactment of those proceedings
thank you
Welcome
Lot of colorful discussion of his response to Congress without discussing his words or in what exact manner they were inaccurate.
What exactly in his response do you think was false?
With the possibility of a response or responses to the question, here is a link to the full hearing with a rough, searchable transcript of the exchanges.
What was said by each participant can be easily found and verified.
Searches can be filtered by transcript type, only name, name and keyword or only a keyword.
House Financial Services Committee hearing on access to affordable housing.
https://www.c-span.org/video/?465549-1/secretaries-mnuchin-carson-testify-affordable-housing
Dear Obi,
Thank you for the wonderful insights and the consistently clear facts presented over the years. They are all top notch and very valuable to us in light of the tipsy-topsy development of FnF affairs..
You are welcome and it is a pleasure to participate.
With regards to the 2 proceedings that you described as plausible scenarios of "wiping" out shareholders, can i say that (my views):
It was not stated that those proceedings are plausible. Those two are merely the means by which shareholders could be wiped out if conditions supported and contributed to those proceedings being enacted.
1. 5th Circuit has ruled that FHFA has acted in contrary to its mandated Conservator role and FHFA is a Conservator NOT a receiver. And that only future development that adversely affect the operations/profitability of FnF, or that the conditions suitable for FnF to be placed into receivership are present, can the FHFA adopt the receivership proceedings. Do you agree that such "circumstances" even though possible is pretty remote based on current situations?
Yes.
2. The Legislative Proceedings are even more remote looking at the dysfunction senates on both side of the aisles to come to agree on anything, not to mention the tremendous disruption it will do the housing sector as there is no ready replacement at all or to have ample time to pass legislation to erect new initiatives to transit to a new desired state for housing. Who would take such risks eso when the preset system is proven to be working well.
Yes. For the same reasons all previous attempts to end the GSEs through legislation have failed.
I guess i just like your opinion on whats the real-world possibility of either of these happening.
At the present time, with the present economic, financial and political conditions and circumstances, neither one can happen.
Also, i feel that, based on the testimony of Mark C. during the hearing, he can't be saying that one hand, he's focused on fulfilling his duty as regulator (Conservator) to rehabilitate the agencies to a healthy state for eventual release (a point that he has been consistently preaching in many interviews and hearings), to also making remarks that it his view that shareholders to be wiped out. These are highly contradictory statements becos rehabilitate the agencies to healthy state INCLUDES looking after the present shareholders who he has also remarked that they are both private companies (with private shareholders).
Calabria can make such contradictory remarks because of his stated allegiance to HERA 2008 and an academic and personal interpretation of a set of selected provisional statutes. He can make an argument for whatever is required.
In HERA there are statutory provisions that state that the Secretary of Treasury is to "protect the taxpayer" and "to maintain the corporation’s status as a private shareholder-owned company." There are no similar provisions directing the FHFA Director to "protect the taxpayer." Instead, HERA directs the FHFA as conservator or receiver to "take over the assets of and operate the regulated entity with all the powers of the shareholders, the directors, and the officers of the regulated entity and conduct all business of the regulated entity" and to preserve and conserve the Enterprises and to put them in a sound and solvent condition. So the FHFA and the Director become the companies and the shareholders and the actual shareholders are left outside in the cold.
Edward Demarco first talked about protecting the taxpayers as his job. Then Melvin Watt picked up that banner and now Mark Calabria has followed suit even though it is not listed as an FHFA Director's duty.
Also, Calabria has a facility with words, especially in discussions and interviews where convincing an audience with thorough knowledge of a topic is paramount. In adversarial situations, Calabria loses some control usually by saying too much. Calabria speaks and discusses and writes opinions and blog posts far more than he writes lengthy, comprehensive articles. Calabria was an academic and policy wonk for the Cato Institute. See: https://bit.ly/2Pe6jBp vs. https://www.cato.org/people/mark-calabria
On the back of the recent 5th circuit ruling that the FHFA is unconstitutional for cause removal and acted in contrary to Conservator role (remanded to lower court), and with the stated testimony and remarks made by MC and SM, is it something that the Plaintiffs can use to request Court to 1. further advance their case, 2. impose anti-injuncture acts on such proceedings if necessary?
Yes. Statements demonstrating a clear bias can be used in Plaintiffs' arguments against the NWS and for vacatur. However, an injunction cannot be leveled on Calabria'sor Mncuhin's statements alone. Given Calabria's previously stated position on the NWS and shareholders (see: https://bit.ly/2pT4e2X), Calabria is in odd position with FHFA attorneys who are arguing the opposite position in all existing cases where FHFA is defendant.
Thanks so much again Obi... May the force be with all of us.. LOL
RF
You are welcome.
"Authority over critically undercapitalized regulated entities -Mandatory Receivership"
Currently GSE are undercapitaized because FHFA conservator stole all the capital of conservatees.
Besides receivership can be challenged under the provisions of HERA.
So It wont be as easy as during 2008 conservatorship for FHFA.
The proceedings mentioned are merely the proceedings required for wiping out shareholders.
Present economic. financial and political conditions and circumstances are not currently leading to either of those proceedings.
Thank you Obi.
You are welcome FNM500K
Two questions:
1. Apologies for this question - are the GSE's in receivership in any shape or form?
No.
and
2. Under what practical scenario would legislative action be used to dissolve the GSE's?
Housing and Housing Finance Reform legislation.
Notice that he didnt present any actual circumstances that would present themselves in this situation to require a "wipe out" of the shareholders.
Can anyone here think of any circumstances that would logically necessitate such action? And what the legal ramifications of such would be?
To question 1.....I cant think of any. To question 2.....boy, that sounds like a legal landmine to me.
So.....let's hash this out logically.
Obi.....any thoughts?
Without considering actual circumstances of how the GSEs arrive at the points below, Fannie Mae's and Freddie Mac's shareholders can be "wiped out" by:
1. Liquidation Proceedings (Receivership managed by a receiver)
2. Legislative Proceedings (An Act of Congress can dissolve the GSEs regardless of financial condition)
These two proceedings assume that the GSEs Federal Charters are intact and that the GSEs are regulated by the FHFA.
Sources:
Authority over critically undercapitalized regulated entities -Mandatory Receivership
12 USC § 4617(a)(4)(A)(i)(ii)
https://www.law.cornell.edu/uscode/text/12/4617 -
Fannie Mae Federal Charter
https://www.fanniemae.com/portal/about-fm/governance/our-charter.html
Freddie Mac Federal Charter
http://www.freddiemac.com/governance/pdf/charter.pdf
Much obliged, obiterdictum,
My pleasure Fully Diluted.
I would like to note that it was not my intention to discredit you or anything like that.
Did not receive an impression of that kind and no offense taken.
It is through such open, direct, and uncensored dialogue that the facts of any empirical matter can be fruitfully explored and revealed for the benefit of the discussants and the interested.
I know that there is sufficient confidence in me and no one here doubts that the study existed and delivered these results. Nevertheless, I would like to refer to the highly respected board member obiterdictum, who also dedicated a post to the study:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=99645624
Obiterdictum unfortunately quoted the wrong results - there were two. Anyone who reads my post will understand. https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145761537
The Alvarez & Marsal Valuation Services, LLC liquidation analysis was run under the assumption of receivership with FHFA as receiver and not as a "limited-life regulated entity (LLRE)."
A limited-life regulated entity is tax-exempt is required to be wound up in within 2 years with and 3 additional 1 year extensions (total 5 years) (see: 12 USC § 4617(i)(5) and (6)(A)(B). Establishing an LLRE is one option that the FHFA Director can chose from to manage or liquidate financially troubled enterprises 12 USC § 4617(b)(E)(F)(G)(H). https://www.law.cornell.edu/uscode/text/12/4617
It is apparent that A&M worked a 10 year span for liquidation of the GSEs and held a pronounced and specific assumption and awareness of cash income taxes at federal statutory rate of 35%. An LLRE is not assumed or mentioned.
A receiver can be required to file income tax returns for the entity in receivership. Both Fannie Mae and Freddie Mac are not exempt from the payment of federal corporate income taxes (See any recent 10-Q or 10-K). The amounts quoted from the A&M Note 4 on p. 19 assumed compliance with IRS codes, and so, A&M stated that Net Liquidation Proceeds would be $61,429 million for Fannie Mae and $47,583 million for Freddie Mac if cash income taxes are applied, calculated at the 35% Federal statutory rate. This considerably lower than the non-taxed net liquidation amounts of $97,589,000,000 for Fannie Mae and $73,786,000,000 for Freddie Mac.
The 35% statutory rate has change since 2014 to 21% today and so there will be more cash available for distribution in the unlikely chance of a liquidation.
GSE liquidation scenarios can be qualified as being done by a receiver or as a limited-life regulated entity. The results will be different.
Source:
LIQUIDATION ANALYSIS OF FANNIE MAE AND FREDDIE MAC PREPARED FOR GSO CAPITAL PARTNERS
https://www.scribd.com/document/221220936/FNMA-FHLMC-Liquidation-Valuation-Analysis
I searched waybackMachine internet archive for that report. It’s not there, unfortunately. And I assume you already tried to find it there. Out of 100,000 URLs captured from that domain by the archive, that report is not one of them.
Here is a link to the study.
https://www.scribd.com/document/221220936/FNMA-FHLMC-Liquidation-Valuation-Analysis
Mr Obiterdictum
Hi Mr. Dax.
Hasn’t Collins vs Treasury asked for a writ as well?
Yes. Collins et al. filed a Petition for a Writ of Certiorari on September 25, 2019. It was docketed on September 30, 2019. On October 30, 2019, the Respondents (Steven T. Mnuchin and Department of the Treasury and Mark Calabria and Federal Housing Finance Agency) are scheduled to respond to the Collins et al. Petition for Writ of Certiorari. See: https://bit.ly/2pOsR0F
If so, has it been assigned a calendar date for conference?
No. Not yet.
Also, I read it is out of ordinary they filed for writ, when they had won there appeal via en banc.
Yes. The specific win concerned Count IV.
But , something about they want to be heard with Seila law, because of the similarity on constitutional nature of CFSB and FHFA. And they want judgement for direction on legality and fair compensation for NWS, which was left in limbo.
No. Collins et al. argue that Collins et al. "is a better vehicle than Seila Law." See pp. 19-23 - https://bit.ly/32GCMUS
Regarding judgment sought, an en banc majority ruled the single-director structure of the FHFA (not the agency itself) unconstitutional and the remedy was to "sever the “for cause” restriction on removal of the FHFA director from the statute. See 12 U.S.C. § 4512(b)(2)." p. 60 - https://bit.ly/2qoSFB5
The was no retrospective or backward-looking relief for the Plaintiffs. The NWS was not invalidated or vacated by the 5th Circuit en banc majority. The Count IV ruling only made possible that the FHFA Director "will immediately be subject to sufficient Presidential oversight." p. 55 - https://bit.ly/2qoSFB5
The petition is out of the ordinary since SCOTUS does not usually grant a writ to prevailing parties. The Plaintiffs', however, argue in the petition that this is not a win and that they are not the "prevailing parties." The Petitioners (Plaintiffs) argue that "the Fifth Circuit ultimately afforded them no relief from the injuries they sustained from the Net Worth Sweep and thus, the "Petitioners are thus not “prevailing parties” in any meaningful sense." see Note 1, pp. 5-6, https://bit.ly/32GCMUS
So, in a nutshell do you know if Collins has a date for conference,...
There is no date. Responses from the Respondents and Amicus Curiae must be submitted first before a conference can be scheduled.
...and Is SCOTUS expected to combine the two cases, to expedite and be more efficient.
There is no argument made by Collins et al. for combining cases. All American makes an offer to do so. https://bit.ly/2BAiGQ7. Seila Law also argues to go alone. See: https://www.supremecourt.gov/DocketPDF/19/19-7/118174/20191004141216726_19-7_CertReply.pdf
The US Supreme Court panel will decide to combine or not.
If Collins does have a date on the calendar, this year and is granted there writ request,, can it be expected o be heard, and an order directed next year?
No date on the calendar. No estimate for timing unless the writ is granted.
Thanking you in advance ,
Dax
You are welcome.
Obit
I believe scotus is Oct 30 last day to appeal the Constitutionality of fhfa by DOJ if I remember correctly.....
On October 30, 2019, the Respondents (Steven T. Mnuchin and Department of the Treasury and Mark Calabria and Federal Housing Finance Agency) are scheduled to respond to the Collins et al. Petition for Writ of Certiorari.
https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/19-422.html
You are welcome Doc.007
What Happen At SCOTUS Oct. 18th ?
FRIDAY, OCTOBER 18, 2019
CERTIORARI GRANTED
19-7 SEILA LAW LLC V. CONSUMER PROTECTION BUREAU
The motion of United States House of Representatives for
leave to file a brief as amicus curiae out of time is granted.
The motion of Alan B. Morrison for leave to file a brief as
amicus curiae out of time is granted. The petition for a writ
of certiorari is granted. In addition to the question presented
by the petition, the parties are directed to brief and argue the
following question: If the Consumer Financial Protection Bureau
is found unconstitutional on the basis of the separation of
powers, can 12 U.S.C. §5491(c)(3) be severed from the Dodd-Frank
Act?
https://www.supremecourt.gov/orders/courtorders/101819zr_6j37.pdf
You are welcome imtheshadow.
Foster and Calabria Exchange - Affordable Housing Hearing - 10/22/2019
What did Foster and Calabria actually say about wiping out shareholders?
https://www.c-span.org/video/?c4824072/affordable-housing-hearing-10222019-foster-calabria-exchange
Watch at: 4:17
You are welcome YanksGhost.
Good Morning, obi.
Good Morning YanksGhost,
I have an interesting question for your consideration. In reading through some of the Milken Institute reports I discovered an interesting inference to a change under HERA and the transition to FHFA from OFHEO that suggested FHFA is actually funded by the GSEs and not by taxpayers. After some digging, I found some slightly different information in the FHFA 2018 Report to Congress in the Financial Reporting section near the end of this voluminous document (archived on the FHFA website).
In simple terms, this report states that the GSEs provide $250 M per year in assessment fees to basically fund the operations of FHFA under the enacted requirements imposed under The Safety and Soundness Act. There are some carryover funds, but that appears to verify that that FHFA is not a taxpayer funded Agency of the United States Government.
I am not asking you to research all this background, but could you comment on a question relating to it?
Yes.
Assuming the GSE assessments are the funding source for FHFA,...
1. The GSE assessments of the GSEs and Federal Home Loan Banks are the primary funding sources (98%) for the FHFA. This funding method is mandated by law (12 U.S.C. § 4516 - https://www.law.cornell.edu/uscode/text/12/4516).
... does this potentially exempt FHFA from the structural challenges raised in the Seila/Collins/All-American matters pending before the Supreme Court?
2. No. Consider the 5th Circuit's en banc's majority Count IV decision.
The only functioning Government regulatory body I am familiar with that is funded on an assessment basis would be the Federal Deposit Insurance Company. It strikes me that this difference between FHFA and CFPB might make any conjoining of these cases exceptionally diffficult. The FDIC functions as a Government Agency but has a board of directors, not a single Director of the Agency. However, the elective process is similar to the Fdderal Reserve Board: nominated by the President, confirmed by Congress but NOT removable by the Executive Branch (similar to Jerome Powell who Trump detests but cannot remove from office).
I would really appreciate your perspective on this.
3. FHFA is established by law as an independent agency of the Federal Government (See 12 USC § 4511(a) - https://www.law.cornell.edu/uscode/text/12/4511) and is funded by assessments on the GSEs and Federal Home Loan Banks (98%) and other sources (2%) (see p. 34 https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2018-PAR.pdf). The FDIC is an independent U.S. government corporation (See USC § 1811(a)) and is funded by assessments on banks and/or savings associations. CFPB is an independent bureau that is an executive agency within the Federal Reserve System (See 12 USC § 5491(a) - https://www.law.cornell.edu/uscode/text/12/5491) and is funded from the combined earnings of the Federal Reserve System. None of these agencies are funded by Congressional appropriations of taxpayer monies.
The issue before the US Supreme Court concerns the constitutionality of the single-director structure of CFPB, and perhaps later FHFA. The funding methods are not a source of conflict in conjoining cases since the funding methods of CFPB, FHFA and FDIC are not made through Congressional appropriations of taxpayer monies. Funding is achieved through assessments (FHFA and FDIC) or by transfers of earned monies (CFPB).
The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America - 10/22/2019
Web Cast Link:
I would like to add, any settlement in the future is depending on a possible future outcome in court (who has the best cards) in our case, the outcome is slam dunk positive one for plaintiffs, so bruce and bill will only settle if the terms of value and time match each other, otherwise they will wait for the outcome in the several cases, then it will be even more painful for the government, not only money wise, but also the loss of face, which also again contributes to the settlement, so for now the government has a lot to lose
Before the question below, what definitive, conclusive court ruling or rulings have made the future outcome for Plaintiffs (assuming all Plaintiffs in all cases is meant here) slam dunk positive? How have these definitive, conclusive rulings aided the Plaintiffs to slam dunk the currently pending cases?
Question to Obiterdictum: what would your Obiter dictum statement say, who will have the favorable outcome, plaintiffs or defendants?
At the current moment, it is not possible to know who will have the favorable outcome, Plaintiffs or Defendants.
~~~~~~~~~~~~~~~~~~~
I do know who I am pulling for.
Actually, anecdotal evidence is a much weaker term than what applies here.
Argumentum ad populum. (https://investorshub.advfn.com/boards/read_msg.aspx?message_id=151807305)
The evidence I am citing is more along the lines of reasoned evidence from knowledgable, experienced sources.
Argumentum ad verecundiam (https://investorshub.advfn.com/boards/read_msg.aspx?message_id=151807510)
Hi obiterdictum,
Hi Fully Diluted,
Argumentum ad populum? Great! As always, your analyses are first class and didactic.
But what have we learned from the privatization of Sallie Mae?
Not sure what has been learned.
This is what I thought when I followed your links provided here:
- A full privatization of the GSEs would be a lengthy process.
Indeed.
- The announcement of the privatization has boosted the price of Sallie Mae's shares. The market has valued the arising opportunities higher than the resulting disadvantages.
This depends on what Party is in power in the House and Senate from 2020 to 2024 and 2024-2028 and how the White House and legislators will go about amending, creating anew or eliminating through legislation the federal charters. Along with this will be the political treatment the GSEs will receive and the types of hubbub that is bound to emerge in the media.
I think that also with FnF the advantages would outweigh. Here are a few basic approaches:
- FnF could get in mortgage originators business. This would significantly increase profits.
- FnF could create competition for banks wherever they consider it lucrative.
- FnF could bring their structures and business model to the whole world. New IMBS(International MBS)...
- As one of the rating agencies recently announced, the MBS rating would be downgraded by one notch if the GSEs were fully private. This would not be far-reaching and would probably be passed on to the consumer.
- FnF would have to pay more interest on their short-term loans, but with the high core capital to be expected, one purpose would have already been found.
That should do it for now.
That is a lot to consider.
Regarding the above, the federal charters must be legislatively amended or eliminated to stipulate and allow the GSEs to enter the primary mortgage market and compete with primary lenders, which will be in conflict with the original GSE purpose of providing liquidity to the primary mortgage market. Also, Calabria wants FHFA to have statutory authority through congressional legislation to create chartered, secondary mortgage market competitors to compete with GSEs. Then there will be FHFA as regulator, if it survives in its present form, and FSOC, both of which will be looking down hard over the shoulders of the GSEs operations and SIFI status. And there is Dodd-Frank and mortgage brokers and....How much privatization will be allowed and how free will the GSEs be able to expand operations?
GLTY
Ditto
obiter, could a consent decree be made by FHFA on the GSEs to dictate organic recapitalization maintaining quarterly profits in reserve per the decree until a specified capital amount was attained?
Yes.
If the capital goal was not attained by a specified time, then per the decree the GSEs would need to raise further capital via an equity placement or public offering.
Yes.
Consent decree seems to offer a lot of flexibility.
That depends on the stipulations and conditions in the consent order.
As may be known, both GSEs operated under consent orders in the past. Freddie Mac operated under a consent order issued by OFHEO on December 9, 2003, that required Freddie Mac to implement recommended corporate governance practices and other remedial steps (https://bit.ly/2VJguiy). Fannie operated under a consent order issued by OFHEO on May 23, 2006 that required the Board of Directors and senior management to take steps to improve corporate governance, establish policies and procedures to ensure appropriate oversight, follow a OFHEO capital restoration plan, limit mortgage portfolio assets as directed, follow new personnel compensation rules, and a host of other matters (https://bit.ly/2q7m2rg).
Consent decree, consent agreement, settlement agreement, consent order, regulatory consent order are not equivalent.
See: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=151705104 and the related thread.
Here is a good example of a corporate consent decree with Cabot corp being forced by a US gov agency - EPA in this case - to install emission sensors on equipment to avoid excess pollution. Not hard to imagine forcing the GSEs to attain sufficient capital before reinstating shareholder dividend payments, etc.
https://www.epa.gov/sites/production/files/2017-12/documents/secondamendmentcabot-cd.pdf
Yes. However, this is a consent decree issued by a court. An FHFA issued consent order does not involve a court. HERA gives the FHFA power and authority to issue consent orders.