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Thanks again Obit. You are a more effective search engine than Google.
Obit, I don't understand. Can a protective order prohibit the plaintiffs' lawyers from laying eyes on some documents/evidence? Will only the judge be able to see the evidence or is it possible that such evidence be ordered protected and kept secret from the judge and the lawyers and therefore kept out of the trial completely? Lastly who would issue the protective order?
Thanks
I think that bigyank is only talking about the vote by the comitee to present the bill on the floor. Then Harry Reid will probably refuse to take it forward from there because he knows that it lacks support to pass.
MB loads of thanks. Gov. Doesn't like Meany Sweeny.
Hornsby may be a stool pidgeon. He could cut a deal and sing like a bird about illegal activities at fhfa for some relief of prosecution and he could claim that he is being framed for not falling in line like a good soldier.
It is because I figured out former direcot Ed Demarco's plot to blame COO Richard Hornsby for the illegal net profit sweep. Then I posted it on Ihub. Hahaha
Wow was ihub down for u all this morning? I felt vulnerable. Couldn't spend this a.m. at computer researching news. I had to leave the house early. Makes me realize how valuable this board is with all of you that pore over news and charts then relay your links.
Thanks all
Demarco wanted COO Hornsby to fall on his sword in court accepting responsibility for the illegal net profit sweep. Hornsby refused so Demarco gave Hornsby poor job performance ratings and Hornsby got pissed and threatened Demarco. How is that for a conspiracy theory? Just having some fun. All a work of fiction from an overactive imagination!
Thank Navy and others
For relaying the volume data and big buys. I can only ck my phone periodically for updates. Fastest way is through the ihub app. Been long for a good while so day to day fluxes don't really matter but good news obviously puts me in a better mood.
Seeking alpha is pushing ackman's pitch and slide show pretty hard and favorably.
www.hawaiifreepress.com/ArticlesMain/.../Caution-Senators-at-Work.asp.
Friday, May 02, 2014
Caution: Senators at Work
By Heritage Foundation @ 2:00 PM :: 42 Views :: National News
Caution: Senators at Work
by Amy Payne, Heritage Foundation, May 2, 2014
Obamacare is wreaking havoc on the economy; entitlement spending is swallowing the federal budget; America’s military readiness is in shambles; and a handful of senators are working hard to make sure the government stays in the housing finance business.
Priorities, right?
Fannie Mae and Freddie Mac, the giant government-sponsored entities (GSEs) that dominate the American housing market, were supposed to help people get homes and stabilize the market. They have failed at these goals. Now, some members of Congress are claiming they want to reform the system—but they’re basically just trying to rename it.
Johnson Crapo housing cartoon Fannie Freddie
Right now, Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) are trying to gain a few more votes to propel their not-really-reforming bill to the Senate floor.
Heritage experts Norbert Michel and John Ligon have analyzed this and other Senate proposals, and they warn that these “bills would not help people buy homes; they would only protect investors and special interests at taxpayers’ expense.”
Meanwhile, the politicking behind the scenes is fierce. Sen. Sherrod Brown (D-Ohio) told The New York Times that his fellow senators had better steer clear of one man: “If they’re thinking of Jeb Hensarling and his no-government role while we negotiate this, nothing happens.”
A “no-government role”? Sounds like a great idea. Naturally, Senate liberals aren’t too interested.
Rep. Jeb Hensarling (R-Texas) is sponsoring the PATH Act, a very different approach in the House that would get the government out of housing finance. He calls the current system of government intrusion in the housing market “unsustainable, unconscionable, and unfair.”
Hensarling told The Foundry that it doesn’t make sense to continue government-sponsored entities like Fannie Mae and Freddie Mac—which “represent the single largest bailout in America’s history, almost $200 billion coming out of the pockets of working men and women in America.”
>>> Watch Rep. Hensarling make his case
It’s uncertain whether the Johnson-Crapo proposal will make it to the Senate floor for a full vote this year; committee votes in the next week or so could determine its fate. But when it comes to housing finance, this is one area where the government needs to get out and move on.
Heritage experts have concluded:
The federal housing policies related to the GSEs have proved costly not only to the federal taxpayer, but also to financial markets and the overall economy. It is time federal policymakers accept that this institutional model has failed and that they should move toward a U.S. mortgage market without Fannie Mae and Freddie Mac.
After all, we can think of a few other things our senators could do.
What would you like to see the Senate focus on? Let us know in the comments.
Read the Morning Bell and more en español every day at Heritage Libertad.
Quick Hits:
Do you think global poverty is on the rise—or the decline?
Who is at the center of this Benghazi controversy?
See how much are unions spending in the 2014 election cycle so far.
What were investigative reporters doing in California last weekend?
Heritage President Jim DeMint talks about the difficult but important task of making—and watching—a movie about this killer.
I think that if an announcement was made that uplisting procedure is being pursued then the $4.00 pps will no longer will be an issue
At first I was getting angry at the dumbass talking head. Her initial response to the headline was so exemplary of the public uninformed masses that she sounded like leno on the street or a SNL parody. You would think that working in a news room one would pick up tidbits of real information. Eventually I could not tell if she was sensationalizing or if she is a bubble headed bleach blond( Don Henley ). She was ignoring Bove's corrections like a politician with an agenda of fear mongering. It was a strange combination, especially on FOX. Then when Dick Bove responded so well both times to her misrepresentation of information and her over the top response to her own exaggerations I felt better. He kept his cool and patiently repeated the facts.
At least this time with more glaring evidence of a cover up from the commander in chief on down there is a possibility of of justice for the families that were told by Hillary that it was due to a video. I hope they don't try to sneek the vote through this hearing. There now I am not off topic.
It is possible that they do vote generally coinciding with earnings. The jaded disposition that I now have makes me think that it is likely. They want to manipulate the pps and it has been done so much in the past. Damn crooks.
I hate low volume
Would fnf require anything from govt. Bailout $$ if the net profit sweeps were cancelled? Even in a worse case scenario? I don't think so.
I don't post often but I just have to say that I agree with you. She needs a professional spokesperson.
Nice letter but your next one from your email address will go directly to the spam/junk mail can. At least you got it off of your chest.
There is a new seeking alpha article out. I cant post it. I am on my phone
I wonder if they can delay the vote without shelving until midterm elections conclude. Feel free to chime in.
somebody posted that they dreamed that there was a dramatic drop in share price right before news of restoration. Then there was a more dramatic increase to $11.11
maybe this is the beginning of that $11.11 dream coming true.
I know they are considered an mj sector stock but I hope they weren't testing their own product and just forgot to sign up for the contest.
I squeezed a little more lunch $$ out of mom and bought 5000 more shares at 3.92.In a year I can pay her back triple.
Fidelity posted my shares.
Phot has been halted.
Thanks, money back to fannie. That makes me warm inside.
Ok so I didnt know what a clawback agreement is. I just read a couple of definitions off the web. It seems that it just protects participants' privileged info. from being disclosed accidentally and then used in a trial. So how does this agreement help the plaintiffs in the fnf court cases? Is there another part of clawback agreements? Help me out here. I want to be happy about this like you guys.
I will try to paraphrase it......Be careful ! How was that?
So I know nothing about 6o+. Is it safe for me to assume that they are our friends?
another opinion
http://newyorksstateofmind.wordpress.com/
March 28, 2014 at 7:42 am Leave a comment
Burning Down The House
Call me wacky, but I don’t think a convicted arsonist should be able to collect insurance for burning down his house.
If you agree, you’ll understand why I am a little uneasy about an announcement last evening of a settlement of more than $9 billion between Bank of America (BoA) and the Federal Housing Finance Administration (FHFA). This puts to bed claims that Countrywide and Merrill Lynch duped Fannie Mae and Freddie Mac into purchasing mortgage-backed securities that crashed, causing billions of dollars in losses and contributing to the eventual bankruptcy of the GSE’s.
I’m a bit more impressed, however, by a related announcement. New York’s Attorney General Eric Schneiderman was able to get former BoA CEO Ken Lewis to contribute $10 million to a settlement of claims that BoA deceived shareholders as part of the bank’s efforts to acquire the aforementioned Merrill Lynch and Countrywide. The AG’s settlement represents the first that I am aware of in which a CEO is taking personal responsibility for his actions during the mortgage crisis. What a concept! Lewis also accepted a three-year ban from serving as an officer or director of any public company.
Let’s take a trip down memory lane. As late as 2008, Fannie and Freddie were private corporations that specialized in buying mortgages and packaging them as mortgage-backed securities. Many of our largest private banks, including Countrywide and Merrill Lynch, also purchased mortgages from banks and credit unions and packaged them as so-called private label securities for sale in the secondary market.
One of the great myths is that Fannie and Freddie caused the mortgage meltdown. They didn’t. Banks like Countrywide bought and sold poorly underwritten mortgages because they were making gobs of money. If Fannie and Freddie didn’t exist, they still would have made the same loans and bundled the same securities, they would have simply made more money. That being said, government policies promulgated under the Clinton Administration to expand home ownership combined with Fannie and Freddie’s desire to maximize their own profits made the GSE’s willing co-conspirators in the mortgage mess and it was the insolvency of these two institutions that triggered the cascade of events leading the Great Recession.
Remember that when the crisis hit, the government was scrambling to save as many institutions as it could. That’s why it strongly encouraged a few healthy banks, including BoA to purchase Merrill Lynch and Countrywide in the first place, This brings us back to yesterday’s settlement. The idea that somehow Fannie and Freddie, institutions that specialized in bundling mortgages into securities, were fooled into buying securities of poorly underwritten mortgages is a convenient legal myth. There were no institutions in the world better positioned to do their own due diligence, nor any institutions more cognizant of the state of the housing market. So when the history of the last seven years is written, let’s not let the government off the hook.
Why should credit unions care? Because there are no lenders that need a well-functioning secondary market more than credit unions. Just as home buyers should be held accountable for the terms of their mortgage, institutions that sell to the secondary market should sell these mortgages secure in the knowledge that they are no longer responsible for them. unfortunately, the secondary market has developed as a system of “seller beware.” The more liability that companies face for mortgages that they sell, the more expensive it will be to sell mortgages to the secondary market. Ultimately, your members will pay for yesterday’s settlement. As part of housing reform, the laws have to be strengthened to limit the ability of any secondary-market participant to hold others responsible for arm-length purchases
Maybe sticky this
http://www.marketwatch.com/story/vapor-group-inc-spli-releases-statement-on-the-high-quality-standards-of-its-e-liquids-2014-03-27
March 27, 2014, 8:17 a.m. EDT
Vapor Group, Inc., SPLI, Releases Statement on the High Quality Standards of Its E-Liquids
DAVIE, FL, Mar 27, 2014 (Marketwired via COMTEX) -- Vapor Group, Inc., formerly AvWorks Aviation Corp. (otcqb:SPLI), (the "Company", "AvWorks", or "Vapor Group"), released a statement today about the unique, high quality standards behind its highly successful line of "Made in the U.S.A." e-liquids.
Yaniv Nahon, Chief Operating Officer of the Company, stated, "We believe that our e-liquids are unmatched by any competitor in terms of purity, high quality, and the steps that we take to protect our customers. All of our e-liquids are formulated and mixed exclusively for us here in the U.S. by an FDA registered laboratory by degreed professionals, in accordance with cGMP guidelines (21 CFR part 111). All our ingredients are quarantined before use, and must pass a test for purity by an independent, third party laboratory before being added to any formulation. The key ingredients that we use in our e-liquids are all United States Pharmacopeia ("USP") grade and kosher. When our products contain nicotine, it is only "levorotatory" nicotine which is extracted using natural processes from high quality black leaf tobacco."
He added, "All batches of e-liquids have a distinct lot number for quality control tracking of ingredients back to their "Certificate of Analysis." Our lab carefully tests each batch of e-liquid with a high pressure liquid chromatograph to verify that we have the correct levels of ingredients, especially nicotine. We don't believe any of our competitors go to the extreme of quality testing that we do."
"Important, each of our e-liquid's packaging bears the following consumer warnings in addition to others: 'NOT A FOOD PRODUCT. DO NOT EAT. KEEP OUT OF THE REACH OF CHILDREN. Refrain from using this product if you are under the legal smoking age in your state. This product is not an aid for smoking cessation.'
"We care immensely about the safety of our children and the safe use of our product. We are committed to clear, definitive safety labeling to ensure that our products are used by adults responsibly. We believe setting and maintaining such high standards for ourselves is the right thing to do, and the smart thing to do for the interests of our shareholders."
Dror Svorai, President and CEO, added, "We are confident that whenever governmental regulation comes to our industry, that we will not only be in compliance with the required standards to be met, but will exceed them in every way. We believe that we are way ahead of our industry when it comes to meeting high standards of product quality. And we are committed to keeping it that way."
About the Vapor Group Vapor Group, Inc., www.vaporgroup.com , is in the business of designing, developing, manufacturing and marketing high quality, vaporizers and e-cigarette brands which use state-of-the-art electronic technology and specially formulated, "Made in the USA" e-liquids, which may or may not contain nicotine. It offers a range of products with unique e-liquid flavors that is unmatched in our industry. Its products are marketed under the Vapor Group, Total Vapor, Vapor 123, and Vapor Products brands. It sells nationwide through distributors, wholesalers and directly to consumers through its own websites and direct response advertising.
All of its E-cigarettes consist of a long-life battery, a heating element, a cartridge filled with an "e-liquid" and an atomizer which when heated, vaporizes the e-liquid. Because E-cigarettes are not "lit" like regular cigarettes, they don't create flame, smoke from burning, ash, tar, noxious fumes or leftover "cigarette butts". As a result, they may be used virtually anywhere.
Vapor Group is committed to providing E-cigarettes that are convenient and economical to use, safer and healthier than traditional smoking, and which provide a flavorful, enjoyable smoking experience.
Vapor Group, Inc. is managed by a highly experienced team of executives committed to responsible business policies and practices, including the marketing of our products only to those eighteen years of age or older, not making or avoiding claims about our product health benefits, and fulfilling the requirements of all applicable laws and regulations.
Safe Harbor Statement: This release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Certain statements set forth in this press release constitute "forward-looking statements." Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate", "project", "intend", "forecast", "anticipate", "plan", "planning", "expect", "believe", "will likely", "should", "could", "would", "may" or words or expressions of similar meaning. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the company's actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company's ability to grow its business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company's limited operating history, the limited financial resources, domestic or global economic conditions -- activities of competitors and the presence of new or additional competition and conditions of equity markets.
I hate the manipulation. Not just mm. There is no way a s/a article comes out with enough time to tank a stock just to have the company publish stellar earnings later the same day. We were played but I did buy more.
Who is the recipient of the pharm pods in Canada?
Even the Russians know who caused the housing crisis!!!
http://rt.com/business/banks-pay-us-penalties-313/
Still holding tight. Not going anywhere. Feel bad for turning ppl on to fnf right now because I don't think they can see this through. Some got out at $6.00 and doubled their money. Some stayed in. Hope something breaks soon to keep them strong.
I just bought 2,000,000 shares for peanuts. This is a fun lotto ticket!
Charles Payne biggest drama since lehman. I posted this yesterday but it is still current if you have not read it. In addition he was on Fox yesterday with the judge and they pointed out the unconstitutionality of this government extortion.
http://finance.townhall.com/columnists/charlespayne/2014/03/25/biggest-drama-since-lehman-n1814055/page/full
Biggest Drama Since Lehman
Charles Payne | Mar 25, 2014
Charles Payne
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The great Fannie Mae heist continues to be one of the most intriguing stories not told in the press. Consider all the moving parts:
• Government Bailout
• Printed Money
• Forced Out Competition
• Housing Recovery
Consider all the players:
• Individual Investors
• Federal Government
• Federal Reserve
•Taxpayers
•US Economy
There are parts of the bond market and parts of the Federal Reserve that I still find quite perplexing; especially actions by the Fed that I cannot wrap my mind around. The fact is that of all the experts opining on the Fed, I bet 1% honestly understands the inner workings, and they never give us all of their information. It is like members of a secret society protecting their turf, even those that have left in disgust or frustration. So, we continue to get the most basic explanations regarding the Fed and policies like, (QE) Quantitative Easing.
What we know is there have been three rounds of QE, each with its own idiosyncrasy, though they have all shared the same stated goal of jump-starting the economy.
QE1, November 25, 2008 to March 2010, announced it would pump $500.0 billion into the banking system hoping to lower mortgage rates. By the end of the program, the Fed owned $1.25 trillion of mortgage- backed securities and $175 billion in agency MBS and the 30-year rate drifted to 5.0% from 6.25%.
QE2 was launched from November 3, 2010 to June 30, 2011, and $600.0 billion of long-term US Treasury debt was purchased to further pressure short-term rates, which sparked an increase in money supply, and assisted the housing market. Mortgage rates decline from 4.80% to 4.35%.
QE3 is the most misunderstood version of extraordinary measures taken by former Fed, Ben Bernanke, pumping in $85.0 billion a month in purchases split between US Treasures and agency MBS. This did little for mortgage rates, which dipped from 3.75% to a low of 3.31%, but have been ending higher and seem out of the grip of the Fed.
I keep going back to the fact that the Fed has been buying agency MBS as the most compelling part of this scenario. (No, the Fed has not been buying stocks and in fact, the Fed does not really "print" money, as its purchases are made with accounting gimmicks and use of credits.) QE3 began September 13, 2012, not too long after Fannie Mae took its last drawdown out of the pool of $200.0 billion in the first quarter of 2012. That final dip into the bailout pot sent the total to $116.1 billion in taxpayer funds.
A couple of weeks ago, Fannie Mae made another payment bringing the total to $121.1 billion. Yes, the American taxpayer has been repaid, but how the heck did fortunes of Fannie Mae reverse so quickly?
From what I can discern, the Fed was buying mortgage-backed securities that originated from government-sponsored entities, largely Fannie Mae, which has been a boon for them to dump certain junk while keeping better and quality assets. Sure, the housing market has improved and delinquencies are easing. However, there are parts of the equation that no one can explain as free market. Of course, the so-called free market is missing that key component of competition, as this administration have forced many players out of the space, leaving fresh originations for single-family mortgages all to Fannie Mae.
A component of many deals involving Fannie Mae paper is the obligation, or an option to buy back after 24 months, the non-performing mortgages. We could see large chunks of payouts because of this, but in the meantime, it has been remarkable. But in the process, there is even less competition in the mortgage arena, and the Fed has begun to wind down this (final) version of QE. The hunch is jobs will materialize and wages will begin to head higher. Sparking that elusive virtuous cycle:
The biggest winner would be Fannie Mae, but who would get to enjoy this cash machine?
(Note: Japan invented quantitative easing, added even more bells and whistles, and with the election of Shinzo Abe, they might see a turnaround after two lost decades and 15-years of deflation. Finally, wages are up in Japan for first time in 22 months, coinciding with inflections in production and retail sales. )
Why Fannie Mae is an Amazing Asset
The Great Fannie Mae Heist is about money and power ... plain and simple. It has become a money machine and everyone wants to control it. The composition of mortgages is a critical reason Fannie Mae is poised for a brighter future.
History of Housing Boom
During the Clinton administration there was a reiteration of the Community Reinvestment Act that pressured lenders to make dangerous loans. The risk was eased somewhat when Franklin Raines changed the rules at Fannie Mae, allowing it to become a buying of junk mortgage-backed securities. The stage was set.
The housing boom began in 1998; but ramped up as the US stock market melted down. By 2003, the dynamics of loans offered began to change dramatically, as traditional mortgages and lending standards would have derailed the boom.
Sub-Prime mortgages were 4.5% of the total, (subprime backed by MBS 1.4%) and in 1994, they grew to 20.1% and 16.2% respectfully, by 2006.
Alt-A (alternative) loans were less than Prime, but greater than sub-prime. These loans were 98.7% fixed in 1998, and by 2004, 64.3% were adjusted with several different versions. By 2007, the industry saw that it was in trouble and began to ask for more documentation -demand for FICO scores above 741, which surged, while fixed rates bounced back to 27.6%. It was too little, too late.
Growth of Mortgages
2001 through 2003
2003 - 2006
Agency
95%
-60%
Sub-Prime
94%
94%
Alt- A
54%
340%
Key Risk Products
Declining Risk at Fannie Mae
Back to reality for Fannie Mae, which has seen a strong rebound in Fixed-rate mortgages?
Composition
2013
2007
2006
2005
Fixed
97.6%
90.1
83.4
78.7
Adjusted
2.4%
9.9
16.6
21.3
Alt-A
1.3
16.7
21.8
16.1
Sub-Prime
-
0.7
0.7
0.0
Interest Only
0.2
15.2
15.2
10.1
Negative Amortization
-
0.3
3.1
3.2
Improving Housing Market
I think home prices bounced back too quickly, but as they settle and rates inch higher, there should be a greater sense of urgency from fence sitters. If the housing market gains Main Street traction, we could see a couple of fantastic years of growth and orderly price improvement.
Either $0.00 or $30.00
Fannie Mae share price, which climbed from $0.09 to a recent high of $5.44 has struggled of late, plunging to $3.55 at the close Friday. The reason for the plunge is a proposal announced by Tim Johnson (D-SD) and Mike Crapo (R-ID) to unwind government sponsored enterprises (now in conservatorship) to allow the private sector into the mortgage arena. These entities would have the explicit backing of the government on loans paid for and through a FDIC type of arrangement.
It's a toss-up as to how this all unwinds, but members of the powerful Senate Banking Committee, including Elizabeth Warren, who opposes the unwinding.
In the meantime, there is a serious battle brewing over how much current shareholders in Fannie Mae (and Freddie Mac, together with its counterpart, should receive, as a total of more than $200 billion covering the $188 billion in bailout was paid.
Investors want their share of profits, but I read where one Congressman said these GSEs should pay 50 times the bailout, covering for risks taken by taxpayers.
I am not sure how it is all going to shake out, but a friend says that the short interest on Fannie Mae is rocketing like nothing he has ever seen since the Lehman days. The stock is "hard to find," so shorts are paying hefty premiums because they see this stock going to ZERO. On the one hand, bulls see entities too big to dismantle, eventually sharing profits with shareholders, making this stock worth at the very least $30.00 a share.
This is a drama to watch ... the implications are amazing from government reach and manipulation, to shareholders rights, to lower rates and the role of the Federal Reserve.
Stay tuned!
Keeping Powder Dry
I didn't like Friday's close, so I'm not chasing out of the gate for investments and would rather see how the market acts as the session moves on. The major indices need to digest gains and even if that doesn't mean a traditional correction it could mean moving sideways for a while as a tug-o-war plays out.
The good news is there aren't a lot of unknowns. Sure, there are dark clouds from policy (health care law), geopolitics (Putin), and valuation (biotech sector), but we know where the Fed is coming from and the war on success has been stalled and could be stalled even further come November.
Everyone should have a fair amount of cash. The next breakout could be huge and bring on that parabolic move that is typical of a truly overbought and overvalued market ... we are NOT there yet. I'm looking for the breakout to lift the Dow to 17,000, so keep your powder dry for the moment but be prepared to take advantage.
A new article (payback time) helpful, positive opinion
http://www.fundweb.co.uk/opinion/vanessa-drucker-fannie-mae-and-freddie-macs-payback-time/2008387.article
Categories:Investments,US
Vanessa Drucker: Fannie Mae and Freddie Mac's payback time?
25 March 2014 | By Vanessa Drucker
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Binary outcomes are more often associated with options than with common or preferred stock investments. Yet both classes of government sponsored mortgage agencies, known as Fannie Mae and Freddie Mac, now stand to soar or collapse depending on the American government’s actions.
This chart illustrates the past year’s market reaction. Dick Bove, an analyst at Rafferty Capital Markets, estimates that Fannie common stock could rise to $18 a share, reckoning on the company now earning $1.60 per share, and applying a 10-12 multiple.
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Vanessa Drucker: Cheerios say cheerio to GMOs
click here
Remember that in 2008, the government pumped $189.4bn collectively into the GSEs, which prop up about 90 per cent of the American mortgage market. In return, shareholders lost all rights to dividends, while the GSEs recuperated. By July 2012, both had become profitable and stopped drawing down from the Treasury.
Private investors were taking note, including a group holding over half of the $34.6bn outstanding in GSE preferred stock. In July 2013, led by Bruce Berkowitz of Fairholme Funds, the team sued the government and presented a further proposal in November to purchase and recapitalise the mortgage agencies.
Their plan involved converting their junior preferred stock, raising new capital in a rights offering, winding down the GSEs’ insurance and investment books, repaying Treasury with the proceeds and still delivering a profit to taxpayers. The common stockholders would ultimately reap the remainder.
The government is loathe to give up its cash cows for such juicy dividends or to be seen to reward private shareholders after a bailout. (But note: shareholders of AIG and the entire banking industry have done very nicely, thank you, despite Uncle Sam’s intervention.)
A new bill, introduced by senators Johnson and Crapo, focuses on another restructuring, with private capital covering the first 10 per cent of losses. That controversial legislation will likely stall this year though, ahead of the midterm congressional elections.
The GSEs still play a critical role in underwriting the housing
market and could be granted a reprieve, with more regulatory oversight and capital requirements. If they wither, it’s goodbye to longer-dated mortgages, Bove warns, noting that issuers will hesitate if the GSEs no longer exist as purchasers of the securitised packages.
Vanessa Drucker is the American editor of Fund Strategy magazine
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