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This will run a day or two before the news. The insiders/congress will load up as the agreement is worked out. Don't kid yourself, it is going to happen. Any of us who have been here for a year or longer can see each "match stick" coming into place. Ever see CNBC ask a normal question about FNMA? Thanks to Joe, check. See the written press, hedge funds, congressmen and other positive statements and shareholding positions, not last year. The move is coming, just like all these developments. And the move will come before the news. That's how it works now.
ValueWalk article:
Large Banks Unprofitable Without Government Backing: Penn Study
by Mark MelinMay 02, 2014, 12:41 pm
Large banks reap $102 billion benefit from US government
Based on previously reported estimates of the value in a government risk guarantee, the large banks receive “the combined financial advantages and subsidies for the six biggest U.S. banks since the start of 2009 was at least $102 billion.”
Report author Nizan Geslevich Packin from the Penn’s Institute for Law and Economics connects the dots, pointing out that follow up studies estimate that “the profits of two of America’s large banks would have been negative if not for implicit and explicit government subsidies.”
Why does the government’s free insurance policy help the large banks so much? “The most significant implicit subsidy stems from market perception that the government will not allow the biggest banks to fail — i.e., that they are “too-big-to-fail” (TBTF) — enabling them to borrow at lower interest rates,” the report says. “While the Dodd-Frank Act attempts to solve the TBTF problem, it does not prohibit the government from giving financial support framed in a general fashion.”
In other words, crime pays for the large banks. The fact is they have engineered a system where criminal actions are seldom investigated — and this is hard to value.
Detearing and Captain,
Nice to see some life on this board. I've been "in" MTG since below $2.00 as well. It's as nice a recovery story as one could ask for. Their huge book of legacy business and reserves about to be recovered into profits make this a very easy stock to sleep on. I see my friend and soon toast-mate Detearing at the FNMA/FMCC board. Captain you may want to look into this one too. Cheers to you both.
Redsolocup,
I have written an email to both David and Tim mentioning your reference to meeting with the Oregon Senator Merkley during the Investors Unite conference earlier this week. I have asked them to connect you and me together via email. It seems a bit klugey to connect that way, but it's the only way I can see doing it without putting one of our emails on this board. I tried responding to you via PM today twice but it would not send.
I'll post the Google board website on a separate email in case they don't want to that post to remain.
I live in Oregon. I had written to Merkley on our behalf and received no reply. If you would send me a private email I would follow up on any particulars. I do not have the ability to private email on Ihub. I own a construction services company with hundreds of clients and thousands of voting employees. I would be happy to publicly support our effort here. I have had a response from our other Senator in Oregon. Merkley is on the Senate banking committee and up for re-election this year.
I am also on the Gmail chat board and could be contacted through David Sims. I am very interested in being an active help where I can.
4Duxs
Well stated
When will these payments be considered repayment to the owner/investors of FNMA at the time the wrongs were performed? At some point it needs to be considered that the owners of these companies (FNMA/FMCC shareholders)that B of A did these illegal acts to were wronged as well. I would hope the press would begin to understand and publish that fact as well.
I too have contacted all three of my representatives. None of them are replying. I stayed very positive. I plan to contact them again, because I have received their canned reply of I'll get back to you. I think they are all undecided. I hope to craft a second note pointing out the payments, terms of conservatorship and a path to support release that all will win.
Gold and certainly looking forward to LV.
Thank you all for your contributions.
4Duxs
Holding strong, it is not easy to stay above the hubris. Remember 8 months ago we were all alone in our beliefs. Now we have big players hiring big time law firms to represent our beliefs, top analysts reviewing and recommending holding our position (Bove, Kass).
It's their hubris that is the risk to our stock position.
Very kind, nice thoughts, thank you. Luckily I've stayed the course. I kind of expected some kind of rub at us, maybe still do. It's too much upside money that it can be easy.
Please move me to gold
Good points and well phrased. Thank you
My senator is holding a Town Hall meeting 5 miles from my house this weekend. He's the current Chairman of the Senate Finance committee, Ron Wyden, D. Oregon. Any Ihub'ers in the Portland area should attend, just Google his website for location/time info. I think it is important to let them know that this is important to us. I am preparing a respectful question to ask him about FNMA when I attend. The challenge is phrasing all the important points without being to long winded.
I would appreciate any serious/ respectful phrased question you would like to ask.
My concept suggestion:
The business that I own is a construction service business, with hundreds of local contractor clients employing thousands of (voting) construction workers. I am thinking of starting with that intro, mention also how important a 30 year mortgage is, that FDR is the founder of FNMA and that they have now paid in full and that as per law the conservatorship needs to be removed and the company given back to the shareholders. I plan to end by asking for his statement of support for releasing FNMA to the shareholders like AIG etc.
Please share your idea, it must be respectful. I will provide his response over the weekend.
In estimating full value FNMAS is $25, par. If the treasury keeps their 79.9% I'm guessing FNMA FV is $12 (79.9 of BV). What value do any of you estimate the common will rise to? I don't think in the hundreds is logical, but I would like to hear others target price.?
Thank you, it's been a long time coming, but it has been real fun watching the press turnaround and see what we have all believed.
You all may have already thought of this, but could it be an important client placing a large buy order. The MM then accumulates shares all day long until he can fill it as one transaction order. It would keep the pressure off and allow the MM to acquire the shares throughout out the day in an "orderly fashion".
Just an amateur's reasoning.
The future is getting more clear. Raise FHA rates and bring in some private capital, relist FNMA/FMCC and manage their percentage in the marketplace.
From National Mortgage News:
WHAT WE'RE HEARING
What’s Making Nonagency Loans Competitive with Fannie and Freddie;
These layers of risk are presumed to require significant risk-based pricing adjustments and these adjustments will become effective as early as April of next year. Many lenders may need to build these new costs into their rate sheets even sooner than that.
Which begs the question: Why is this being done, and what does it mean to the market? Is this an example of government overreach or an example of the free market in action?
Well, the reason for the increase is most certainly that the FHFA, through these adjustments, is trying to encourage private capital into the market by making delivery of these loans to the agencies more expensive. Many critics of the industry have maintained for some time that the agencies were too dominant in the funding of new mortgages, and that the “free market” should be encouraged to get private capital back into the market, providing a range of outlets for such borrowers...
http://www.nationalmortgagenews.com/blogs/hearing/What-is-Making-Nonagency-Loans-Competitive-Fannie-Freddie-1040342-1.html?ET=nationalmortgage:e5162:849052a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=NMN_Daily_Briefing_121913&site=default_tech
Article from Mortgage News Daily. This latest OIG report that goes to congress, this week.
OIG Recaps 6 Months of Success For Fannie and Freddie
Key point in last paragraph:
OIG says that the GSEs currently do not require further government support.
Article:
Nov 25 2013, 1:11PM
The Office of Inspector General (OIG) of the Federal Housing Finance Agency (FHFA) has released its sixth Semiannual Report to the Congress. The report covers OIG's activities from April 1 to September 20, 2013. OIG summarized its audits which numbered 16 during the six month period, evaluations and other reports relating to the nation's housing finance system. These included an evaluation the security of of Freddie Mac and Fannie Mae's (the GSE's) technology systems, an assessment of the Home Affordable Refinance Program, and FHFA's efforts to gradually increase the GSEs' guarantee fees. OIG also reported on investigations which resulted in the indictment of 75 individuals during the period, conviction of 55, and the recovery of more than $104 million in criminal fines and restitution orders.
OIG also provided an overview of FHFA and its relationship with the GSEs; a brief discussion of the GSE's business models, and a section titled "Lessons for Housing Finance Reform: Five Years after the Federal Government's Takeover of Fannie Mae and Freddie Mac." This section includes a discussion of three factors that are important to a safe, stable, and liquid mortgage market, regardless of the form that market takes. OIG said it was drawing on its experience to speak about soundness, oversight, and balance and was not seeking to take sides in the current discussions about GSE reform or that of the larger finance market.
OIG devotes a section of the report to the GSEs' recent financial performance. During the period ended June 30, 2013 both GSEs reported record profits which have been rising since 2012 and are beginning to offset the losses that started in 2007. The second quarter 2013 results for Fannie Mae were $68.8 billion and for Freddie Mac $9.5 billion.
OIG said there were several reasons for the recent financial successes:
In the case of Fannie Mae, a key factor is the release of a substantial portion of its valuation allowance against its deferred tax assets. The GSEs are required to maintain a valuation allowance for deferred tax assets they feel might not be realized. This caused them to establish substantial allowances during the years they experienced net losses. In the first quarter Fannie Mae released a substantial portion of its valuation which resulted in the recognition of $50.6 billion as a federal income tax benefit.
There were continued improvements in the value of the GSEs' single family business segment. These were driven by stronger credit quality of the loans, increases in the guarantee fee income because of FHFA directed fee hikes; an increase in home prices causing a reduction in defaults, and derivative gains due to an increase in swap rates.
The GSEs also benefitted from extraordinary government measures to support the housing market in general. These include the $1.3 trillion in GSE mortgage-backed securities (MBS) purchased by the Federal Reserve and $135 billion in GSE issued bonds.
The GSEs of course have received an aggregate of $187.5 billion in support by the U.S. Treasury which allowed them the time to make the improvements and put their activities on a sound footing. Against these Treasury draws the GSEs have paid $146.2 billion in dividends, none of which has reduced the monies owed to the Treasury.
OIG says that the GSEs currently do not require further government support. Treasury's last purchase of GSE MBS through the GSE MBS Purchase Facility was in December 2009, and the Federal Reserve last purchased MBS and bonds from them in March 2010.
http://www.mortgagenewsdaily.com/11252013_fhfa_oig.asp
Add 4Duxs to the long list
Long even when I'm fishing the Trask for kings
Long
I am a long/lurker. Thank you all for your insightful communications.
The following article is from today's National Mortgage News
By Rob Blackwell
SEP 26, 2013 11:22am ET
Four Predictions About the Future of Housing Finance Reform
Forecasting the future of Fannie Mae and Freddie Mac is always a tricky business. Just ask the firms' former executives, who in 2007 still thought the companies were invulnerable.
Yet certain conclusions can already be drawn about the effort to unwind the two government-sponsored enterprises and set up an entirely new housing finance system, including whether it will include a controversial government guarantee.
Following are key predictions on how the debate is likely to play out:
1. A final bill will include a government backstop
Although House Financial Services Committee chairman Jeb Hensarling is still pushing a reform bill to end the government's significant role in the housing market, he is having difficulty getting it through the Republican-controlled chamber. Housing groups are aggressively lobbying members, and many lawmakers are unwilling to vote in opposition to a government guarantee when the Senate and President Obama are insisting that a guarantee be part of a final bill.
It has become clear therefore that the eventual bill coming out of the House will likely resemble the bipartisan Senate legislation sponsored by Sens. Bob Corker, R-Tenn. and Mark Warner, D-Va. That bill includes a government backstop in the event of catastrophic losses.
The House bill "will be something that moves somewhat in the direction of" the Corker-Warner legislation, Corker told attendees this week at SourceMedia’s Mortgage Regulatory Symposium.
He was seconded by a panel of experts, who said any final bill would keep the government in the housing market.
Assuming "something will pass…it will have a secondary government guarantee," said Phillip L. Swagel, a former Treasury official in the Bush administration who is now a professor at University of Maryland School of Public Policy. "I think everybody understands that."
2. Corker-Warner's proposed 10% equity threshold will come down
One of the most important provisions of the Corker-Warner bill is a requirement that private investors take a 10% first loss position for any loan or security that is backed by the proposed Federal Mortgage Insurance Corp.
The figure is already a lynchpin of debate, with housing and industry groups arguing it should be substantially lower.
Corker signaled on Tuesday that he will fight efforts to weaken it.
"I think it's very unlikely to come down," Corker said. "I've actually been pretty heartened by the fact that even the more progressive members…of the Senate Banking Committee have seen this 10% as important."
Speaking to the crowd of bankers and mortgage lenders, he added: "I know that many of you are going to try to dwindle this down. I know there are a lot of people who support this bill but want to see capital reduced. I hope all of you are very unsuccessful and we keep it as it is."
Yet many observers predict that the number will inevitably come down amid pressure from many of the same groups that are giving Hensarling trouble on the House side.
"The 10% sounds really good to get a lot of the Republicans and some of the fiscal conservative people in line here, but the 10% capital we think is going to be adjusted down," said Paul Miller, a managing partner with FBR Capital Markets. "The actual equity would be much lower, in the 3%-5% level."
But others said conservatives will resist a dramatic decline.
"We've only really seen Corker just start to reach out to the more conservative members of the Senate Banking Committee," said Mark Calabria, head of financial regulation studies at the Cato Institute. "And they see 10% as a floor."
Still, Calabria acknowledged it would likely be reduced by the time it cleared both houses of Congress.
"I believe it will be ultimately less than 10% that comes out," he said.
3. Affordable housing remains an obstacle
Consumer groups are already angry over both GSE bills' treatment of affordable housing. While the House bill largely avoids the issue, the Senate bill would create the Market Access Fund, an office within the Department of Housing and Urban Development designed to promote rental housing and assist low-income and underserved areas.
Yet the Senate provision is a far cry from the contentious affordable housing goals that Fannie and Freddie once had to comply with and that many conservatives say caused, or at least contributed to, the financial crisis. It is also distant from the affordable housing trust fund created as part of the 2008 bill that established the Federal Housing Finance Agency. That trust fund would have used profits from Fannie and Freddie to fund affordable housing projects. The GSEs failed before any such funds were deposited.
Many see growing pressure on Senate Democrats to strengthen the affordable housing provisions of the Corker-Warner bill. Yet GOP members are likely to protest any such measures.
"It will be a big difficulty," said Swagel. "It will be a very hard. On the right, they will want that as low as possible…It's going to be a big obstacle getting that done."
Calabria said that while Hensarling may be willing to give some ground on a government guarantee, he might take a hard stance in opposing affordable housing provisions.
"It's important to keep in mind that it doesn't get out of conference without Hensarling's support," he said. "Ultimately, you have to make some choices. One way Hensarling will be able to declare victory is to push back on housing goals and a housing fund."
4. The longer GSE reform takes, the harder it gets
Lawmakers are in a very tight spot when it comes to enacting GSE reform. The battles over the budget and debt ceiling are still raging, making it extremely difficult to pass a housing finance reform package this year.
Yet next year, the political environment doesn't significantly improve, with a small window of opportunity before lawmakers become consumed with their next election. While the 2014 midterm elections could hand Republicans control of the Senate, any final piece of legislation would still have to be bipartisan to have any chance of enactment.
More importantly, the politics of the issue become more challenging as Fannie and Freddie continue to make money—and are handing over those profits to the government.
"It gets more and more difficult," Corker said. "People look at the GSEs and say, 'Look how profitable they are.'"
As Fannie and Freddie make more money, the desire to upend the status quo could rapidly fade. That makes it more likely that the government permanently nationalizes the two GSEs.
"If nothing's done, eventually the profits, whatever they are, will be spent and the firms will become part of the government forever," said Swagel. "I think that's the worst outcome of all."
I read here, but don't post. Read the Deal Breaker article on FNMA:
www.dealbreaker.com
......So all of Fannie and Freddie’s debt would become U.S. debt. Runoff would reduce it, but these days that’s $3.25trn at Fannie and $2trn at Freddie. Remember the fight over the last increase in the Federal debt ceiling, of around half a trillion dollars? That might give Fannie and Freddie shareholders some comfort that adding five trillion dollars to the U.S. debt will take a while.