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Draws = $190B
Warrants = commitment fee = $100B - $150B (est. possible value)
So, unless a near miracle occurs with the Wash Fed case, we will have paid back the draws (plus some) AND have "paid" a commitment fee equaling somewhere between 50%-80% of the funds provided. That will be interesting to compare that to whatever commitment fee has to be paid going forward for an explicit gov't guarantee. Un ... bucking ... falievable
$4.02 on strong volume in Deutschland
So the gov't got the warrants for a commitment fee to provide funds if needed (step 1) ... then the gov't declared the DTAs worthless and, voila, FnF "needed" the funds (step 2) for which they paid 10% (and then more with the sweep). So before FnF needed a dime, they gave up 80% of the common just in case they needed capital - capital that could have been secured at a fraction of the value of the warrants. Still, unless Wash Fed (or future cases) can prove the terms were fraudulently established, I think the warrants will stand as the mechanics (not economics) seem sound. cheers, shadow
Sweeney will not decide anything mid-Nov. Rather, that's when oral arguments will be presented to see if her court has jurisdiction. No one knows when she will make her decision following the oral arguments, but if she finds she has jurisdiction, the claims can proceed to towards trial ... and that means discovery ... and that means the 11,000 docs.
Re warrants, only one case challenges them - Wash Federal - but some may argue that no taking occurs until they are exercised (per Lamberth?), so more suits could follow if/when that occurs.
As Mae West said, so many suits, so little time ... at least if the election is really driving the time table. Seems unlikely that a settlement could be reached before Sweeney's mid-Nov ruling. If not, and she has jurisdiction, then the Wash Fed claims get put on the negotiating table - thought that may not mean squat to the govt thieves given their demonstrated hubris. cheers, shadow
A great return for those who bought after cship (congrats!) does not negate the incredible taking that has occurred - not to mention the 11 years and counting the gov't and courts have delayed justice. I've lost money on other investments and understand the great opportunity that later investors sometimes realize (including myself a few times). But this is different. The scale and depth of the deception and theft (or judicial cowardice) exhibited by the bad players is truly a threat to capitalism and the rule of law. Not a soapbox speech, just the truth. I am grateful for the en banc decision - but even a Moelis style outcome will be a travesty with the 10% rate and 80% warrants. Un ... bucking ... falievable.
What leverage do shareholders have to get a fair deal?
1) Trump wants bragging rights for election: yes, but if he's bragging about how much MORE he protected tax payers, well, that's not so good for us
2) NWS exceeds FHFA authority: yes, but what if UST appeals to SCOTUS? Mitigated by #1
3) Head of FHFA can be fired: doesn't matter because it doesn't matter to Trump's re-election
4) Attract new investors: should keep capital requirement reasonable and prevent new charters (which need congressional approval anyway) ... but we want IPO pps to be HIGH, new investors want it LOW ... and he who has the most money to invest makes up the rules
5) Current (new?) lawsuits: with exception of #1, time, $ - and most of the judiciary - on gov't side
6) Congress - just kidding
So, on balance, campaign bragging rights might be the only real leverage in our favor. Unfortunately, current pps indicates market is not so optimistic, yet. Not sure the opinions of thousands (millions?) of sophisticated investors following two of the most profitable companies in the world should be dismissed lightly. Long 50K pre-cship shs and getting much closer to my life expectancy every day ... cheers, shadow
Aunty, you might be right that the RRR will NOT be a handout to WS/TBTFB. It seems that would require new charters that allow banks to compete, and many sources say that requires congress, which ain't going to happen. So we'll see what balance the WH/Admin can strike between plaintiffs, current shareholders and new shareholders. Personally, I'd be willing to wait to see what's in the 11,000 docs, but I don't think that will happen, just like we may never see much of what's in the Epstein files. cheers, shadow
You have been relentlessly optimistic - and that is to be applauded - but I wonder ... what does success FOR CURRENT SHAREHOLDERS look like to you? I see 4 major obstacles to success (sp > $5): 1) ending AND returning sweeps exceeding 10%, 2) reasonable reserves, 3) no new charters/competition and 4) warrants. Since Moelis assumes the warrants are exercised, that might not be obstacle for my benchmark, but the other 3 could easily sink the ship. The law suits, election and new investors will all put pressure on Trump, but the narrative still coming from the WH/Admin. is highly destructive to current shareholders. Are you really expecting the WH to cave - meaning the current rhetoric is just posturing? Thanks for any specifics on how you see this unfolding.
PS given our track record in the courts, and the narrow 9-7 en banc ruling, I not so sure the gov't will feel that they have to settle the law suits to RRR. Compared to the P's, the gov't has effectively unlimited time and money.
you may get a lot a heat for that post but, sadly, i agree. yes, we may see $5 or even $10 when the dust settles, but that is 6ft under from where it should have been.
oh well, in the not too distant future, climate change will (forgive me) trump everything. if we think the 1% are manipulating things now, just wait.
kthomp, is there any chance that settlement with plaintiffs could benefit JUST plaintiffs and the rest of us get screwed? FWIW, that's the only way I can see a settlement that wouldn't otherwise require the gov't to return the sweep payments in excess of 10%. TIA
in a nutshell, yep
IL, it has nothing to do with left or right ... the gov't HAS TO END the sweep to RRR ... BUT, if the en banc ruling is appealed and reversed, then current shareholders won't get a dime of the tens of billions paid to the UST in excess of the 10%. That's REAL money out of OUR pockets into UST's without ANY compensation, and that should be a violation of the 5th amendment.
Yes, you are TOTALLY correct - but I (and many, many others - including most world leaders) think Mr. MAGA has set a new bar disdain for the ROL. I'll never forgive Bush for the cship, and Obama for the sweep, but Trump was supposed to drain the swamp. I will withhold final judgement to see if/how the 3R's happens, but I am not optimistic.
Donot, sorry, I was being facetious ... this has been the most anit-rule of law WH/Admin. in history. What amazes me is how many shareholders continue to support Mr MAGA when his mouthpieces have made it crystal clear that they intend to screw us to the ground (sweep, reserves, warrants, competition). After 11 years of being plundered in broad daylight, I don't think I'm suffering from confirmation bias.
ZZ, i'll try to find the video of SM saying this morning that they are considering appeal
uf-john: of course they say they'll stop the sweep - they HAVE TO in order to end cship!! But we'll never see the over payment when they do that (unless the en banc is upheld)
SM says appeal possible. Glad to see the rule of law WH/Admin. protecting us from violations of the 5th amendment. Gov't wants sweep, warrants, bank-like reserves and competition. Again ... sweep, warrants, bank-like reserves and competition. Our ONLY hope is the courts ... and that is not very encouraging. Ok, time for another lemmings admonishment ...
Ditto ... I bought AFTER the head of OFHE Lockhart declared FnF adequately capitalized and just BEFORE cship was declared. Held all this time out of spite and stupidity, though a reprieve on the latter might be coming lol
Aunty, if Trump doesn't care about WS/TBTFB, then what's with the admin's narrative promoting banks to compete with Fnf and requiring totally unjustified loss reserves to "level" the playing field (maybe he means level as in scorched earth)? Even the market is skeptical that the rule-of-law will prevail with a fair 3R (30%+ is nice, but a joke in the overall scope of things). Trump doesn't have a monopoly on corruption, but he sure does seem to like the banks to me. cheers (and totally enjoy your posts), shadow
Moody's not so hot on UST's plan: https://finance.yahoo.com/news/moodys-sees-fannie-freddie-privatization-185923703.html
Caller: hello, OTC, we need you to keep a cap on fnma and fmcc until all of the fellow travelers are on board
OTC: who the heck is this?
Caller: this is the US Trea ... uh ... it doesn't matter. Just make sure it happens or you'll be covfefe'd on Twitter
OTC: Twitter? What the heck does Twitter have to do with this?
Caller: Twitter is the oranges of all things presidential! Now snap to it! Tee time is in 10 minutes ...
Stuttgart at 3.29 ... trailing? ... leading? ... or contemporaneous?
Trading tomorrow ... 5 hour advanced indication??
https://www.bloomberg.com/quote/FNM:GR
Agreed, Calabria is a non-issue; either he does Trump's bidding or he's gone. Question is how much will Trump sell current shareholders down the river to buy WS/TBTFB election support? In some ways, the en banc decision re sweep is also a non-issue ... everyone knows the sweep would have to end for R&R to happen. So that still leaves new SPS, additional charters (competition), loss reserve, warrants and recap pricing on the table as ways to screw existing shareholders.
Great post!
Aunty, feel exactly the same way. We have a revolving door between special interest, WS and gov't, and the abduction and rape FnF in broad daylight shows just how privileged the privileged are (think Eton Parks). I do think we'll go up a bit from here, but not anywhere near enough to feel like justice. I just really wish Sweeney would release the 11,000 docs. They may be the last place left that MIGHT hold any real leverage. cheers, shadow
I would LOVE to see the Sweeney case go forward with the release of the 11,000 docs (at least those not protected by legit exec privilege). After waiting 11 years, I would still prefer to wait longer if that helps us get a better deal. Re SCOTUS, I think its 50/50 that gov't will appeal. They basically have nothing to lose and it buys them time to pocket more sweeps. Some think that risk of Trump losing puts Calabria at risk of being replaced by Dems, and that will put pressure on Trump to settle. But I don't think losing Calabria matters to Trump at all, but I think he would LOVE to take credit for reforming FnF, increasing competition in the market and rewarding taxpayers with the largest return ever - which he'll claim even if the value of the warrants is lower because he used the difference to buy election support from WS/TBTFB.
Just long way of saying what I've said from the beginning - we're basically totally dependent on the courts because everyone else is part of the heist, directly or indirectly.
Huge favorable decision, BUT, is there anyone besides the plaintiffs (and 10 judges (incl Sweeney)) pulling for us?
This WH/administration has done EVERYTHING possible to hurt current shareholders (continued law suits, block release of 11,000 docs, etc.) AND undermine FnF (support FnF competition, suggest bank-like reserves, etc.) So, yes, the NWS will likely end, but Trump wants a 2nd term more than anything. That suggests to me that he'll totally choose to keep WS/banks happy over maximizing the value of FnF for current shareholders AND even the gov't (warrants) if that helps him get re-elected. Don't think he would short change the gov't to get re-elected? Heck, he'd throw the whole world under the bus to get re-elected if needed (think climate change vs a few coal miner votes). AND, just to be bipartisan, those lovely Democrats who instituted the NWS in the first place (and likely implicated in the 11,000 docs) are just as bad as the Republicans. So, sadly, as much as the en banc decision was great to see, there is a chance that we could have just won the battle on the way to still mostly losing the war. Sorry to sound so negative, but just trying to be realistic (and still holding 50k pre-cship commons). cheers, shadow
PS For all of you who think we have a rule-of-law president, how do you reconcile that with all of the totally anti-FnF actions (or in-actions)?
yeah, MSM's coverage has either been non-existent or a pathetic regurgitation of the Big Lie (access journalism is alive and well!)
Great news (though 7 against, say what?!?!), but as Obi says, more journey awaits. If R&R is final destination, think of how many parties will affect the timing and outcome: Pres., his advisers, UST, FHFA, Congress, WS/TBTF banks, courts, P's (in Collins and possibly other cases), new investors, etc. On top of that we have the possibility of appeals and that insignificant event next year on Nov 3rd. Yikes, I just hope this is one case where the (remaining) journey is its own reward ... cheers, shadow
And your post has what to do with the countless billions stolen from FnF shareholders by your rule of law idols?
With you 100% ... beyond pathetic ... MAGA my arse ... how about make rule of law great again for starters ... and IF this is means an unfavorable en banc ruling is coming, well then, so much for the takings clause ...
Trump, the administration AND Congress all agree on one thing - milk these cash cows until the 5th circuit en banc and/or the SCOTUS say otherwise. As certain as death and taxes ...
Ha! Yes, one usually does catch more bees with honey ... but my 10+ years of frustration(and $180K paper loss) got the better of me. I will flog myself with 30 lashes ... using licorice sticks! : )
Just sent this to David Shipley who wrote a wonderful piece today in Bloomberg:
David,
You either have done very little objective research and/or you have a vested interest in seeing the continuation of what is likely the largest 5th amendment taking EVER.
It has been established via publicly available information that Fannie and Freddie did not cause the 2008 financial crises. Rather, their loan loss ratios were the LOWEST in the industry AND they had adequate capital to cover the losses - in other words, their business model was sound and tax payers were never on the hook. Sure, it didn't look that way AFTER they were put in cship and Treasury and FHFA booked unwarranted and unprecedented loan loss provisions which created the illusion that the twins needed a bailout - but that charade ended in 2012 when the housing market recovered and FHFA had to reverse the loss provisions and the twins returned to profitability. Oh, but wait, knowing the twins were about to become massively profitable, the T/FHFA continued their fraudulent behavior by enacting the Net Worth Sweep (NWS) to avoid the now FULLY DISCREDITED "death spiral" justification.
So now we wait to hear the en banc decision by the 5th Circuit Court regarding the legality of the NWS - which you believe is so totally justified as to warrant continuation - shareholder rights be damned. Are you wishing they decide in favor of the defendants? Well, then, be careful what you wish for because your employer might be the next target of our government ignoring the constitution and taking what ever they please without compensation to the victims. Meanwhile, maybe you should sharpen your research skills by taking a long sabbatical in a banana republic and enjoy life in a country without the rule of law. Cheers,
I was wondering the same thing about Wash Fed case. Now that the gov't has agreed FHFA is unconstitutional, shouldn't FHFA's decision to put FnF into conservatorship be easily reversed as well? Or will the board's "approval" be the gov't shield?
yoyo, how do fnf get recapped under your plan? tia
Well then, how about this:
https://federalcriminallawcenter.com/2012/10/another-fannie-mae-principal-dropped-as-defendant-in-fraud-case/
Howard doubtlessly feels a strong measure of vindication in the wake of a Washington federal court’s ruling this past Tuesday that drops him from the case. U.S. District Judge Richard Leon granted a summary judgment motion in favor of Howard that exonerates him from wrongdoing and cites an absence of any evidence that he contributed to fraud or investor deception.
In fact, Leon’s ruling stated, there was evidence that Howard acted in good faith over the period during which the plaintiffs allege he had helped Fannie Mae manipulate earnings.
The ruling, which marks a definite blow to investors’ “intent to deceive” claims, is additionally noteworthy for being the second such summary judgment granted in favor to a defendant in the case in less than a month. Leon recently dismissed ex-Fannie Mae Chairman Franklin Raines from the case as well, finding no wrongdoing on his part.
Source: Bloomberg, “Ex-Fannie Mae executive Howard dismissed from fraud suit,” Tom Schoenberg, Oct. 16, 2012
is that blondes vs brunettes?
just kidding, and hope ALL longs do well (if this is even for real (volume suggests it might be))
bcde replies to RuddG:
"So you are saying effective accounting entries are
Dr senior preferred stock Cr accumulated deficit
Basically it means you are subtracting from one account and adding to another account both of which are on liability side. Is it correct accounting?"
RuddG, and the accounting entry noted above, are correct if the SPS are cancelled. The offsetting credit effectively eliminates the accumulated deficit. However, fyi, both of the accounts are part of stockholders' equity (not liabilities).
See bottom of page 52, the balance sheet reported in the Q3 10-Q:
https://www.sec.gov/ix?doc=/Archives/edgar/data/310522/000031052218000363/fanniemaeq30930201810q.htm
Yep, just like what happened after Eton Park ...