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Per Wash Post, Gary Cohn, former GS CEO, is becoming THE power center on economic matters, along with many other former GS execs. Will be interesting to see how shareholders and the rule of law will fare with the fate of FnF in the hands of two GS alumni (Cohn, Mnuchin).
https://www.washingtonpost.com/business/economy/within-trumps-inner-circle-a-moderate-voice-captures-the-presidents-ear/2017/04/13/7a7f87b0-1fa7-11e7-be2a-3a1fb24d4671_story.html?hpid=hp_rhp-top-table-main_cohn805pm%3Ahomepage%2Fstory
I am so sick over this whole fiasco. So sick, in fact, that I need to see 11,000 docs ...
But seriously, does anyone know if the docs will be released to the public? TIA
Devils advocate ... re Delaware, P's say the 100% dividend that UST gets can't be in relation to the 0% dividend that the other classes get, because you can't have something in relation to nothing. First, I'm not sure that logic holds even in the lay persons world - and, after seeing the rationale of many decisions against P's, I could easily see a court saying "100% (everything) IS in relation to 0% (nothing)" - and I don't remember reading anything that said the relative position of the dividends has to be fair. Yes, that may seem nonsensical to us, but almost everything the courts have done so far seem nonsensical. 50K pre-cship shs long and hoping that this country has not lost all common sense.
April 17 ... either the 11,000 docs will start to reveal amazing levels of corruption and manipulation ... or the biggest Geraldo Rivera/Jimmy Hoffa type disappointment imaginable. So tell me UST/FHFA, are you felling lucky? ...
Well, you definitely have endless judicial delays, political corruption, the warrants, the NWS, soon to be depleted capital and the anti-injunction clause (with many confirming decisions) on your side. So what, is that all you got?!?! Can anyone say lame-o?
But seriously, obviously the market agrees with you, otherwise, how could two of the largest and most profitable companies in the world be trading at near penny stock prices. BUT, us longs are not without some hope, however slight. We still have possibilities like Judge Steele in Delaware, the remand to Lamberth for breach of contract, Pagliara's inspection of the books and, the true wild card, 11,000 discovery docs. But admittedly, its the 4th quarter, many of our key players have fouled out, we're way behind, our own coach works for the other team and the refs blow the whistle on everything little thing we do while we're being hacked to death by the other side.
So, yes, you may be right and us longs may go home penniless. But be careful of being smug and what you wish for because the same system that robbed 2 companies with trillions in valuable assets in broad daylight "may" (but not shall) do the same thing to you some day. Can't happen, you say? Well, we SHALL see ...
Thanks (and always appreciate the links you provide). As a lay person, I'm not sure they would really risk anything if they file, but if the remand to Lamberth keeps their contracts/takings claim alive, then they may not have much to gain either.
Obi, if you have a moment ... is it still true that by 4/7 Perry could ask for an en banc hearing to challenge the apparently unconstrained powers of a "conservator"? Many thanks (and apologies if you already addressed this - the board really got "swamped" with the last sweep). shadow
My next two personal favorite milestones (courtesy of Obi):
April 7, 2017 - Final day? for Perry Capital LLC to file a petition for an en band rehearing in the US Court of Appeals, DC. https://www.law.cornell.edu/rules/frap/rule_40 [I think this is still an option for Perry to challenge the allowable duties of a conservator. IF that is correct, I will be extremely disappointed if Perry does not file this motion)
April 17, 2017 - Defendants selection and submission of a subset of 11,000 privilege logged documents as ordered by Judge Sweeney in the Fairholme case. http://gselinks.com/Court_Filings/Fairholme/13-465-0360.pdf [Ok, this is where things could get really interesting, though the actual impact on RRR may not be for a "long" time]
Who knows if the money is gone? The Shadow knows ...
Sorry, I thought a (very) little levity was in order and couldn't pass up the play on my handle.
Yes, a rational person would totally agree with you. And thank goodness Washington is full of rational people ... : )
Yes, 10BN is only 0.0026% of the gov't 3.8T annual budget - but to the WS banks hoping to steal FnF's business, it's very worthwhile, especially if they can get it for pennies on the dollar. Even though I'm being screwed by my own gov't, at least I can say I was part of history (even if it was/is the biggest heist in history!)
Another possibility: Many here think that if FnF need another draw that it will be viewed as a bailout resulting in huge criticism for the Trump administration ... and, therefore, the sweep must be stopped to avoid that. However, given that almost everyone already believes that FnF are a failed business model, another draw could be used to "prove" that perception once again, which could then be used to justify lots of things I'd rather not speculate about as an owner of pre-cship common stock. BTW, I don't really have ANY idea if this could happen; I just know that without the help of a favorable court decision and/or a major revelation in the 11,000 docs, we remain very vulnerable to further takings.
I hope you are right. Its just that there are sooooo many factions hell bent on destroying FnF (shareholders be dammed), that stopping the sweep without the cover of a favorable court decision and/or more discovery docs seems incredibly risky for a president who just got his clock cleaned and desperately wants a clear win (remember, appearances mean almost everything to him). I personally think the sweep ends when legal factors make it compelling - or when the gov't can figure out how to announce a home run on the warrants while ending the most threatening lawsuits (including release of 11,000 docs). That would make Trump look like the Deal Maker in Chief he wants to be. Cheers, shadow
Change or not, why haven't they done so already - and why will they suddenly be willing to stop it in the next few days? Just seems like an incredibly low possibility - but would be totally awesome if it were stopped!
The most simple and obvious reason of all ... if they thought it should be stopped, why haven't they all ready done so? Since I don't think it has slipped their minds, there must be some reason(s) why they have not done so already and, whatever those reason(s), it seems incredibly unlikely that anything material will change in the next few days.
No court pressure (yet), no 11,000 docs (yet), debt ceiling pressures, distraction of gorsuch nomination (filibuster and nuclear option), serious damage control on health care, mnuchin repeatedly stating tax reform higher priority >>>> NWS continues (for now). I'm watching 4/7 to see if Perry petitions for en banc hearing (= another shot at conservator powers and NWS) and 4/17 to see what, if any, docs are release by gov't. Also, don't know next critical date for Delaware case, but that is another game changer that might circumvents anti-injunction clause.
Obit - love the timeline; great tool
My lay persons take: The appeals court blocked any attempt to challenge the NWS itself because of the anit-injunction clause, but remanded the issue of contractual dividend rights of preferreds (common don't have any) back to Lamberth for a potential takings claim. The filing we saw was the Institutional Plaintiffs (IPs) asking the same 3 appeals judges to reinstate their right to participate in the remand because the IPs did not specifically include their claims in the motions heard by the appeals court (the IPs thought it was understood their claims were included with other plaintiffs). Bottom line: it seems that there will/may NOT be a request for an enbanc hearing on the NWS issue, which may be why the pps has fallen (because commons will not benefit from the remand, only preferred).
Thoughts/corrections appreciated. Sincerely, Not Smarter Than A 5th Grader
Even if everyone, including the new administration, knows that the NWS is a taking (and possibly illegal per Delaware law), the anti-injunction provision has been upheld SO FAR, so there is no immediate legal pressure to end the sweep. Some argue the sweep needs to end now to make a recap possible without tremendous dilution of the commons in addition to the warrants. However, IF less dilution is desired/needed for recap in settlement talks, the gov't can always adjust the warrants (increase exercise price and/or reduce shares purchased) at THAT time and, meanwhile, keep the sweep going. As such, it seems that only the plaintiffs want the sweep to end, and everybody else (including courts so far) thinks it should continue (not necessarily because its legal, but because then can). I think it will continue and that we'll see a bit of a drop when it does. Very long and utterly disgusted with the whole thing, shadow
You keep skipping over possible favorable developments, such as the 11K docs, Delaware suit, Pagliara suit, etc. etc. Yes, the gov't has won so far, but this is chess, not checkers, and there are serious constitutional questions about the anti-injunction provision of HERA - and the stakes are high enough that you can be sure at least a few plaintiffs will take up that issue and fight it to the SCOTUS if necessary. If someone is a trader, than your thesis/position seems appropriate; but if you are an investor, then its a totally different story. Also, the real Tim Howard has repeatedly stated that he does not think a rship will happen. Of course, it could, but what in your credentials/connections would suggest your assessment is more likely than his? Not that a less qualified person couldn't be right and TH wrong, but I think its a fair question to ask. Cheers
If you just use quotation marks, then "$3" can mean anything you want it to afterwards (at least according to an un-named source ...)
Re Delaware case, let's say that the gov't was greedy and corrupt and wanted to totally defraud all other shareholders (only hypothetically speaking, of course), why wouldn't the gov't just issue a 4th amendment that gives a pittance of a dividend to junior preferred and common thereby technically satisfying Delaware and Virginia law on dividend preferences? Sure, such a change would be an obvious abuse of the law, but how could the courts determine what was or was not an appropriate dividend split (as long as there was one)? I'm long and don't mean to be pessimistic, just pretending to think like a greedy and corrupt gov't lawyer (again, hypothetically speaking, of course ...)
While I agree the commons are very risky (which I bought at $6 just two days before cship), their ultimate value will be a combination of not just the NWS and DTAs, but also court rulings, the 11K discovery docs, many complex political factors and the need to ultimately attract some amount of private capital for a recap. Yes, traders may get burned in the short run, but others like myself have a different horizon and risk/benefit expectations. cheers, shadow
capitalism and rekcusdo, appreciate both of your replies. My original question should have been two separate questions: 1) are warrants treated the same way as commons (i.e. IF commons are worthless, then so are warrants) and 2) what is the likelihood that the residual value of fnf in r-ship will leave anything left over for commons (and warrants). I think you are both saying warrants are treated the same as commons, correct? As to the residual value (2nd question), that could be so highly manipulated by the gov't that god only knows what the outcome would be. Still, I think IF the warrants are treated the same as commons, then no r-ship.
capitalism, if fnf are placed into receivership, I believe the warrants will become worthless along with the common, correct? If yes, that should preclude r-ship and so the common may get diluted 80% (plus another XX% for recap), but they won't be worthless. Correct? TIA, shadow
yes! plus "see also: Alexa, Siri, Google ... and Obi Wan" :)
How about using Obi's GSE Timeline to replace the old stuff (with Obi's permission, of course)?
Obi, another incredibly helpful post, really. Not sure what you do for a living, but we could really use someone with your fact-based, critical thinking skills in DC right now. Please let us know if you ever need OUR support for something. Would be delighted to pitch in. Cheers, shadow
Cmdr, do you have a link to the order? On its face, it's awesome! Many thanks for your endless efforts, shadow
What does the current pps tell us? Look, there are likely thousands or more of very sophisticated investors and traders around the world watching these two companies. In the absence of the NWS and warrants, the pps of these companies would be close to where they were before the cship less dilution needed for higher capital requirements. Despite this enormous value, the collective wisdom of the market says the NWS and warrants remain a stranglehold because of the deference the courts are giving the gov't re anti-injunction clause. I unfortunately agree with those that believe the gov't is addicted to the NWS and they won't let it go without full use of the warrants and, at a minimum, wiping out common (which I own) in the process of a "recap and release". Only things I see that could change that are 1) someone goes after the constitutionality of HERA itself (I'll be dead when that is settled) or 2) Sweeney orders the 11K docs released and those are so embarrassing/incriminating that the government settles with both pfd and common. Except for Sweeney, the courts have failed us, both political parties desperately want the money, the press still believes the false narrative (and so do some in the courts) and public perception is either non-existent or negative. I think the "market" feels the same way - and that's why the pps is where it is today. glta, shadow
Obi Wan ... many thanks for your incredible contributions to this board. Your midichlorians count must be epic! Sincerely, Droid X61
cmdr, thanks for posting Peter Miller's great article - and all of your other positive messages. I still worry that the govt's need/greed for money could lead to the full exercise of warrants AND additional dilution to recap, but hopefully something will put sufficient pressure on congress and the WH to do otherwise (like 11,000 other somethings ...) Long 50K commons since 2 days before the cship was announced!
This seems like another example of one of the oldest adages on Wall Street - buy on rumor, sell on fact. Just meaningless noise on the way to the real news that will either come from the courts (Lambert appeal and or writ of mandamus) and/or the new administration. Already waited 9 years; I can wait a few more months.
Agreed ... why would TH717 shut down his blog just on the eve of maybe seeing all his efforts pay off, giving him the ultimate platform for acclaim? Could just be bad timing ... or he caught wind of a court ruling against plaintiffs? TWT
Cmdr, fyi, the following was posted by the real Tim Howard (former FNMA CFO) on Jan 7, 2017:
The part of my answer that has not changed is that neither company ever purchased $20 billion in toxic loans, or as far as I can tell ANY significant amount of toxic loans, in any month post-conservatorship. My basis for saying that is an analysis of mainly Fannie’s, but also Freddie’s, monthly financial summaries, quarterly 10Qs (filed with the SEC), and annual 10Ks. The monthly summaries give dollar volumes of mortgage purchases and MBS guarantees for each company, while the 10Qs and 10Ks give descriptions of the credit characteristics of the loans they acquire each quarter. Had either one bought $20 billion in toxic loans in any month, let alone for many months, it would have been apparent in their monthly and quarterly financial data. There is no evidence at all of either a surge in volume or a deterioration in credit quality. In fact, on the latter the opposite is true: the risk profile of both companies’ loan acquisitions in the five quarters after conservatorship is better than in the five quarters prior to conservatorship.
Where I’ve changed my view is that I now believe, based on news stories that came out at the time, that Treasury may well have intended to force Fannie and Freddie to buy $40 billion per month in toxic loans, in conjunction with its own intention to use the bulk of the $700 billion in TARP money it received from Congress to buy bad loans from banks and other holders. Treasury, however, could not figure out how to administer such a program (mainly how to price its purchases), so it quickly gave up on the idea, and instead used most of its TARP money to put capital into banks. Once that decision had been made, Treasury couldn’t very well insist that Fannie and Freddie buy toxic loans (for the same reason: how would they price them?) so it dropped the idea.
Most likely, therefore: yes, there was a plan by Treasury to have Fannie and Freddie each buy $20 billion in toxic loans per month from banks, but, no, it never happened.
I still think this all hinges on the courts. Why? Because the gov't deficit and national debt are already huge and soon to be even YUGER if Trump lowers taxes on the 1% AND spends hundreds of billions on infrastructure. Can you say FnF aka cash cow, ATM, printing press, etc. to the rescue? If we don't get a Perry reversal/remand and/or the release of the hidden docs, then Trump and Congress will have all the cover they need to milk us dry. On the other hand, if the courts go our way, then Trump will have the perfect cover for RRR while blaming the illegal NWS on the Big O. Trump wins either way - but we NEED a court victory. FWIW, I'm not confident about Perry but I am about the release of the docs. glta
I've been thinking the same thing, but other than Sweeney supporting disclosure, the courts have really let us down (and anti-review provisions of HERA might be unconstitutional) and congress/administration are totally addicted to our profits. If the Circuit court affirms Sweeney's order to release the 56 docs, I may reconsider as that MIGHT improve chances for favorable Perry appeal. Meanwhile, I'm very pleased to see that we are half-way back to my cost basis ($6/sh.) ... and I've only had to wait 8 years ...
Since Congress passed HERA and HERA controls FnF, doesn't that mean that Congress effectively controls FnF? Anyway, I think this whole exercise is not so much about who controls FnF per se, rather it is trying to undo the NWS and, possibly, lowering the 10% dividend so that the market can place the appropriate value on the enterprises for a takings claim if the gov't tries to shut them down or sell/transfer them.
I hear you and felt the same way for some time, but as federally chartered entities, FnF are totally controlled by Congress and there is no question about that. However, if the value (not control) of the entity is taken by the government, the 5th amendment comes into play. I think it is a disgrace that Congress and the Administration would take two of the most important financial organizations in the world from shareholder, but they can. Only question is how much they will have to pay up to do so.
Having said all that, we might have some victories that restore value to the entities (reverse the NWS), and that will certainly help establish the price the govt will have to pay for the taking (and I'll sell at that moment), but ultimately, if the govt wants to take them, they can (and seems like they will).
rek, I totally agree with your last post and actually think the odds are good that this will become a takings case at the end of the saga, even if HERA is found to be unconstitutional. I think there is a decent chance the Perry appeal will fail on the basis that Congress can ultimately decide the fate of FnF and the only question will be compensation for the taking. BTW, I REALLY hope I am wrong.