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Even when FHFA makes these rules/regulations based on laws, these rules can be challenged.
Since currently FnF are under FHFA conservatorship, affected stakeholders (not just shareholders) can challenge these regulatory rules as arbitrary on behalf of FnF (derivative lawsuits). BTW these rules/regulations are not acts of conservatorship and 4617(f) does not apply.
"Hear! Hear! The high capital requirements will keep potential competitors at bay."
The FHFA capital rules must be in supportive/compliance of white house policy directives.
The FHFA draft capital rules fail this criteria on all counts.
It only allows FHFA to keep the FnF detractors happy and may be Calabria happy.
"All keep in mind this is proposed capital rule open for comments. I'll comment FnF didn't use the two hundred billion made available to get through the Government created housing crisis and what they did use was often just circular book entries to pay Gooberment unearned dividends then the net worth sweep was invoked leaving the GSE's 0 capital to work with until Mel Watt got the net worth sweep changed so that they could retain 3bil capital. So FnF carried housing and the US economy on it's back with three bil for years and continue to do so right up to this very day. So FnF never needed this bailout and without it they'd already have $240 bil capital anyway. Bottom line this rule is negotiable and MC is highballing."
What these hare brained bureaucrats do not understand is, during crisis no amount of private capital will enable FnF to provide unlimited liquidity. It is only Gov/Fed that can provide unlimited liquidity during crisis. This is what happens in every crisis.
FHFA bureucrats are worse than idiots, to come up with all these meaningless capitals rules.
"When in the past
How recently?
How many times? Tia
"
Asking FnF to step in to provide more and more liquidity with lower capital levels is happening all along.
It happened in 2008 with imposition of conservatorship. FHFA suspended capital requirements and mandated FnF to provide unlimited liquidity. For last 11 years FnF are operating without any capital.
Recently Gov mandated unlimited forbearance is another example.
"FHFA proposal indicates anticipated new preferred and new common shares. Will probably have to resolve lawsuits before going to market to raise additional capital."
I do not think FHFA and its advisers have any hopes that FnF will raise any capital from market without resolving issues of NWS, SPS, Warrants, Gov LOC, lawsuits, ending conservatorsip and uplisting.
One thing FHFA can achieve with high capital requirements is, overcoming the resistance to ending conservatorship from FnF detractors.
High capital requirements cut many ways. FnF will have limited ability to support market liquidity needs for housing loans and also limited pro-cyclical capabilities. What happens to capital requirements during crisis? Without Gov support FnF will have limited pro-cyclical capabilities. Any large capital is not enough for pro-cyclical role.
Another side effect of high capital requirements, it automatically eliminates competition. Why would any one wants to start companies similar to FnF with all the restriction, when they can do the same as banks with all flexibility.
Only with optimum capital requirements FHFA can comply with White House policy directives. Too low or too high capital levels make it impossible to achieve Gov public policy goals.
Eventually administration or lawmakers will force FHFA to lower the capital requirements. This is how it happened in the past.
"Direct claims essentially dead. Company will likely get compensation via derivative claims = common appreciation."
Yes, Most probably Judges will not award any damages to shareholders like in AIG.
But trials will expose Gov over reach and abuse of power. Many key officials from previous administrations will be called to testify and may face legal troubles.
Out of embarrassment Gov may be forced to end lawless conservatorship.
Hank created HERA/FHFA as an independent agency mainly for subversive mission of winding down FnF. But with change in administration, FHFA could not succeed in its subversive mission. So HERA/FHFA are no longer required and may be abolished.
"Sweeney has already made it clear, through her dismissal of all direct claims, that the government has never stolen money from shareholders."
Another complete false narratives.
Can you please post the basis for this statement?
Sweeney dismissed direct claims because, USFC lacks jurisdiction over tortious direct claims.
" Banks syndicated in the book running process will likely only subscribe to Preferred share offers because common shares don't qualify for their own core capital. "
Very valid point. Investors will be more interested in fixed income securities with some sort of guarantee that FHFA will not rob their money once again.
No one will invest tens of billions in the CS of any company and that too with a companies known to have been robbed by their Gov regulators.
Any way, in 2008, Hank and FHFA Director fooled all with their lies that conservatorship was temporary, to pre-empt any challenges to conservatorsip (within 30 days). Next time FHFA can not fool the investors.
"Yes he does! The previous administration dragged the previous capital into a special funds black hole and spent it...but they'll never admit it.
They'll stick with "pooof", as in magically disappeared."
FHFA conservatorship is a fraud on American people. FHFA conservatorship not only robbed FnF capital but also abused taxpayer's money. There was never a need to force mafia loan (taxpayer's money) on FnF.
"“The entire housing system is at risk because Fannie and Freddie currently
do not have the capital to withstand a serious downturn in the housing market, he said. And as we learned in 2008, when the enterprises fail, they are unable to fulfill their mission and role as a countercyclical support to the market in times of stress.”
Calabria keeps on talking about how much capital FnF need. But if Gov keeps on stealing FnF capital, then no amount of capital is enough.
Calabria needs to explain about what happened to more than $90B capital FnF had at the time of conservatorship.
"The who says 5 years"
This guess is as good as no guess or any guess.
"Arrowwood case was about direct claims only--not derivative--ruling was as expected"
"This court agrees with the reasoning and conclusion in Sisti: The FHFA does not shed its government character when acting as conservator because it does not step into the shoes of the Enterprises. Otherwise stated, the FHFA-C is the United States because it retains the FHFA’s government character. Plaintiffs’ claims, therefore, are against the United States for purposes of the Tucker Act. -USFC"
The problem with Plaintiff's direct claim is Jurisdiction of court. The USFC lacks jurisdiction over plaintiffs’ claim that sounds in tort. US regular District courts have jurisdiction over plaintiffs’ claim that sounds in tort.
"One Name That Started The Feud, Glen Bradford"
LOL, Glen rightly disclosed his conflict of interest as a JPS holder. So one should not have focused on what Glen wrote.
"Arrowwood case was about direct claims only--not derivative--ruling was as expected"
This is my understanding. There are two different types of direct claims.
First direct claim is that only companies claim. The second one is what shareholders can claim as a direct loss independent of company's direct loss. When companies can not file for direct claim because of conflict of interest of management (conservator), shareholders can file derivatives claim on behalf of companies direct claims. USFC has upheld derivatives claims on behalf of companies.
Not sure whether this dismissal is of second type.
"The battle over preferred and commons just add to that reality
Why can’t we all just get along??"
This is not really about "get along". Most of the investors have both commons and JPS. These investors are ok with any good reasonable outcomes for both common and JPS.
There are few doom and gloom posters (not sure whether even they own any JPS or common) keep on posting these outrageous ideas about massive dilution and JPS conversion at deep discount, as if Gov is only interesting in benefiting JPS holders at the cost of all others.
"In short, current common shareholders should be on their knees begging Treasury to exercise the warrants. Doing otherwise is just biting the hand that feeds them, and such behavior is generally punished."
LOL, Last call in desperation! But there is no one take it.
"I hold both commons and JPS. If JPS get to PAR, it is 4 times return. That's more than good enough for me, if it happens in 2-3 years."
Same with me. JPS holders need to have right expectations.
The chances of commons getting massively diluted and JPS getting converted at deep discount are none.
"Thanks for that statement. Things are looking good since you've been wrong every time."
Anyway, many of these doom and gloom JPS holders are wrong either way.
If FnF are wound down, JPS holders get big nothing.
If FnF are NOT going to be wound down and released eventually, JPS holders may get par value and nothing more.
As of now the Administration plan is to release FnF.
"It has always been my view that an exit from conservatorship is going to require a large capital raise by Fannie and Freddie."
The views or opinions of regulators or conservators are not regulations or laws.
Already loose talk Calabria has killed any chances of FnF raising fresh capital.
If Calabria continues to talk about bank like big capital requirements, then new investors will respond with wrong finger.
It appears Calabria has learnt his lessons and has stopped loose talks interviews.
"So, how did AIG get out of jail while FnF remain on investor death row?"
AIG were never under conservatorship. Under Gov bailout terms (may be some laws)_AIG was was managed by Gov appointed BOD/CEO. But BOD/CEO were private and independent. Once Gov recovered all the bailout money, Gov stopped telling AIG what to do.
In case of FnF, Hank's main goal was to liquidate FnF using conservatorship, but he could not do it without unwinding all the interconnected transactions/investments. If Hank were to continue as UST-SY then probably Hank would have liquidated FnF.
HUD-OHFEO was the regulatory agency for FnF before FHFA. BTW HUD started as House and Home Financing Agency. UST never regulated FnF.
"You can't compare them for the reasons outlined. The relationship of FnF and the Treasury is regulated by laws,"
What is the law ?
There is no such law. HERA only allowed UST to lend/invest in FnF. GSE act allows FnF to borrow few billions from UST.
UST has no regulatory authority over FnF. UST is using SPSPA to indirectly control FnF.
"but the capital rule won't be so high either. "
This is true.
Calabria has made sure that no new investors will invest in FnF equity capital with his many loose talk interviews.
Besides unless FnF are totally free from Gov loans/investments and Conservatorship controls, no new investors will invest in FnF equity capital. No expert adviser can convince new investors to invest unless these conditions are met.
"Seems the insured MBS in central location works better and its what we know but I do think he knows the business - he just hates it and has so written many times"
It is about $10T business if one considers non FnF MBS.
Economist Calabria without any financial experience, is basically saying that all those whose invested $10T in MBS know less than him.
If Calabria truly believes in Bank model then Calabria should not have become FHFA Director.
"I can see it now the...New Capital Rule not complete in
May...why ? I need more time to work out the details
or some other ridiculous reason why the job did not
get done."
Yes, Calabria is not doing his job correctly.
There is no perfect capital rule. He can start with range and then narrow it down or fine tune it.
If FHFA can not come up with capital rules even after 12 years that too for 70 year old companies, then it speaks of quality people at FHFA.
Best option is to move FHFA under HUD control. Independent FHFA Director position is too weak to handle the housing finance regulatory job.
Since UST Secretary regulates mainly banking, he is inherently biased in favor banking industry and this is clearly visible in last many decades.
The best option is, FHFA be moved under the control of HUD Secretary.
"Every shareholder that is so upset with Calabria should just sell their shares and move on to another investment. Why berate the guy that is actually acting as a conservator? Move on to something else there are a lot of opportunities out there right now for companies that are not in conservatorship.
"
LOL, How any one in his right mind can logically tell long time shareholders to disinvest because there is a ignorant loose talk FHFA Director.
"So true."
Thanks.
"Calabria had Absolutely NOTHING to do with LOANS"
Calabria also knows nothing about FnF insurance business model.
Calabria keeps on comparing FnF with banks and wants to regulate FnF like banks. Calabria's does not seem to understand that Banks have their own regulators and those regulators do not have any direct regulatory authority over FnF. Since 2008, bank regulators are regulating FnF through proxy FHFA, because FHFA failed to act independently as mandated by HERA.
There is not a single common business feature between and Banks and FnF. But Calabria continues with his loose talk to denigrate and harm regulatees and conservatees (FnF) just like previous FHFA directors.
Calabria knows absolutely nothing about MBS secularization Business. That is why Calabria likes only bank business model.
"the GSEs have A FAR GREATER IMPORTANCE PURPOSE & IMPACT on the U.S. ECONOMY - THEY HAVE BEEN GIVEN NOTHING - only TAKEN FROM"
As long as swampy judiciary is supporting lawless conservatorship, wall street proxies in Gov bureaucracy have no incentives to do anything or follow the laws or respect the constitutional rights of the citizens.
Constitution authorized three independent branches of Gov to protect citizens from tyrannical Gov. It was never to protect one branch of Gov from other.
But paradoxically unelected past SCOTUS Justices altered constitution to allow independent unaccountable Gov agencies like FHFA to protect revolving door wall street bureaucrats from oversight of any branch of Gov.
It is time for current SCOTUS Justices to realize lawlessness past Justices have created and restore the rule of law by abolishing all independent Gov agencies.
"But make no mistake: Calabria's minimum capital requirement (not the statutory one) is the one that will have teeth. Calabria's is the one that will determine FnF's capitalization level by HERA, and FnF having less core capital than Calabria's minimum standard is what will make them "significantly undercapitalized", which in turn gives Calabria the authority to determine the form and amount of the capital raise."
LOL, Calabria and FHFA do not have any financial/insurance business knowledge/skills to make such determinations. FHFA even do not know how to organize as a regulatory agency even after 12 years.
FnF are insurance companies and Calabria keeps on talking about Bank like capital.
White House / Administration will tell FHFA and Calabria about the capital requirements and how to phase it out.
"Fannie Mae, Freddie Mac are preparing to cover servicers’ advances
on loans in forbearance GSEs reveal they will make payments to bond holders after four months"
Does any one know why Gov requires private companies FnF to provide the forbearance to mortgage defaulters instead of Gov pay GSEs on behalf mortgage defaulters during forebearance period?
Gov exacted usury interests from FnF for SPS and 80% warrants even when FnF never needed Gov money. Now Gov is imposing social mandates on FnF without funding the costs.
"FHFA Faces a Formidable Challenge: Remediating the Chronic and Pervasive Deficiencies in its Supervision Program Prior to Ending the Conservatorships of Fannie Mae and Freddie Mac - FHFAOIG"
How can anyone trust such agency that it acted properly as a regulator and as conservator for 12 years.
It is good time to change HERA and move FHFA under HUD.
"FHFA Faces a Formidable Challenge: Remediating the Chronic and Pervasive Deficiencies in its Supervision Program Prior to Ending the Conservatorships of Fannie Mae and Freddie Mac - FHFAOIG"
https://www.fhfaoig.gov/sites/default/files/OIG-2020-002.pdf
----------------
LOL, Lobbyists and their proxies in Gov talk about FnF Business Model as faulty.
Now it is faulty model of FHFA that is going to delay ending conservatorship.
It is a travesty that Judges trusted such an agency and ruled in its favor on lawless conservatorship decisions.
"a) It's been printed here several times that Fannie and Freddie had $95 billion in capital July 2008. Straight from FHFA website:
https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=Statement-of-OFHEO-Director-James-B-Lockhart-in-Support-of-Secretary-Paulson,-Administration-and-the-Federal-Reserve-in-T.aspx"
If less than $95B is good enough for exiting conservatorship now then FnF never needed conservatorship and SPS in 2008.
"Update: Todd Sullivan is an idiot. I stand corrected."
LOL, All have to agree.
"Paulson is the guiltiest of all and the primary source of the Government Sachs corruption that sucked the GSEs down the vortex. He also recommended Geithner for the UST job who he knew well when Tim ran the NY Fed."
Agree. Paulson was the father of all corruptions.
"privately owned utility model will work
"
Now the question is how to end lawless FHFA conservatorship. Conservatorship is a life time employment for FHFA Director and FHFA employees.
How will FHFA employees give up conservatorship so easily? FHFA will find one or the other reason to continue conservatorship.
Trump administration should ask FHFA to appoint independent common law conservator and FHFA to focus only on regulation.
"When the name change took place, I thought there was a planned exit from conservatorship and an end to the lawsuits. However, nothing happened to date."
There are many in Gov and Wall Street who are doing every thing possible to benefit their cronies as a price for ending conservatorship. But these people have not found a convincing plan within the legal and financial framework that would not start a congressional investigations or investor lawsuits.
Once the White House issued policy directives to end conservatorship, there are no obstacles to ending conservatorship. But still these people have not found a way to swindle FnF and investors as a price for ending conservatorship.
"Ackman wins. Berkowitz loses."
When lawless conservatorship end, all stake holders win.
JPS holders never bought JPS with the hope of conversion.
JPS holders started becoming greedy when they realized the extent of corruption and the extent of lawlessness at unaccountable FHFA during Ob administration. Swampy judiciary made them even brazen.
"The intriguing aspect supporting this strategy is that it is the ONLY proposal I am aware of that resolves the huge dilemma of having one, low price for current common shareholders and somehow some higher price for Newco iunvestors when each actually own the same stock. It also resolves the other issue: if any new IPO is at prevailing <$2.00 market prices, the MASSIVE dilution that would create would be disqualifying."
This is correct thinking.
If US Gov wants to keep FnF as private companies and also keep FnF as instruments of Gov public policy for maintaining/regulating housing economy then there are not many options. FHFA does not have much say in this White House public policy matter.
Then there are many in Gov and Wall Street who are doing every thing possible to benefit their cronies as a price for ending conservatorship.
These two conflicting forces can explain why there is so much of delay in implementing the White House policy directives to end conservatorship.
Rampant swamp politics in Judiciary, has made things even worse. Most judges have chosen to agree and promote false narratives and lies that revolving door Wall street bureaucrats used to impose conservatorship and rob conservatees.
The first step in raising any capital starts with abolishing HERA and FHFA. But there are no such plans. So it is impossible to raise even a small equity capital. Raising massive equity capital is just a pipe dream that is never going to happen.
Another golden option is, FHFA appointing independent private common law conservator under the supervision of corporate courts. This conservator can negotiate with UST under the supervision of courts for better terms and arrange for release.