Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Judge Sweeney said that the PSPA amendments did not violate FHFA's statutory authority.
Every court agreed before the 5th Circuit which voted 9-7.
SCOTUS is coin flip on this issue. This may not be a constitutional issue, but a takings.
Then it goes to Judge Sweeney and Judge Lamberth.
Wow. First time I've ever been accused of "missing the legal angle."
Consent order will include provisions for loosened restrictions from FHFA pending certain capital milestone. This can be signed at any point but I would like to see it signed by 1/20/21. Nothing can the order except agreement from both GSEs and FHFA or violations of the terms.
Mnuchin is discussing the concept for the first time with Congress (after Calabria has been talking about it for more than a year), which he didn't have to and was a major indication that it's going to happen. Ackerman completely botched the follow up story.
This isn't complicated, but you're making it complicated so you can get your jabs in to the JPS.
No consent order is potentially a killer for all of us. I don't care what ACG said; they're wrong on this.
January 8.
I'm going to start helping you understand what's going on here...
A consent order is between FHFA and GSEs. Treasury has no role. If you reference the letter from FHFA/Treasury to Senate Democrats earlier this year, only FHFA replied to consent order questions.
However, via Section 5.3 of PSPA, Treasury must approve a release from conservatorship.
This will be addressed with the next amendment of the PSPA, otherwise recapitalization is dead for at least 4 years. Recapitalization cannot be dead for at least 4 years, because that puts taxpayers and the housing finance system at risk.
This is the reason that Mnuchin will not transfer any controls to Yellen.
If you disagree with any of this, you really need to sell your shares, because this entire investment doesn't work with the way you try to describe it. You spend too much time worrying about JPS shares and it's forcing you to advocate for a path that doesn't work.
You're welcome.
Somewhere in between, closer to full write down that conversion. Treasury should try to convert as much as they can support, but need to be conscious of the impact on litigation. The entire plan could fall apart if litigation continues. However, courts can't solve this issue like the administration can. Advantage: Treasury.
Yes. Not willing to share, however. Information isn't free.
Not really interesting at all.
It's quite simple and well-telegraphed if you pay attention and stop re-posting the same message over and over again about no consent order and a long, slow recapitalization that favors common.
That's just not how it's going to play out. Leaving GSEs significantly undercapitalized and only building $10-15B per year after commitment fee makes zero sense. Keeps taxpayers and housing finance system at risk. But you keep repeating that and misleading people.
Eliminated or converted. There won't be a senior preferred overhang preventing third party capital. But that's been widely known.
Unless there is a last-minute disaster and all we get is a Letter Agreement.
If you choose to listen to Andrew Ackerman over Mark Calabria and Steven Mnuchin, that's on you. But I fully expect a PSPA amendment to satisfy Treasury's role in a consent order, however minimal.
The recapitalization plan will be executed as quickly as possible. The GSEs, their FAs and FHFA are ready to rock. Calabria wants the first capital raise before he's fired. Maybe he'll ring the bell at the NYSE.
I guess you'll have to wait for the PSPA amendment to drop then.
Probably better not knowing until then.
This board is quiet. A lot of talk about ACG yesterday and nothing today. I guess that you guys found a link to the call this morning.
Well, don't be too sad. Maybe Mnuchin will comes back from his overseas trip and change his mind about who is "in the room" negotiating the final deal.
~10% of common of both Fannie and Freddie, so ~$500M worth. I forget how much preferred, it's less than $500M.
Sure does. “Core capital deficit.”
What does that mean? Look at the SEC filings. It very clearly states that core capital is negative $180 billion or so. Converting or eliminating seniors just gets the GSEs barely above zero.
What a great idea! Reverse split solves the problem!
Well, you listen to Andrew Ackerman and I’ll be fine.
How do you know so little after spending so much time following this?
CET1 and core capital is like NEGATIVE $180 BILLION.
Next question...
Consent decree is executed in court.
You’re confusing it with a consent order.
A consent order is a regulatory tool between a regulator (FHFA) and regulated entity (GSEs) that will allow the GSEs to access capital markets.
Treasury does not need to sign off on a consent order, but they do need to sign off on release from conservatorship per Section 5.3 of PSPA, which would be in 2-4 years when the GSEs hit the minimum capital requirement unless Section 5.3 is amended or Treasury consents to release at certain capital milestones.
If a consent order is not signed, FHFA would need to make other concessions to let the GSEs raise third party capital.
There are many options. A long, slow recapitalization is not one of them. You’ll see.
$5-10 is 2-4X return for common! That’s pretty good!
At what price would it be a good deck? $20? $200?
Probably 6X after 6:1 split.
Everyone should have sold at $5 in late 2016. That’s where common will be in 2021 if things go well.
What town? Hasn’t been in DC in weeks.
Saudi Aramco
Bershire Hathaway
Apple
Microsoft
Commercial Bank of China
China Construction Bank
JP Morgan
Alphabet
Agricultural Bank of China
Bank of America
Bank of China
Ping An Insurance
Alibaba
Intel
Wells Fargo
Citi
Verizon
Gazprom
Facebook
Samsung
Pfizer
Shell
VW
Exxon Mobil
Risk of investing with other people’s money.
Fund liquidating.
Have fun in court for the next decade.
Latest 10-Q filings show $229 billion liquidation preference. SEC filings are available online.
Why would Treasury write off the liquidation preference and give back $30 billion overpayments? That’s the worst case legal outcome.
Doesn’t need to be “written off.” Can be converted fully or partially. That prospect makes this a restructuring.
The entire capital structure. There’s $229 billion in senior preferred that is an immediate concern. Then $33 billion legacy junior preferred. Then $100 billion of new equity needed.
Calabria called it a bankruptcy. Do more research.
If you say so.
This scenario leaves the GSEs on the chopping block indefinitely and paying a significant percent of earnings towards the commitment fee.
A long recapitalization is not only dangerous but also unlikely.
You’ll see.
What’s your Twitter handle?
I will continue to talk to allies privately. Enjoy the message boards.
Good luck.
Maybe you've found the only restructuring in the history of the world where subordinate securities outperform the senior ones.
If so, congratulations.
I'm not betting on that.
Your calculator is broken again.
That's more like it!
Anyone ever consider that Treasury just converts the senior preferred to common, allowing for recapitalization to proceed, and then lets the courts decide on "pay back" or "overpayment" in 3-5 years?
Cash is tracked on the balance sheet; look more closely. Problem with cash is what it doesn’t mean anything on its own. $100 billion in cash with $6 trillion in debt isn’t worth much, is it?