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Hi RickNagra,
no. It's all about the MBS ratings, not about the line of credit.
Merry christmas 2U
Hi imtheshadow,
a 4th amendment must include a devaluation or even write-off of the SPS so that crucial court cases like the Collins case are off the table, companies can issue new stock, and Biden can't undo everything. This would then automatically end the NWS as well.
Calabria's actions are right, but the capital requirements are far too high. Nevertheless, it is still okay for Fannie and Freddie to generate an ROE around 10. That's okay - and strong as an ox.
I believe there should be as minimal regulation from the government as possible. But Fannie and Freddie are more systemically important than any other company. There simply has to be nothing wrong with them. The latest rule proposal is just fine, if you ask me. At least its approach - I haven't looked into the details yet.
If Fannie and Freddie are "Calabria adequately capitalized" at some point, they will be the 2 safest financial companies in the world. That's good for us, but comes at the expense of the current common shareholders. The only one who can interfere later is Congress. But that is, and always has been, a special risk with government-sponsored enterprises. And, of course, the FHFA could later lower the requirements again and reduce safety.
GLTY
Hi WB_fan82,
an explicit government guarantee for Fannie and Freddie would require legislation. The current line of credit could be used as a sort of stopgap until Fannie and Freddie are adequately capitalized.
GLTY
Calabria-Reform Done
Mark Calabria's goal is to transform FHFA into a "world class regulator" before he ends the conservatorships and releases the companies, which he sees as his primary task. Yesterday, I believe he completed this FHFA internal process.
After the capital rule and an addition to it, yesterday Calabria presented a new rule that strengthens FHFA's authority in its role as supervisor. The goal of the rule is to create a way for the FHFA to wind down Fannie and Freddie in the form of a Limited-Life Regulated Entity if they are broke. This is intended to protect taxpayers.
The approach is not new and is already in the HERA law. Now Calabria is laying down the procedure, i.e. how to proceed if the companies go bust. It also requires Fannie and Freddie to provide the FHFA with regular insights into specific relevant business areas, which the firms must now also evaluate - a kind of early warning system. Furthermore, very specific capital requirements - and in particular their level - are aimed at protecting Fannie's business partners, the creditors and debt-holders. This is because they can no longer rely on the government to bail out the companies in case of doubt.
What does this mean for us?
1. This was probably the last part of FHFA reform that Calabria felt needed to end conservatorships. Back in 2012, he wrote:
"The law is quite clear. FHFA would continue to run the GSEs, with the option of a good/bad bank model to resolve bad assets, and the only way FHFA can terminate the receivership is to sell the charters back into the marketplace (see Section 1367(i)(6)(C) "Termination of status as limited-life regulated entity").
So let's get the facts straight. Receivership would not end the GSEs. The fundamental difference between receivership and the current conservatorship is the ability to impose losses on creditors. The sole reason that Paulson and crew chose conservatorship was to protect the debt-holders and stick the taxpayer with the tab. There were options to do otherwise."
https://www.cato.org/blog/receivership-does-not-end-gses
2. It means for us that Fannie will be saddled with even more regulations. But this is all playing out within a workable framework. And the capital requirements are high. Both were to be expected.
3. Downgrading of Fannie's MBS by the rating agencies is imminent if there is no more Treasury credit line at all. But let's wait for the 4th amendment first.
a. Fannie still has its congressional Charter.
b. Downgrading would be quite tricky for global financial markets.
Calabria and Mnuchin are most likely in close contact with the rating agencies right now to avoid a downgrade. Fortunately, the FED has already given the green light. The rating agencies always have some "leeway." This is being explored right now.
A rating downgrade could be turbulent. But Fannie would contain the downside to it via its pricing policy, to the detriment of homebuilders.
The new rule would not directly lead to a lower rating. But the risk to investors in Fannie's securities MBS would increase. Of course, Calabria wants to take away the "implicit government guarantee" from them. Keyword: moral hazard.
4. A 4th Amendment is imminent. The FHFA is now ready. Calabria is ready.
Calabria has balls. You have to hand it to him. He's following through with his ideas as hard as nails. Thank God he is convinced that he is legally obligated to end the Conservatorships. He'll go through with it, I'm even more sure of that now!
GLTA
Reference:
https://www.fhfa.gov/SupervisionRegulation/Rules/RuleDocuments/Resolution%20Planning%20NPR%20TO%20FR_for%20website.pdf
Can you feel it too? Great things are just around the corner!
GLTA
No. But the Buisness Insider article ends after the line that a Fannie Mae spokesperson declined to comment.
GLTY
Hi TRCPA (and Chaser13),
The author has slightly modified the article from Buisness Insider. But the content is correct. For example, he writes:
" A Fannie Mae representative decreased to comment."
The original reads:
"A Fannie Mae spokesperson declined to comment."
All OK! I checked it.
GLTY
Hi kthomp19,
you are probably right about the WF case. I am not really familiar with the case.
But if you are right, that is good for us. Because then Mnuchin can ignore the case when it comes to a 4th amendment or enabling third party capital investments. Because the potential damage to the plaintiffs would have to be paid by the treasury, not FnF.
In a few weeks, at the latest, we will know who is invested in the right shares, or whether we are both wrong.
GLTY
Hi HoldenWalker99,
you think that
The only thing missing here is that on SCOTUS he said: “It’s not the only issue but obviously to raise third party capital that issue has to be resolved.”
— Victoria Guida (@vtg2) December 10, 2020
Hi Rick,
I hate to contradict you. But did you not read the Bloomberg article?! In it, Mnuchin says he's settling all the lawsuits and deleting the SPS. He just uses different words.
https://www.bloomberg.com/news/articles/2020-12-10/mnuchin-says-he-s-likely-to-back-changes-to-fannie-and-freddie
It is also just possible that I may be wrong. It's getting late over here in Germany.
GLTY
Yee Haw, the Supreme Court
Today the price went up when the opposition lawyer was confronted with our arguments - probably because some people thought that the judges were on our side because of it. And down when our lawyer was confronted with the arguments of the other side. How the judges will judge, they probably do not even know themselves by now.
That doesn't matter so much for now, because there is reason to believe that Mnuchin will act in his remaining time as Secretary of the Treasury. The question of all questions is: How will he get rid of his senior preferred shares? And he will have to do this without a doubt if he wants to prevent a later Biden Access and enable the companies to increase their capital.
Does he delete the SPS or convert them into common shares? The latter not only involves a risk for us, but also for the Treasury Department, should Collins win his case. In that case, there would only be one form of judicial remedy left, namely to repay 124 billion dollars to FnF, because a devaluation of the SPS, as Collins would actually like it to be, would no longer be possible if the SPS had already been converted into common shares.
Mnuchin already holds 79.9% of all common shares should he exercise the warrants. With the converted SPS, he would come to over 99%. This additional 20% would cost him $124 billion if Collins were to win. But these 20% are never worth that. And he would have to sell them in a timely manner, because otherwise FnF's books would be transferred to the national budget. 79.9% is the upper limit that the government can hold without taking over the books of a company. Therefore, the warrants grant exactly 79.9%. Thus, according to my modest calculations, Mnuchin would be throwing around $20 billion of taxpayers' money to the wind if he converted the SPS into common stock and then lost the Collins case.
The Supreme Court can now decide the following:
- Collins is proved right and the SPS is deleted, or Mnuchin can keep the SPS and in return must pay back $124 billion to FnF.
- Collins loses, but can win the case later.
The Supreme Court examines whether the FHFA is unconstitutionally structured and whether Collins is entitled to a remedy if applicable. However, the 5th Circuit has already ruled in favor of Collins on another count, but sent the case back to the district court. This point of contention, namely whether the FHFA has adhered to HERA, will be heard if the Supreme Court upholds the NWS and SPS, which I think is likely. Today was a free ride for Collins with nothing to lose.
- Mnuchin wins. The issue here is whether the plaintiffs have any claim at all, because there is a clause in HERA that prohibits courts from interfering with the FHFA's financial decisions. The Fifth Circuit has already ruled that this is not applicable and that the plaintiffs have a claim because the FHFA did not follow the first rule of a conservator to protect the companies' capital, but paid it in full to the Treasury. If the Supreme Court rules that we do not have a claim, the lawsuits are over and we have lost in all the cases that are still pending.
- Mnuchin loses. Then it really goes on with Judge Atlas of the District Court. Unless Collins wins.
Got it? Do not forget: Today 2 petitions were heard. And Mnuchin is represented by the Justice Department, whether he wants to or not. And he obviously doesn't want to, because he refused the request of the Supreme Court for a brief.
I think Collins is going to lose his case, but so is Mnuchin. Then it will go on as usual.
I hope that Mnuchin will delete the SPS to complete the housing finance reform.
In June Fannie Mae hired Morgan Stanley as financial advisor, Freddie Mac chose J.P. Morgan. The FHFA hired Houlihan Lokey Capital as financial advisor in February to end the Conservatorships and Milbank as legal advisor in April.
Not to forget Sheila Bair, once the most powerful woman in the world, is now on Fannie's board of directors.
This is where they're putting their heads together. Anything else would surprise me. And there was also the green light from the chairman of the banking committee, Crapo. Full speed ahead! Trump's memo from March 2019 on the release of FnF from the Conservatorships is now being implemented. I have no doubt!
GLTA
Many thanks, obiterdictum,
you are absolutely right: my presentation was superficial and imprecise. It is in fact uncertain how long Calabria will actually remain in office and indeed depends on the factors you have described.
But the point I was trying to make has become clear, I think: the Supreme Court can rule on the constitutionality of the structure of the FHFA, even if Collins would withdraw his case or there would be a settlement, if the judges think that the question presented should be an important question of principle.
Calabria's job is not secure at this time, no matter what he, Collins or the Treasury Department do. I take this from Epstein's words.
GLTY
Hi Golfbum22,
I think that you have found the statement, because it has already been posted in the forum.
You must know: With live streams it is tricky to post the timestamp, because it changes eye-to-eye as soon as the stream is no longer live. This has happened to me before and led to a wrong information from me. Therefore I wrote that it was said just in this very moment.
GLTY
Hi obiterdictum,
thanks for your answer.
Richard A. Epstein also commented on Calabria's probable term in office. He took part in a round table discussion at the Competitive Enterprise Institute. There he said starting 33:01 in the video attached below:
"Now it's interesting to add by the way that in some of these cases the settlements are not going to make the case disappear. ...because it is an important question of principal... we[scotus] have to solve this."
Epstein thinks that the chances for Calabria to keep the job are 10%.
GLTY
Reference:
Yeahh, Mnuchin just said:
"There could be a scenario where at some point between basically the zero capital they have and the full capital requirement there would be a consent order and they would be released subject to consent order."
Hi Robert from yahoo bd,
what do you think about that:
1. devaluate SPS
2. Release per consent decree
3. Recap per Biden, who must face the music before the Supreme Court.
When I read this, this option no longer seems so improbable. And Trump and friends could make a fortune...
GLTY and thanks to RuudG for sharing on Twitter. ähmm: "Holy" Walker
P.S.: Dreaming is allowed...
https://twitter.com/HoldenWalker99/status/1333610742747164673
Thank you, tutt1126,
in fact I often think that Ackman is on the same wavelength as me when it comes to Fannie.
However, there is one not insignificant difference that distinguishes us: Ackman still goes to work.
GLTY
Hello, folks,
In my many years here on the board and in Germany I have experienced days like this many times:
There is good news coming, which I also present here as such, but the share price is falling sharply and I find myself in need of explanations. So be it. Because if I remember correctly, the following days were always really up.
Senator Crapo, Chairman of the Banking Committee, gave Calabria and Mnuchin the green light today! He could have also said that they shouldn't take any steps without Congress, - just like it was always heard in the past, even from Crapo. And he could have also said that he would bring a law to prevent the Secretary of the Treasury from changing the status of the SPS, - as it happened twice before: GSE Jumpstart and its extension, which failed.
But he did not. On the contrary, he called on Calabria and Mnuchin to end the "unacceptable" status quo of Fannie and Freddie! I never expected that. But here, the Republican in Crapo obviously comes out.
By the way: The chairman of the FED, Powell has also spoken out in favor of Fannie being free again. Because he welcomed private capital that Fannie should build up over a longer period of time to protect the taxpayer.
Really: Things could hardly get any better. Longer time means less dilution for our shares.
Conclusion: Share price down, but Fully satisfied. The target line has come even closer today. Our political opponents today gave in, knowing full well that they lost. Opposition from Senator Warner? No response! And from Senator Crapo? He is now suddenly an ally - at least in spirit.
GLTA ...and hang in there strongly
Senator Crapo
Hi folks,
Crapo addressed Fannie - was somehow to be expected. He said that the status quo was not sustainable and that Mnuchin and Calabria should take the necessary steps to steer the matter in the right direction.
Wow, Crapo's backing for Calabria and Mnuchin to take administrative steps to release Fannie - or at least not to hand things over to Biden as they are.
https://www.banking.senate.gov/hearings/11/20/2020/the-quarterly-cares-act-report-to-congress
starts at 21.56
GLTA ...and hold on to your stock strongly...
Thanks for the info, Golfbum22 and
GLTY
It's Bruce - Bruce Lee III
... And one should assume that a secretary of the treasury can actually count to 10...
Mnuchin shall devalue the SPS. I don't care about when and how.
I even know that Jon plays poker. Gosh, it's about time. Calabria, please set me free.
... is probably his "skateboard account".
Honestly, I often ask myself this question about Glen.
Commons_Cancelled or whatsoever is apparently very keen on being Glen...
Hi FOFreddie,
I remember the discussion concerning Otting. Trump just picked him.
I don't think the question of an acting director is very interesting at the moment. And I hope that this will never change.
GLTY
Hi mrfence,
yes, it's him:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=149952822
Just changed his nick, like brooge did.
GLTY
moot Ruud
Hi obiterdictum,
nice that you are actively participating in the forum again.
I have a question for you regarding Calabria's remaining time in office:
The 5. circuit reversed "...the judgment as to Count IV and REMANDS that claim for entry of judgment that the “for cause” removal limitation in 12 U.S.C. § 4512(b)(2) is unconstitutional."(1)
And here is my question: Is Judge Atlas, who has to execute the "entry of judgment", also obligated to do so if Collins would withdraw the case?
Here is a brief overview of how I reached to this question, which unfortunately I cannot answer, but I hope you can:
1. Judge Atlas from the district court ruled in the Collins case that Calabria can only be removed for cause and HERA is not unconstitutional on this point.
2. The 5th circuit expressed the opinion that this judgment must be revised and Atlas must carry out the "entry of judgment".
3. As long as there is no entry of judgment, no appeal against a judgment can be made. Therefore, both Collins and the Treasury Department have used an alternative procedure to be heard by the Supreme Court: writ of certiorari
4. Therefore Atlas has not yet carried out the "entry of judgment" and Calabria can therefore not yet take action against the judgment and therefore cannot be fired - (even if he wants to kiss tattoos on ankles)
Corrections are always welcome. But I think that we are standing right there now: Should the Supreme Court bring the case to an end, Calabria will remain irremovable until then.
But what happens if Collins withdraws the case for any reason, such as an accommodating revision of the SPSPAs? Would Calabria remain in office until a new case regarding the constitutionality of the FHFA structure was heard and finally ruled on? Or could or even must Judge Atlas then still carry out the "entry of judgment", which would shake Calabria's seat, even if the case were closed? If so, is there a specific time frame?
Or would a President Biden have the chance of success to let the Supreme Court answer this question nevertheless?
I am at the end of my Latin and I hope you know that. I'm pretty sure you have already examined this matter thoroughly and I hope you have found an answer.
GLTY
Reference:
(1)
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf
page 4 of 123 in the reader
Hi altruism,
In Germany +13%
already open
https://www.ariva.de/fannie_mae_federal_national_mortgage_association-aktie/kurs
GLTY
Is this the "5 Dollar by Friday"-week?
I hope so. The parking fees for the space shuttle are pretty high.
I still have a space shuttle waiting in Yuma...
Hi Guido2, I don't see any concerns for the CRTs or the markets, if it is done right.
Hi Mr Michael,
i truly hope that the informations really helped you in the end.
GLTY
You are welcome, KenKong.
GLTY
Hi RumplePigSkin,
I think ...
... it's coming, amigo.
Thank you, Louie Louie,
it is not always easy to keep his honesty and decency. But it is the right thing to do.
GLTY