Hi Guido,

I think you are wrong about Kao - he is very well known by JPS holders and he is quite smart. Kao is wrong about 31 CFR 902.2 and so was Calabria in his book - rather than go to the CBO Paper or the Reg itself - Calabria quoted the spin from a UST official. The question is why Kao quoted Calabria rather than the CBO or actually analyzed the Regulation. Perhaps it has to do more with the volatility of a JPS hedge rather than being right about the discretion that the UST Secretary will have under 31 CFR 902.2. Remember KT talking about his dynamic hedging strategy for his JPS position - what was his short position against long JPS.? Personally I think Common is worth 8 to 14 and JPS are worth PAR but I am not short any common just long a little.

Michael Kao is a really smart guy with extensive restructuring experience but he relied on a quote from Calabria's book rather than actually going to the Compromise of Debt rule in the CFR and the CBO GSE Paper. Calabria's interpretation is directly in conflict with the CBO Interpretation of the applicability of 31 CFR 902.2

See Footnote 30 on Page 13 of the CBO Paper:

Section 902.2 of title 31 of the Code of Federal Regulations
sets forth standards for the “compromise of debts” by
the Administration. On the basis of its review of those
standards, CBO believes that a reduction in the value of the
Treasury’s preferred shares could be undertaken as part of the
recapitalization of the GSEs.

https://www.cbo.gov/publication/56511

Bottom line is that a DJT Treasury Secretary can write down the SPS in his/her discretion which is what the CBO has stated. Calabria did not discuss what the CBO Opinion has been or did he actually reference the compromise of debts regulation. It is clearly discretionary

Looks like American Funds Small Cap bought 8-9 million shares of FMCC in the last couple of months.

https://www.cnbc.com/quotes/FMCC

If the GSEs are released they will be primarily owned by institutions since they will be cap weighted components of the S&P 500 Index and all related tracker ETFs and indices. If we ever get released hold on to your shares until all the institutions become fully invested to minimize tracking error with the S&P 500.

Good stuff Rick. Thought it was interesting that they pointed out that FMCC cant do construction lending in Conservatorship under its Charter - perhaps another reason to get them out of Conservatorship. The article also stressed all of this could be done without Congressional approval.

Thanks!

Thanks for the Video Link - None of them seem to be well informed about what happened and what has been happening. Ackman and Paulson would have to do a GSE 101 with them.

Here is the filing. Just seems like a party has asked for a transcript of a Hearing:

TRANSCRIPT OF PROCEEDINGS before Judge Royce C. Lamberth held on 11/4/22 CORRECTED TRANSCRIPT; Page Numbers: 2859-2872. Court Reporter/Transcriber Tammy Nestor, tammy_nestor@dcd.uscourts.gov, Transcripts may be ordered by submitting the Transcript Order Form
For the first 90 days after this filing date, the transcript may be viewed at the courthouse at a public terminal or purchased from the court reporter referenced above. After 90 days, the transcript may be accessed via PACER. Other transcript formats, (multi-page, condensed, CD or ASCII) may be purchased from the court reporter.
NOTICE RE REDACTION OF TRANSCRIPTS: The parties have twenty-one days to file with the court and the court reporter any request to redact personal identifiers from this transcript. If no such requests are filed, the transcript will be made available to the public via PACER without redaction after 90 days. The policy, which includes the five personal identifiers specifically covered, is located on our website at www.dcd.uscourts.gov.

Redaction Request due 10/11/2024. Redacted Transcript Deadline set for 10/21/2024. Release of Transcript Res triction set for 12/19/2024.(Nestor, Tammy)

Thanks Guido - if the question is Net Worth - it is approximately $ 140 bn (FNMA $86.5 FMCC $ 53 bn) as of 6/30/24. Prob at least $ 150 bn at end of 2024 and at least $ 200 bn at the end of 2027 when a recap could be possible. Bottom line is that any stock offering would be $ 100 bn or less for a market value of approx $ 300 bn. If JPS is converted the stock offering would be less than $ 65 bn to reach $ 300 bn. Most likely GSE Net worth at the end of 2027 will be closer to $ 220 bn and with a JPS conversion of $ 35 bn - new equity would be less than $ 50 bn.

See the CBO GSE restructuring Paper and you can see that the GSEs are running $ 20 bn more in Net Worth. This Paper assumes JPS are paid at PAR and the warrants have value. SPS get partially written down.

Here is the CBO GSE Paper link:

https://www.cbo.gov/publication/56511

See Table 3 which assumed a 2025 stock offering

Of course KM could find a way to rip off everyone.

Use the $ 300 bn UST stake in the GSEs as a first loss position in a $ 3 trillion Affordable Housing Investment Entity.

There are a couple DJT and JB Haters on the Board. One guy would post 10 negative posts on DJT and claim his memory is gone to justify his positions. Politics in relationship to the GSEs is fine but politics just to espouse how much you hate a candidate does nothing to share useful info.

Has Bill Ackman made any comments about GSE JPS and Common recently?

DCbill - Why isnt that a possibility? Merge them and move them to Cincinatti and reduce the MBS fees all homeowners pay with the cost efficiencies.

https://www.realclearmarkets.com/articles/2024/07/02/taxpayers_shouldnt_be_forced_to_pay_for_freddie_macs_mission_creep_1041640.html

Hi Donot - what do you think about the idea of placing the GSE equity owned by the UST and use it as the first loss piece of a $ 3 trillion housing investment entity. UST invest $ 300 billion and private investors invest $ 2.7 trillion. Work with local jurisdictions to build new housing units for 20 years to build and resale housing units to cover the $ 3 trillion investment plus interest expenses. Something like this was proposed to the Obama Admin in the 2012/13 time period I believe?

.@realDonaldTrump is going to win in a landslide. The country should rally around Trump and help him succeed.

Trump didn’t expect to win the first time he was elected. As a result, he was totally unprepared. The lack of preparation, the Russia investigation and the ensuing…

— Bill Ackman (@BillAckman) June 28, 2024

How about the Calabria interview on Bloomberg?

Are speculating that GSE JPS may have been used as collateral for LBIE Counterparties?

Hi Real777 - do you think the potential use of the UST GSE stake for housing programs will be part of any campaign proposals?

Thanks imbellish - seems interesting that Thompson is getting off the case and Wazee is going local NJ. Arent we at the end of the life for all the outstanding litigation with just a few last gasps for potential Cert? Didnt UST assume $ 3 bn for potential litigation losses - seems like they will be less than a 1 bn even with the Lamberth class action?

New Wazee Lawyer

https://webbermcgill.com/douglas-j-mcgill/

Looks like they are going to continue with the Long Shot Appeal? Maybe Alioto will give them a chance to atone for his grievous mistake with Collins? Real long shot but looks like Wazee will still try to fight for justice?

Yes NeoSunTzu - with all of the naysayers how did common get to $ 2 and where it is today. There was a lot of pressure to push it down to $ 10 cents - was this rally all retail buying or are there large holders just waiting for an exit announcement to weigh in?

The Lambert Plaintiffs' attorneys should have some indication of who the big holders of FMCC are since they are part of the class - at least which clearing firms have concentrated ownership and potentially trace back to historical clearing firm relationships with particular hedge funds ect? Was the rally in common all retail and related to DJT - or is there a real accumulation?

Humongous Fan of Yours!

Hi Kthomp,

How do you arrive at 10 - 12 for FNMAS? What is your assumed exit date? - IRR?

Thanks Kimbrown,

The Calabria interview cleared up a lot of the speculation about what he meant in his book. A couple of things were cleared up but what he said also raised more questions.

He definitely said that the SPS would have to be crammed down and likely converted - so the issue is valuation and ultimately dilution.

He said that he did not think the warrants will be exercised so unless there is a forced receivership the common will have to vote on any recap and if the USG does not own any common then the legacy common could reject any conversion terms - does anyone think that HERA gives the FHFA to vote for the common shareholders?

Any restructuring of the JPS would have to be approved on a series by series basis so it would be difficult to do anything but pay par on the JPS or make the restructuring terms attractive to all of the series. Any series could block a restructuring or just hold out for PAR.

Any thoughts?

Hi LuLeVan,

What do you mean by a major top? Where do the JPSs trade on Nov 30 if DJT wins?

Yes - he also spoke about the SPSA being crammed down. Do you think the UST will just let the warrants expire? What will be the mechanism for a recap - if the UST does not exercise they will not be able to approve a recap since 100 pct of the common will be held by legacy common. Also any recap of the JPS will have to approved series by series with a supermajority vote. Can the FHFA director vote for common shareholders? Seems like it will be really hard to restructure unless the UST controls the ownership of the GSEs? Thoughts?

Thanks Guido - I wonder why Nader has not spoken up since this article

Thanks Guido - I wonder why Nader has not spoken up since this article

Ralph Nader Letter To US Treasury Secretary Jacob Lew Excerpt:

Regardless of the final outcome of the deliberations on the structure of these GSEs, Fannie and Freddie common shareholders deserve a chance to recover some of the value of their stock. As you know, the Federal government provided funds to help stabilize AIG ($69 billion) and Citigroup ($45 billion). Other funds and guarantees were also made available to these companies. AIG and Citigroup shareholders benefited from the recovery of these companies. Similarly, Fannie Mae and Freddie Mac common stockholders should be allowed to participate in the recovery of the value of their stock just as was the case with AIG and Citigroup investors.

The common shareholders have been in a financial limbo far too long. It is unfair to punish the common shareholders who have held their Fannie and Freddie stock, in the hopes of recouping some of their losses. Fannie Mae and Freddie Mac should be relisted on the NYSE and their conservatorships should, over time, be terminated.

What steps do you intend to take as Secretary of the Treasury to ensure that the legitimate concerns of Fannie Mae and Freddie Mac common stockholders are addressed?


https://nader.org/wp-content/uploads/2013/05/lew-5-18-13-11.pdf

Thanks Viking61 - any thoughts on why the JPS is generally trading up? Just DJT odds?

Thanks No Name - maybe realmellon777 has a perspective? It seems like you have some restructuring experience regarding your undergarments after spending a day at the beach? Preferred Certs usually require a supermajority vote to restructure?

Sage advice from No Name

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=174489713

Hi No Name - based off your years of restructuring experience - isnt a vote required on a series by series basis for any reduction of nominal value of the JPS?

Hi Glen, any update on the JB June scenario?

Correct the CBO report which assumes the warrants to be exercised had an implied value of approximately $ 110 bn. This valuation needs to be updated for the amount of retained earnings which have trended significantly higher than the CBO assumptions. The CBO report also assumed the SPSA would be written down at least partially. Some people believe that the warrants will be written down and the SPSA will be written down for good reasons. Lets wish the best for all shareholders - great news about the JPS trading well. Are you still expecting a JB event by the end of June?

Yes - several billion dollars of JPS were sold - I bought FNMAT at $ 25. The Growth Fund of America bought more. No disclosure by the UST - this memo was not public until 2013 or so as the FCIC Commission records were made public. The NEC and UST knew that this was going on all along and duped the Senate Banking Committee including Calabria that they were dealing fair. Also - they let Wall Street sell Billions to unknowing JPS investors.

HI Ace - it is not What IF - it is what was actually planned:

From the NEC to the UST on March 8, 2008

https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf

Government Bailout Is Necessary, Likely, And Potentially Helpful

Fannie Mae is demonstrably a failed social experiment. A realistic assessment of its balance sheet shows
its net worth to be overstated by tens of billions of dollars and the company to be already insolvent.
Even with all its accounting legerdemain, Fannie's losses are an accelerating horror show, with
shareholders losing $1.5 billion in 07Q3 and $3.7 billion in 07Q4. Those losses are just the beginning.
As shareholder capital gets wiped, the government will have no choice but to seize the company and
place it in conservatorship or receivership. Importantly, mortgage-backed security holders guaranteed
by Fannie Mae will see no losses. The government will likely allow debt holders to fare okay, with either
no or token losses, perhaps 1%.
Shareholders, both common and preferred, are likely to be left with nothing. However, these
shareholder losses have already been locked in by the company's credit decisions over the past few
years and cannot be helped. It must be remembered that Fannie is the biggest mortgage risk holder in
the biggest mortgage crisis.
A fully government-owned guarantor of mortgage debt might be exactly what is called for given the
current housing crisis. While various proposals have been floated to expand the FHA to meet this role, it
has neither the infrastructure nor the expertise to address the broader mortgage market. A nationalized
Fannie Mae would be refocused to directly address the various problems of illiquidity, affordability, and
sustainability in the mortgage market. Without the need to satisfy a fiduciary duty to shareholders,
Fannie might finally be able to perform its affordable housing mission in a helpful and proactive manner.

Hi blownaccount9

Why do you thinks the JPS are trading so well? Just a Trump trade?

Thanks Guido - it would be good to get a clarification on remaining paths forward.

Thanks for the correction.

Thanks for the correction.