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I agree with you about the political implications of the jury's decision. But in formal legal terms, the jury's decision does not invalidate the NWS or the PSPA. Nor would the U.S. District Court for the District of Columbia
have the power to do so. It's only about monetary compensation.
The breach of contract at issue in Lamberth is the breach of the implied contract between Fannie and Freddie and their shareholders. These contracts were consummated with the purchase of their respective shares (C + P), and these purchases occurred prior to the conservatorship, when FHFA did not even exist.
The actual breach of the implied contract occurred later in conservatorship, when FHFA approved the NWS in 2012.
It's obvious (and trivial) that FHFA must assume the legal defense in conservatorship on behalf of the real defendants, Fannie and Freddie, precisely because FHFA is acting as conservator.
Importantly, the government and Treasury are not defendants in Lamberth, as Barron falsely claimed. So there is no legal basis for the government to appeal (or not to appeal, as Barron also claimed).
I don't own a yacht, fwiw.
Short story by Franz Kafka
"Before the Law"
A man from the country seeks "the law" and wishes to gain entry to it through an open doorway, but the doorkeeper tells the man that he cannot go through at the present time. The man asks if he can ever go through, and the doorkeeper says it is possible "but not now". The man waits by the door for years, bribing the doorkeeper with everything he has. The doorkeeper accepts the bribes, but tells the man he only accepts them "so that you do not think you have left anything undone". The man does not attempt to gain entry by force, but waits at the doorway until he is about to die. Right before his death, he asks the doorkeeper why, even though everyone seeks the law, no one else has come in all the years he has been there. The doorkeeper answers, "No one else could ever be admitted here, since this gate was made only for you. I am now going to shut it."
https://en.wikipedia.org/wiki/Before_the_Law
That's part of the game. Never play games with the mafia.
What are your chances of negotiating with "crooks" when every cent you win in that "deal" reduces the mafia's profit? You are dealing with an institution run by the government, for the government, and for the exclusive benefit of the government ("and the public that it serves"). Welcome to Kafka land.
The hiring spree at the FHFA is even showing up in the national job data.
Government is hiring bigtime
By Jeffry Bartash
Government agencies at all levels added 52,000 new jobs in December - the biggest of any industry - to cap off a record year of hiring.
True, but unfortunately the circumstances are such that so far nobody has the will and/or the financial means to prove this in a court. So the government is simply getting away with its fraud against shareholders. It may be banana republic politics, but you have to live with what you get - or emigrate (which begs the question: where to?).
One should also consider the many plaintiffs who have spent millions on lawsuits without really changing the status quo. So far, there are only the Lamberth peanuts. The chance that the "last plaintiff" will be able to turn the tide is unlikely - even if only statistically, according to the law of series.
I agree. But my post is about the current price shifts in Fannie/Freddie JPS which are obviously based on the expectation of pre-judgment interest on Lamberth damages. Freddie JPS don't get PJ interest, while Fannie JPS do.
FMCKJ is currently the cheapest of the three most liquid JPS (FMCKJ, FNMAT, FNMAS). Historically, FNMAT is the cheapest. So if you own FNMAT (or FNMAS), it is worth switching some of your holdings to FMCKJ. The difference in price is sometimes significantly greater than the difference in Lamberth damages (including interest).
How the Biden admin can unilaterally generate ~$250b in funding to solve the housing affordability crisis!
— familymang (@familymang1) December 19, 2022
A thread🧵...👇#HousingCrisis (1/4)
Maybe, but usually high volume pullbacks don't precede new highs.
What's up? FNMA down 7.5% on heavy volume...
https://www.otcmarkets.com/stock/FNMA/overview
I would also be interested to know whether the SPS, which were reported at about $187 billion in the FnF balance sheet in 2012, were actually accompanied by a cash flow of that amount - from the government to the two companies - (as I have previously assumed), or whether the SPS merely represent a kind of government guarantee and thus were issued "for free".
I think: Yes. $612 million in damages (+ interest) is not enough. On appeal, the plaintiffs (shareholders) could get the $1.6 billion that Lamberth originally awarded; maybe even the difference between the closing price before the NWS announcement and 0 (+ interest).
You can't seriously ignore that the government paid $191 billion to Fannie/Freddie to receive the SPS. They actually bought the SPS. That $191 billion is the least that needs to be subtracted from your $301 billion to determine the net cash flow to the government. If you think HERA is legal, then the 10% dividend on the SPS is legal as well. Even the Collins plaintiffs asked for only about $29 billion to be returned. But it's true that the Collins plaintiffs asked for the SPS to be "deemed" paid (as if they were debt) and thus get deleted.
I agree that your tweets have contributed to the shift, even if some of them are possibly wrong, illogical and/or exaggerated (like your constantly repeated statement that $301 billion was "stolen" by the government, it is far less). Your tweets seem like a thousand little pinpricks.
How many times do you want to repeat this illogical sentence? An appeal is only possible when the judgment is final, and it is not yet final because Lamberth's signature is missing.
Don't worry. You can buy back the shares next week, albeit at a higher price.
It is noticeable that recently more and more voices have been heard calling for the release of FnF. Some of these voices may even have been "initiated" by the government to prepare the public for FnF's release.
Add to this the unusually high volume in last week's common stock rally and the further delay by Lamberth (are there serious legal problems for the FHFA/government if the jury verdict becomes final with Lamberth's signature?).
All of this suggests that there could be an unexpected surprise early next year.
Ted Tozer, Ginnie Mae former President and CEO says @fhfa should release Fannie/Freddie from conservatorship as soon as possible! https://t.co/aTEaU66Ech
— Alec Mazo (@Alec_Mazo) December 30, 2023
Buffett would probably ask for special preferred shares that are issued for him personally. That's what he did when he invested in Occidental Petroleum (OXY).
I agree with you that potential admin actions (Biden, or perhaps Trump) would not allow the negative long-term effects of the 4th Letter Agreement to occur at all.
Mnuchin may have framed the 4th L.A. in such a way that 1. the profits from FnF can continue to be used to build capital (as has been the case since 2019), and 2. the government can still assume that it is not giving away anything for free because the NWS is only being delayed.
Why is the 4th Letter Agreement "borderline criminal"?
Originally, from 2008 to 2012, FnF had to pay a 10% dividend on the government's SPS. FnF were forced to draw the SPS "aid" from the government through accounting fraud (DTA). In the end, the SPS totaled $191 billion on the FnF balance sheets.
In 2012, the NWS increased the SPS dividend to (almost) all of the GSEs' income; the original 10% dividend was eliminated. Almost all earnings were funneled into Treasury's coffers.
In 2019, the NWS was overturned by Mnuchin after a ruling by the 5th Circuit. For about two years, the twins were allowed to keep their profits to build up capital.
That changed in January 2021, when Mnuchin and Calabria issued the 4th Letter Agreement. Officially, the GSEs were still allowed to build book capital (currently $120 billion). However, the government's SPS LP increased by the same amount. To hide this latent fraud, the "official" SPS-LP remains fixed on the official balance sheet at $193 billion, while the "shadow" SPS-LP continues to grow - to now more than $300 billion.
So since Jan. 2021, the GSEs have been forced to continue drawing new SPS LP from the government, even though the 2012 wind-down arguments are now completely obsolete (FnF are earning 25 billion per year).
Officially the GSEs can build capital by keeping their earnings on their official balance sheets - and they could even reach the high Basel III capital levels at some point. But once they get there, the 10% dividend on the "shadow" SPS LP, which may have grown to $400 or even $500 billion by then, will be due again.
If a 10% dividend has to be paid on $400 billion, virtually all of the GSEs' profits will continue to go to the government. This is because the GSEs are unlikely to earn more than $40 billion once the required capital levels are reached. So that is where NWS 2.0 begins.
What is borderline criminal about the construction of the 4th Letter Agreement is that the GSEs still have to draw new SPS LP on their shadow balance sheets, even though they are in solid financial condition (high earnings, solid stress tests) - and there is less reason than ever fabulating about a supposed "death spiral".
Edited:
It is kind of difficult to understand. For example, "SPS LP increased for free in the absence of dividend to UST" is subtle. I would say "NWS was only stopped for a short time: Starting 2019, Fannie and Freddie were allowed to keep their earnings to build up capital. But since Jan. 2021, dollar-for-dollar, their retained earnings are added to government's "off-balance-sheet" SPS equity (i.e. Liquidation Preference). When things resume normal, Fannie and Freddie are required to pay 10% of their LP as dividend. NWS payments were deferred to a later date.
(It's not easier to read now, but at least correct.)
All hat and no cattle
These fools [TM] are pumping up the commons:
https://www.fool.com/investing/2023/12/28/why-fannie-mae-freddie-mac-and-redfin-soared-this/
What I have written is true, even if I am from the planet Mars.
Dividend payments to shareholders do not result in companies "paying off" their shares as if the shares were a debt.
It's the same with IBM stock. Dividend payments by IBM to shareholders do not constitute a "stock repurchase". The shares remain the property of those who bought them - even though the dividends received may, in aggregate, be greater than the current price of the IBM shares.
The concept of SPS as "concrete life preservers" was cleverly orchestrated by Goldman's Treasury Secretary Hank Paulson and George W. Bush.