JPS Quagmire Trade ...
Here is a very basic way to view the JPS quagmire investment thesis, which is so laser focused on the financial angle they can’t see the more important legal and political perspectives, making their investment a quagmire.
JPS’s theory of how the Gov/FHFA will address/speak to this situation after a favorable Scotus ruling:
“Guess what, everyone, FnF received $180 billion from us (the gov) and repaid $300 billion back to us, netting us $124 billion dollars in profit. That equals a whopping %67 ROI for us (the gov).
So now that Scotus has basically told us (the gov) we need to honor the intent (9/10ths of the law) of a conservator to conserve and preserve our ward’s assets, and that Scotus has de facto or de jure 0’d out the liquidation preference, we are still going to do more to help us (the gov) generate more money.
We (the gov) know FnF repaid us orders of magnitude more than AIG, Citi, Insurance companies, Auto Industry, etc, but we don’t care. We are going to go further to profiteer from the GSEs.
What we (the gov) plan on doing on top of the $124 billion we netted on our PSPA investment is to now take %80 control of FnF because we can and we will for no other reason that we can - so too bad.
But wait, shareholders, there is more. We know both Common and JPS shareholders have completely lost control of their company, and both have been left out in the cold going on 13 years, but we are going to reward only the JPS shareholders and destroy the Common shareholders.
Sorry, even though we (the gov), have already profited at $124 billion, we are going to take these measure to spite shareholders, and especially Commons because we can’t use one tiny bit of creative financing to manage this situation so it is equitable for all shareholders. We (the US Treasury) who has 100s of years of industry experience doesn’t know how to restructure a company equitably that has already been paid to a net profit of over $124 billion dollars, equating to the best deal for us (the gov) since the Louisiana Purchase.
We (the gov) have no appreciation of what a $124 billion dollar windfall to us means within the historical context of the entire existence of the US republic. We do know this was the best investment deal we have ever made, but we are going to exploit and profiteer from FnF further.
Further legal considerations be darned because we don’t care. We will do more to extract every drop of blood out of the FnF stone, shareholders and legal challenges after our actions be darned.”
If you believe the above I have a JPS portfolio ... uh, I mean a bridge in NYC Metro area to sell you ...
