Send PM
Followers 45
Posts 5938
Boards Moderated 0
Alias Born 11/18/2016

Re: Robert from yahoo bd post# 727397

Thursday, 07/21/2022 12:56:11 PM

Thursday, July 21, 2022 12:56:11 PM

Post# of 733925

Who ever heard of a 14 year conservatorship with the GSES making $20B to $30B per year?

As I see it, there have been three phases to the conservatorships:

1) September 2008 - August 2012: FnF were losing money (mostly due to accounting shenanigans), running up the senior pref balance with Treasury, and many politicians thought they should be wound down due an alleged perpetratory role in the financial crisis.
2) August 2012 - September 2019: FnF were making money but Treasury was sweeping every dollar. There were still calls to wind FnF down, even by President Obama himself, but the huge cash inflows were a good enough reason to keep FnF around.
3) September 2019 - present: FnF are increasingly stable, safe, and fantastically profitable. But now the government has no direct financial gains from FnF: $1 of liquidation preference isn't worth nearly as much as $1 in cash because FnF can only be worth so much as companies, and the time value of money makes the disparity even greater.

I find the last phase to be even stranger than the first two. The main reasons I see to continue the conservatorships at this point are:

1) FnF don't have (nearly) enough capital according to the capital standards, and the leverage (minimum) standard of 2.5% of balance sheet assets can't go any lower due to the letter of the law in 12 USC 4612(a)(1).
2) The Supreme Court said the NWS was perfectly fine, meaning an administration (now or in the future) could choose to just turn the cash sweep back on and not fear legal repercussions.
3) FHFA retains much more authority over FnF in conservatorship than out of it, letting the administration have more control over the housing finance system.

All of these have mitigating circumstances:

1) Treasury writing down or converting the seniors, plus a big enough capital raise, can take care of the capital shortfall pretty quickly.
2) The repercussions in the housing system would be potentially catastrophic, though, and Treasury can make money off of recap/release via warrant exercise or senior pref conversion.
3) FHFA's greater level of control can be extended past conservatorship with a properly-crafted consent order.

All in all, there is less reason than ever to keep FnF in conservatorship, and as they retain more and more capital it will be harder to justify keeping them in. Remember that the main point of the NWS was to prevent FnF from building capital and "escaping" conservatorship.

Got legal theories no plaintiff has tried? File your own lawsuit or shut up.

Posting about other posters is the last refuge of the incompetent.

Day Range:
Last Trade Time:
Total Trades:
  • 1D
  • 1M
  • 2M
  • 3M
  • 6M
  • 1Y
  • 2Y
  • 3Y
  • 5Y
Recent FNMA News

ILUS Confirms Share Lock-Up Opportunity ILUS Sep 29, 2022 1:25 PM

ILUS Appoints Investment Bank to Assist With Up-List and Associated Acquisitions ILUS Sep 29, 2022 11:22 AM

New Break Identifies High-Grade Gold, up to 70.60 g/t Au, via Grab Sampling at Moray NBRK Sep 29, 2022 10:29 AM

Arts & Collectibles DOT Company Coinllectibles Seeing a Very Bright Future with Revenue jumping by 100% to US$8.8 Million in First Half of 2022 as compared to The Year Before COSG Sep 29, 2022 8:44 AM

Rising Star Trillion Energy Ready to Supply Much Needed European Gas TCF Sep 29, 2022 8:00 AM

GBT is researching the Development of Electro-Thermal Aware Design Environment for Integrated Circuits.Seeking to Address Advanced Nanometer Nodes Semiconductors Electro-Thermal Modeling and Optimization. GTCH Sep 29, 2022 7:30 AM

Goldshore Intersects 192.75m @ 1.02 g/t Au from 94.45m depth in MMD-22-051 GSHRF Sep 29, 2022 7:30 AM

SFLMaven Plans for New Potential Revenue from Patent Pending HolgoGlow Technology for the Metaverse SFLM Sep 29, 2022 6:30 AM

Ludwig's genomic-based mRNA Inflammatory Index - a Ground-Breaking Technology LUDG Sep 28, 2022 1:34 PM

Headwater Gold Commences Multi-Rig Drill Program at the Spring Peak Project, Nevada to Follow Up Epithermal Vein Discoveries HWAUF Sep 28, 2022 10:13 AM

Valiant Eagle Inc. (OTC: PSRU) Significantly Increases Its Equity Stake in Sumer Technologies, Inc., as the Ride-Sharing Company Readies Its Much Anticipated Innovative Zumr App For Q1 2023 U.S. Launch PSRU Sep 28, 2022 9:30 AM

Good Gaming Inc. Announces Official Launch Date For Their New Minecraft OP Prison Game Featuring MicroBuddiesTM GMER Sep 28, 2022 9:15 AM

Trend Innovations Holding Inc. Completes the Second Version of the AI Consultant Chatbot on the Company's Website TREN Sep 28, 2022 9:00 AM

GBT will be attending the Interactive MoneyShow Virtual Expo, on Sep 27-29, Presenting its Technologies, Innovations and Future Visions GTCH Sep 28, 2022 7:30 AM

Branded Legacy, Inc. Reduces Authorized Shares By 300 Million BLEG Sep 27, 2022 11:53 AM