ThE DELAWAre BAY COmPANY uc
Gary E. Hindes
Managing MeMBer
646-467-5242
gary.hindes@delawarebaylic.com
1375 AveNUE OF THE AMERICAS
29™ FLOOR
NEw YORK NY 10019
December 30, 2022
To my partners:
The case for 2023
The stock market is ending 2022 with its worst performance since 2008. Ugly. And, alas, 2022 is about to end with Fannie Mae and Freddie Mac still in "temporary" conservatorship - their 14th year as wards of the state. The last piece of unfinished business left over from the 2008 financial crisis remains ... unfinished.
We are in what we in the industry call a 'value trap'. But following the breadcrumbs', I believe the table has been set for the companies release - most likely in 2023. I base this conclusion/prediction on a conversation I had with a top White House official back in late April.
I half-jokingly commented that the Fannie and Freddie conservatorships were going to outlast even that of Britney Spears (they have), to which he laughed and responded that he had just that week told his "team" that "now is the time to get this done. " He told me the time frame would be 12 to 18 months and they were "not going to do it piecemeal". That says to me that they have a plan and we should expect to see action by November. Fingers crossed.
"Breadcrumbs' essential to release set in place in 2022.
• On March 31, FHFA Acting Director Sandra Thompson gave a wide-ranging interview (you can view it here) in which she exhibited a pretty good grasp of the issues which still need to be worked out (Consent Agreement, etc.). And it's clear she has been interacting with the bankers (Morgan Stanley and JPMorgan) as referenced by a comment she made that an IPO in conjunction with their release would be "the largest in history". No mention of "deferring to Congress".
Number one was Treasury restructuring its stake.
Acknowledged there are private shareholders - including junior preferreds.
• Priscilla Almodóvar just assumed the CEO position at Fannie earlier this month. After a decade with JPMorgan (followed by a stint as CEO of Enterprise Community Partners), no one, in my opinion, would have agreed to take that job without a clear
