Replies to post #377199 on Fannie Mae-No Politics (FNMA)

[obiterdictum]

1. You asked for the two articles I cited and any related text.

Thank you for the article.

2. This piece is in the "related" category. It clearly reinforces my point on momentum seeming to line up behind government keeping the warrants and "sharing" in the success of revitalized GSEs.

Excluding Washington Federal, the warrants were not an issue raised with the majority of the court cases since 2013 and are not an issue of concern with Berkowitz and Ackman. The issue in the court cases are, in the main, centered around the net worth sweep and gradual de-capitalization as a 5th amendment taking, a violation of HERA and the APA statutes and a breach of contract and fiduciary duty.

The possible exercise of the warrants and the resultant dilution and possible Government majority ownership and control have been of considerable concern to GSE investors not directly involved in the courts and that has been consistently the case as evidenced on this and other investor forums for several years. There seems to have been no change in this division over the years. The lack of concern and the concern about the warrants have run parallel since 2013 in the forums without much change.

3. Howard's comments on release seem, to me, to read like a page from the earlier Fairholme Offer.

In what way does the Howard article read like a page from the earlier Fairholme Offer? What in Howard's article is similar to the Fairholme Offer?

4. And, of course, the article specifically slams big Wall Street and big banks while lauding Berkowitz, Ackman and Hindes as deserving in the settlement end game.

Howard sees the "Financial Establishment—large banks and Wall Street firms, and their advocates and alumni at Treasury and elsewhere—has been engaged in a well designed, carefully scripted and highly orchestrated political campaign to convince Congress to replace Fannie Mae and Freddie Mac with a mechanism more financially beneficial to themselves."

The only mention in the Howard article of Berkowitz and Ackman is when Howard states this:

Plaintiffs know that Fannie and Freddie have much more value as ongoing entities than in liquidation, and both Bruce Berkowitz and Bill Ackman have said repeatedly that “there is no alternative” to the companies.

Berkowitz and Ackman are not lauded in the Howard or DiStefano article. There is no mention of Hindes in the Howard article. Berkowitz and Ackman are not mentioned regarding the settlement. Ackman has no case before the court.

5. However, non-hedge-fund nvestors get no sway whatsoever in this article.

How does it come to be thought that non-hedge-fund investors "get no sway" in the article. As is well known, the beneficiaries of a settlement or a plaintiff court win depends on the GSE case. There are dozens of individual and institutional plaintiffs and Berkowitz's mutual fund, Fairholme Funds, Inc., is one among many. There are also the thousands of members found among the institutional plaintiffs and thousands of class action plaintiffs members, which include current long term investors. Thousands of investors are not hedge fund investors, and if the their cases are successful, they will be the beneficiaries.

6. Is this all just serendipitous? Could be, I suppose. Then again, maybe not.

Serendipity is not involved. The parallel positions of lack of concern and concern about the warrants has always been the case. Not much as been changed except the appearance of different pundits and critics who bring with them their views and promotions. The parallel views is the way it has gone since the first lawsuits were filed with the district courts 2013.

7. If I can locate the two initial pieces, I will post them. However, there has been so much print coverage of late that this may be difficult.

That should not be two difficult considering the specificity of the topic. There has not been that much detailed coverage recently.

8. Do you have any thoughts on why government retaining warrants warrants seems to have moved into the acceptable outcome dialog?

The acceptability and non-acceptability of retaining and exercising warrants has not changed. The division was always present. There are those who accept the warrants as a contractual reality, those who do not accept that the warrants are valid and want the warrants voided, and those who use the warrants as a single note or discussion point in general and academic articles.

9. This was not as much of the conversation about Fannie Mae and Freddie Mac until lately.

Yes. Conversations debating the validity and exercise of the warrants are not found in general reporting articles. The conversations and arguments are usually found in forums, investigative articles and academic papers taking a sided point of view regarding the conservatorships.

The appearance of one or two articles on a blog from a supporter of the GSEs release and recapitalization does not represent much of a change in conversation that was conducted for years by investors out of sight and sound of the larger public.

However, the two US Treasury warrants may become a public topic of discussion during the the new administration since the resolution of the temporary conservatorship is considered to be at hand and the decision to exercise, not exercise or void the two warrants will be necessary. It seems that all those various others interested in having the warrants voided will raise their voices and opinions and all those various others for the exercise of the warrants will raise their voices and opinions and, if this debate occurs publicly, this hubbub will be reported widely in the media.

Sources:
Di Stefano Article
http://www.philly.com/philly/blogs/inq-phillydeals/409810485.html

Howard Article
https://howardonmortgagefinance.com/2017/01/04/economics-trumping-politics/

Fairholme Offer
http://online.wsj.com/public/resources/documents/FairholmeOffer.pdf