you’re analysis is on point but it doesn’t account for a positive aggressive en banc ruling which reverses overpayments that the plaintiffs are asking. If NWS is rules illegal then all past NWS is illegal and must be reversed through a simple accounting change. That goes right back into recapping the GSEs.
CryptoNator......great summary post. I find myself agreeing with everything you said. It's also so easy to get caught up in the minute by minute details of any stock that you intend to hold long.
There is nothing wrong with that, per se, other than we are all human and only have so much energy to invest. Sometimes it is necessary to monitor these things closely to either avoid a big loss or to take advantage of a big gain. I have had both in my life.
But it's also imperative that we regularly step back to both enjoy the present and look at the big picture. That is a lesson I have learned along the way as well.
To be clear, UST is not keeping billions in a magical escrow account that they plan to surprise reveal and gift back to shareholders. They aren't going to repay anything like some have suggested (e.g. $100 billion).
However, with regard to NWS legality if found to be an over reach and the treasury is deemed to owe the GSEs the over sweeps which are in excess of 100 billion then the whole paradigm shifts.
In this instance the GSEs would have the amount required for recap as a credit with the treasury but would still owe a balance against the bailout funds drawn. Since the UST possesses the money as collateral for the money drawn, FnF could be deemed recapitalized along with the taxpayor made whole concurrently. Then there would be no necessity for Warrants as collateral so they would be cancelled, c-ship ended, and as FnF continue to pay down the bailout balance the treasury can simply return each payment against the over sweeps balance until both contra accounts are zeroed out simultaneously.
Much kinkier legal accounting agreement stuff was done in giving birth to this mess so all I'm sayin is...
What will happen is the NWS will end, risk capital will be raised over several years, the GSEs will be reformed with some form of explicit government guarantee that is paid for by the GSEs on an ongoing basis.
What evidence or reasoning do you have for these statements?
The first doesn't fit this administration's timeline. Mnuchin is committed to ending the conservatorships during this presidential term, and Calabria has talked about a sense of urgency. Neither of these comport with a multi-year timeline.
The second (explicit guarantee) requires Congress. That makes you just about the only one who believes Congressional action will actually happen.
We may see Fannie and Freddie Merge.
This is antithetical to the desire for more competition expressed by both Calabria and the administration. If this is to happen, it would have to be under a new president and FHFA director.
However, even if this plan takes a few years to implement, what is exciting is the street will price it into the shares immediately when confidence in the execution of that plan is established.
The problem with such a long timeline is that a new president can blow it up with his or her choice of Treasury secretary and FHFA director. Either of those is enough to cause the whole process to grind to a halt.
These shares will likely be worth between $12 and maybe up to $25.
Since your hypothetical situation is based on something that won't happen (according to Calabria and the administration), the share price estimates are meaningless.
This is also a great opportunity if they resume dividend yield. How often in the history of the market can you acquire 5%+ coupons for under $10 per share? Amazing really. The investment may just be to hold these and soak up the dividends each year.
A share price under $10 is no barrier to dividends, even at 5+%.
If you are going to invest mental energy, invest it in repeatedly contacting your elected officials, journalists, attorneys, and drumming up social awareness. That is far more powerful than you realize. People in Washington often want to stay in Washington. We've seen time and time again where they must betray their special interests to ensure they get re-elected. The GSEs are a political "investment" so you need to engage in the politics to move the needle.
By far the best part of this post. It's spot on. We want our front to appear educated, enlightened, and erudite.
Quote " shares will be likely be worth between $12 and maybe up to $25." In other words : 1. You are judging based on your state of mind. 2. It sounds identical to G. B. 3. Treasury, paulson who put both fnf in conservatorship is not wise enough by holding his shares in fnf for a decade just to earn between $12 to maybe up to $25.