Replies to post #774116 on Fannie Mae-No Politics (FNMA)

[FOFreddie]

Hi LuLeVan

Again I disagree.

Calabria's views will go the way of Mike Pence and will fade away in irrelevance. They are not influential now and will not be influential in a potential DJT Admin.

Under Collins the FHFA has wide discretion over the assets and questionable discretion over the equity of the GSEs. The 5th Circuit just opened the window for the equity v assets discussion regarding a 4617(f) challenge not to mention a MQD challenge. Theoretical for sure but there is no reason to believe that there will not be challenges over a cramdown. The dollar amounts are too great and you do not know who owns or will own the legacy common going forward.

[The Man With No Name]

I agree that it is impossible to know if there will be a cramdown or not. No one knows, except maybe a few insiders. I also agree that a cramdown is an act that could undermine confidence. But some people here claim that this is not the case because the underwriters of the new shares are selfish and want to get the most for themselves (at the expense of legacy commons). The same goes for the government.

What definitely supports a cramdown is the fact that Calabria claims in his book that Congress considers a write-down of the SPS illegal. This may or may not be true. In any case, it fits perfectly with the FHFA's and Treasury's previous ignorance of existing shareholders.

The government doesn't have to fear a lawsuit over the cramdown because 1) according to Scotus, the FHFA can do whatever it wants, and 2) the most common shareholders will gain from this decision is the loss in share price. That's less than 73 cents per share at today's price. The Lamberth trial also showed that the FHFA only had to pay 38% of the price loss on the day of the NWS announcement for its breach of good faith, even though Lamberth had previously ruled 100%.

Dilution is something new investors won't blink an eye at, nor will the government. If existing commons were diluted into oblivion, the total damages would only be the difference in price after the news broke, which could be nothing....since retailers won't understand what is happening anyway....but in the most unlikely scenario it dropped to a few pennies....the max damages are peanuts as compared to the upside the government will have.

Investment banks line up to buy newco shares of re-orged bankrupt companies.....they will do the same here.

[Wise Man]

Bradford continues to lie about what the SCOTUS said, here
and with the alias LuLeVan:

according to Scotus, the FHFA can do whatever it wants,

which isn't the first time that he says it and was already rectified multiple times before, like here, but he is paid to write lies.
He paraphrases his boss, Bill Ackman, who implied also that the FHFA has absolute discretion in its actions (an Agency without rules is his wishful thinking), contravening judge Willett "any action within the enumerated powers" and the very SCOTUS, with Justice Alito starting out his sentence with "rehabilitate FnF".
The financial rehabilitation has only one meaning: put FnF in a sound and solvent condition (the FHFA-C's Power or Authority). When soundness means restor capital levels and solvency is related to the abilty to meet the debt obligations, which can be referred to the obligations SPS as well. What FnF have done through the Separate Account, using these exceptions to the Restriction on Capital Distributions:
-Reduce the SPS (U.S. Code §4614(e)) under the guise of 10% and NWS dividends (also no earnings available for distribution as dividend, out of Accumulated Deficit Retained Earnings accounts)
-Recapitalization (CFR 1237.12 in 2011): under the guise of NWS dividend and the gifted SPS that carry an offset (reduction of Retained Earnings like a dividend. One is a charge, the other a distribution)
Justice Alito was authorizing the actions in the best interests of the FHFA "and the pubic it serves", while rehabilitating FnF, through the extortion of their resources (sale of NPL, RPL and REO inventory), but it was never meant to allow taking their capital away, as now the scammers peddle all the time.
Justice Alito said "beneficial to the FHFA" instead of "in the best interests of the FHFA" set forth in the law, to transmit the idea of "monetary benefit" and add to the confusion and help the hedge funds out in their Govt theft story for stock price manipulation.
A Conservatorship preserves their status as private shareholder-owned enteprises and any attempt to steal money from them must be defused.
Today FnF are not rehabilitated (Balance Sheets), evidence of a Separate Account plan that upholds the law: the Common Equity is held in escrow.

Huge adjusted capital shortfall($402B combined)over Min Leverage C.requirement, is driven by the Retained Earnings accts w/ Accumulated Deficit:
Official/Adjusted($B)
FNMA: -60/-134
FMCC: -38/-83
RE, only acct that absorbs future (unexpected) losses, not capital stock.#Fanniegate https://t.co/io1Qr07Fw4 pic.twitter.com/AjFQXuM1WL

— Conservatives against Trump (@CarlosVignote) November 12, 2023