Replies to post #174563 on Fannie Mae-No Politics (FNMA)

[kabanch]

Thank you Obi.

[HGG]

Thanks Obit! Always providing amazing dissected information to the board! Without your support, I don't think I'll have held this long!
Cheers to you man

My only allowed post. Lol!

[sage4]

Thank you for your summary.

[Always wondering]

Tx obi. Looks like homework tonight

[chessmaster315]

The government's position is somewhat problematic. On one hand the government says that the (common) shareholders have no voting rights, but on the other hand, the government suggests the senior preferred sharhoders "voted" to allow the dividend sweep. The shareholders have voting rights or no, and they can not argue both sides of the position when it serves their own interests.
Generally, preferred shareholders do not have voting rights, but that is specific to each stock:
http://www.investopedia.com/terms/p/preferredstock.asp

In Koontz vs St Johns, Supreme court Justice Alito referred to it like this:

It makes no difference that no property was actually taken in this case. Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.
end quote Justice Alito.

This thinking appears to expand the definition of what constitutes a government "taking," in that lipstick on a pig is still a pig. The government can not dress up their taking in a costume and call it non taking.

[betahighlander]

Obit- thank you for the posts and analysis. I passed them on to others and credited you.(if this is a problem please let me know)

As for the legal cases favoring the pfds. Yes they have the strongest legal position. However their win is very good for commons. pfd- safer- commons - unlimited upside.

[TII]

Obi, as usual, you've done a masterful job of unpacking the documents legalese and explaining it in terms many can understand and relate to. You have reached Aaron Director Teaching Scholar status here on this board, at least in my book. Therefore, I would like to add an AD to your name. Obiteridctum AD, or Obi AD sounds about right to me. :)

Again, many thanks!

[Donotunderstand]

thank you for the analysis

Seems the plaintiffs first want to raise capital in F and F - via $ paid above 10%. This is the first on the list. To me this is good for common and preferred ? Seems its a way to create capital at F and F which makes a neon light of wind downs such that any "recevership or a non "pay out" wind down" is a SCREAMING YELLING INANE INSANE TAKING --- ??? thoughts. This is at first good for common and preferred - if the money counts as capital

Seems the next is also good for both. If the amount owed to GOV is reduced this is such a neon light shouting sign of F and F in good shape and the beginning of the GOV moving to 80% or zero % ownership and paying pfds and common?

The next few choices seem to be better for preferreds (and I fing it fascinating that they appear (implied or explicit?) - that by SR getting more then 10% they participate in profit and did not act like preferreds but more like common. Very logical - and it will come to word smithing and the judge if it gets to this level (v a flat out decision the sweep money belongs to F and F or the amount still outstnding is reduced !! - option one and two offered by the plaintiffs)

Do you or anyone know the amount so far (pre this round) that F and F or just our FNMA has paid over the 10% due to the sweep? I thought it was substantial as Fnma used a TON of tax credits and a bunch of loss reserve reversals to "create" income? (and thus cash to pay Treasury unders a sweep)

thank you - and lets thank the plaintiffs

As I recall a ton of banks bought insane amounts of FNMA prfd as the GOV allowed the banks to have more then 5% of reserves in FNMA prfd (and not other. The irony of it all will be part of the drama ---- the GOV saying to banks (prior) put money in FNMA pfds - its great for everyone. The judge will hear this 10 times minimum IMO

That issue was even at the PR announcement - where Paulson sais that is an issue - but said they would deal with it one by one

Time for some bank (shareholders) who got FDICed with a ton of FNMA pfd worth 25 cents suing now

[loobeyondbm]

obiteridctum: Comments on your post of Continental Lawsuit

In last Fall's NYU Law's conference on GSEs, I think in Panel 2, there's a conversation between Cooper, Troy Paredes (former SEC Commissioner) and an audience. Basically an audience claimed that the 3rd amendment changed the economic benefits among the shareholders so it was indeed an issuance of new common shares to the Treasury, i.e., re-characterization of senior preferred to common shares. His view was confirmed by the SEC commissioner. I think Cooper endorsed that view in this recent Continental Lawsuit. I am pretty sure Cooper has done the homework on this issue after the NYU conference.

See time 1:13:25