orthopa

Good question. Volume has been on the low side so maybe just some people who don't want to miss out early in the expected SCOTUS window. The market of course has the uncanny ability of pricing things in so maybe the SCOTUS will be good. The price was so low though that even a mildly positive decision would have bumped the price from where it was. The latest in the rumor mill was David Thompson was doing some calls. Not sure about what means specifically but maybe some action from that.

https://www.bnnbloomberg.ca/gop-s-toomey-seeks-democratic-support-to-free-fannie-and-freddie-1.1577201.amp.html?__twitter_impression=true&s=09

My impression is the Lamberth Trial was not going to start until the end of 2022 but if hindes is correct will be sooner. Getting summary judgement seems the quickest/best way to go.

I have been looking more deeply at FB too. Ex cash its very reasonably priced. It seems like a lot of the buyback in past years has gone to share compensation. A new buyback was announced but wont love if 25B goes towards just fighting share compensation. Im no where near tech savvy enough to argue for or against VR but dont mind getting it along with the core advertising business at these prices.

Sounds great guys/girls thanks!

Im looking to move some stuff to Interactive Brokers. I called and they said that the preferred are not listed as a ticker/security that they trade or have access to. Does anyone hold an account at IBKR and have the preferred with them? They have some pretty weird OTC stock rules it seems. TIA.

With Calabrias fate decided or expect to be negatively decided we can expect to hear zero out of him going forward for the next couple of months. What else is there left for him to say? He was left at the altar. Fingers can be pointed all around as to what happened and why but it seems nearly all the work he put in over the last 2 years was a big waste of time. I wonder if any of his work sticks around. The capital rule will likely be tweaked again but do they go through the process of getting new FAs again?

What is the impetus to make the gov act post SCOTUS if the ruling is favorable? If it seems the gov will end up paying no matter what why wont they just drag things along? Best case is a SJ as cherzeca has said. The is the language at the end of the last agreement to address treasury's stake but at this point Im not sure thats anything more then a deadline that will come and go.

I think you are misunderstanding how the SPS dividend works. The SPS don't get a dividend until FnF hit their full with-buffers capital level of 4% of adjusted total assets, even if a future FHFA director makes a new capital rule due to Section 5.15, unless Yellen and the new FHFA director amend that out. Once full capitalization is reached ("Capital Reserve End Date") the SPS get the lesser of any net worth increase from the previous quarter and 10% of the SPS liquidation preference. But dividends to other classes of shareholders subtract from net worth just as earnings add to it. So once dividends are paid out to other preferred and common shareholders, the SPS gets the rest of what FnF earned in that quarter. What that means, paradoxically, is that the SPS are at the back of the line in terms of dividends once full capitalization is achieved, and the SPS get no dividends at all before that. It remains to be seen how easy or possible it will be to sell new common shares who have zero liquidation preference ever but will get normal utility-like dividends. Without a settlement to the lawsuits and private capital raises the SPS will get no money from FnF for decades. Not even a commitment fee, unless a future FHFA director and UST Secretary reinstate it. Altogether this agreement actually gives Treasury an incentive to move quickly on raising private capital: slow accumulation of retained earnings provides less taxpayer protection (in terms of how much capital stands in front of UST's LOC) compared to fast and large capital raises, and those raises accelerate UST's timeline to getting payments on its SPS. The SPS dividend also answers a question I had, which was "what would FnF do with all their earnings once they hit full capitalization?" I couldn't imagine the government would be okay with private shareholders getting enormous dividends, and FnF would have no reason to save any money past full capitalization anyway. Now we know: UST gets all the extra money. Something else to consider is that 4% of adjusted total assets, the threshold at which the SPS divs turn on, was $265B as of last June and grows with FnF's asset base. I use 2.5% per year as a ballpark. FnF's combined core capital, though, was negative $167B at that time. That's a $432B gap! FnF make around $20B in earnings per year, but the 4% target grows at $6.6B per year right now and faster in the future as the 2.5% increases compound. Carrying out the math, that means not only will FnF not be fully capitalized through retained earnings by 2028, it will never happen at all! The smallest the gap between FnF's core capital and the requirement gets is $72B in 2065, then the compounding of the 2.5% becomes greater than $20B per year and the gap starts to widen again. Now, assuming flat earnings of $20B per year is probably unrealistic. If they also grow at 2.5% per year, which I think is reasonable because FnF's earnings are also roughly proportional to the size of their asset base, the $432B gap closes in a finite amount of time, but not until 2044. Note: only the SPS balance on the balance sheets count (negatively) towards core capital, a total of $193B for FnF combined. Increases to the liquidation preference due to the letter agreements, including the one from Thursday, are not reflected on the balance sheet and thus don't affect core capital at all. Very nice analysis Midas. So on paper in the end, it is the private gain/public losses that could occur. Calabria has stated time and time again the time to fix the roof is when its shining. With NWS ended as Midas points out Treasury is never in line for an endless stream of dividends but with FnF still leveraged where they are first in line to have to bailout the GSEs again. Im not sure what the excuse would be framed as if the Gov had to bailout FnF again but with a capital rule in place, an eager (for now) FHFA director, FA advisors, etc my assumption would be a stubborn Treasury would be at fault. In the aftermath this may note even matter but it is what it is. A couple points that come to mind as I continue to think this through. 1. The litigation must have either really bothered Mnuchin or he wanted it to be an impetus to something happening. When looking at the conditions for raising capital and leaving conservatorship there are blocks set up. 2 for selling stock. Treasury exercising warrants AND litigation settled. Treasury already had the upper hand in that they have to exercise the warrants. They have till 2028 to do that so could stall all they want but they want the litigation gone too. Same with leaving conservatorship. Have to meet cap levels but with the SPS in place that is a big impediment to raising capital, esp common stock, while in conservatorship. But again Tsy wants the litigation gone too. My read is that Tsy had blocks on both both explicitly with the warrants and implicitly with selling common in conservatorship without adding anything else. The litigation no matter how much it seems to us does not matter, must inside Tsy. They want it gone. 2. The more I think about what options Mnuchin had writing down the Sr Preferred from his seat would have been very tough. Calabria with his objectives its a no brainer. If optics matter much easier to have SCOTUS throw down the hammer then cave. Does treasury in the end feel like they will have to retire SPS either now or in April after consultation with the DOJ? The answer in believe is in their requests in the letter agreement. I also think the decision to discuss restructuring of the SPS in the late summer/fall time frame per the LA will be quite obvious if SCOTUS rules for plaintiffs and there is a 120B decision coming. 3. Not sure how much to actually take from the Treasury blueprint or end of the LA but it does make you feel warm and fuzzy. Not sure how binding this is at all and if not ignore this but Treasury admits in the end the SPS have to go away, third party capital will be raised, and that distributions will be made as appropriate. I could be wrong but if both FHFA and Tsy signed the LA they cant just pick and choose what parts are agreed upon and enforceable. If its in the text that the LA is tied to Calabrias Capital rule can either just ignore that? The word endeavor here isnt great. 4. In regards to investorGs pointing out Mnuchins flip flop on CD I never for one believed that Treasury was ever up for negotiations. Is the Tsy who do they negotiate with????? There have been a couple rumors of this with Berkowitz a while back in an annual letter and others but Treasuries request in the LA has me thinking otherwise. Since when does Tsy ask for lawsuits to go away? SCOTUS surely is a gamble for plaintiffs but if negotiations did truly take place at some level they told Mnuchin to go kick rocks. All speculation of course and probably worthless to think about but whatever. 5.This LA no doubt is complex but as Midas points out Tsy really has nothing to gain now by waiting. No commitment fee, an escrow account of liquidation preference they may never get their hands on, requests for ending exposure to material lawsuits at the SCOTUS, and exposure as the largest shareholders of severely undercapitalized entities that underpin the US housing market. 6. Bidens team has been reported as not in a rush to do anything on housing but if Yellen really was looped in on this (she is not my new savior by any means) and the new Tsy understands where the incentives are hopefully someone lets the Biden team know what the GSEs really represent now to Tsy. If SCOTUS goes for plantiffs 3 months from now they could hold an escrow account with an up to 120B liability attached to it and be responsible as the unreimbursed back stop if the economy takes a shit. What gets them out is making $$$ via warrants and getting paid for what they are doing now anyway in a commitment fee.

Im still unpacking everything and thinking this through but Ill state the obvious in that this wasn't optimal. Alot of this has already been posted but just easier for me to put it on paper. 1. The plan no doubt incentivizes raising capital ASAP and the 70B cap no doubt put heavy pressure on this. If not met early with the increasing preference it becomes near impossible especially for Fannie to get out @3%. The door is open only early and and the legal criteria puts plaintiffs in a bind no doubt. Win SCOTUS and the door opens up, you lose and your waiting for Lamberth and the increased preference bones out of ever getting out on your own with the treasury secretary. What a bastard Mnuchin is. Its clear and I find this interesting that Treasury structures the deal in a way that its easier to exit faster then slower. I thought many things about mnuchin but the closer we got to SCOTUS never that he wanted to settle. 2. Apparently Yellen signed off on this too. If we thought we could trust Mnuchin I dont know I could trust Yellen any more then I could throw all 5 feet of her. She doesnt have a track record of any ill to GSEs. 3. Incentives will drive this for both sides. Plantifs now have a big incentive to try to get this all over ASAP with the clock ticking and think long and hard about the SCOTUS gamble. Yellen has to contemplate an adverse SCOTUS ruling and sending "billions to greedy hedge funds" if they lose on their watch. Maxine Waters thought this agreement was bad, sheesh, that may damn near kill her. 4. Id like everyone's opinion on how binding this is. Lost in these documents after you get shredded is that Treasury will work to restructure their stake in the GSEs. Im done hoping and wishing but does a Yellen treasury even have to do this? This maybe just a carrot but an obvious admission that its current state is unworkable. Again if Yellen is truly on board big win but I not holding my breath thinking about it. 5. Question for cherzeca and excuse me if this is obvious but a gov win on the constitutional claim keeps Calabria in his job right? Or is that only if found for acting director? Im not clear on that. What decision keeps Calabria in his job? What the likely hood that happens and we win the APA claim? slim to none? 6. At least the gov isnt getting the cash immediately with the increased liquidation preference but its just more of a loan that Treasury admits they may have to restructure anyway in the end so that does give them some incentive to get the warrant money. Biden is already spending like a drunken sailor so that warrant money will be attractive at some point one would think. US could just borrow more $$$ so maybe not. 7. Still very surprised at the legal angle of this agreement. This obviously was a huge stumbling block for Mnuchin and in the end maybe the en banc and SCOTUS taking up the case was the final road block on his end as he thought his hands were tied. Not believing his thinking was going to be benevolent otherwise but he was waiting for this to all play out too in a 4 year term. 8. Calabria needs a dance partner but he maybe the sacrificial lamb if Yellen want to gamble. What's worse losing a 120B adverse judgement but getting rid of Calabria or saving face before that happens but having to work with a guy you didn't choose from a Trump administration whos goals are opposite your bosses? Maybe I'm over estimating how much Treasury cares about an adverse judgement but there seems to be a real incentive on their part to at least come to the table. An April judgement is nice and soon and Im sure Mnuchin/Yellen/Calabria are aware of this. 9. Leaving this to legislation when the Dems control the entire gov is a nightmare. In 22 months maybe that flips and in 4 years we re-elect someone but I'm tired of thinking of this in years. F that. Parrot et al are ready to walk in soon. Serious consideration needs to be given to what those assholes can do with access again. Have to think on this more but its what we have and it seems at a minimum the agreement incentives action sooner then later and recognizes both parties and "stuff" at stake.

https://home.treasury.gov/news/press-releases/sm1236

Sources maybe on thing but the reporting, headlines included have been very anti-GSE their entire career so some skepticism should be warranted. Ackerman has been quiet for a month so no one is talking to him either at the moment.

+1 Listen to this. This guy is supposedly our best source and he says "I don't know" 18 times in a matter of 3 minutes. He's in the woods like everyone else. He goes off mortgage industry sources (take your guess on that) who were briefed but have no idea what is going to happen. Unbelievable. His best guess he is "doesnt think" the PSPA will be written down. His source blows. This was supposed to come after the bell according to his source. https://video.foxbusiness.com/v/video-embed.html?video_id=6222969337001&ref=twitter.com Just a bunch of word salad convoluting ownership, percentages, court cases, what conservatorship means, what it means to get out, money going here money going there. This guy is shot and he, Joe Light, and Ackerman are moving the market with their reporting. FWIW when the Treasury plan was under embargo in 2019 he tweeted based on his read the plan was bad for common shareholder which actually meant nothing so this guy is useless too.

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation. My best gin waiting in the fridge in case we have a happy ending LOL I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement. all hat no cattle for that putz. three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that? ending litigation, in his warped mind, makes it easier to raise money. he assumes that trashing existing shareholders is no impediment to finding new shareholders That part I guess I get but I guess my thought or point is regardless of what the SCOTUS decides if FnF are not in a position to raise capital a ruling does not make anything easier or harder. Assumed as Sr not written down or dealt with and not on CD (in conservatorship) what does it even matter what the SCOTUS rules? Rule against gov and doesnt matter as SCOTUS cannot take the companies out of conservatorship. Mnuchins comment I believe implies that even if you screw old shareholders, they have to be in a position to even court new shareholders. This coming amendment has to make a SCOTUS ruling matter.

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation. My best gin waiting in the fridge in case we have a happy ending LOL I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement. all hat no cattle for that putz. three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?