FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[Guest cherzeca]

@berk

 

"I have to believe that they won't just agree with Lamberth's interpretation--otherwise, why did they ask for briefing on 4623 when nobody had even brought it up?"

 

right. this was a 4671(f) case in lamberth's eyes. no jurisdiction. if appeals court were going to affirm on that, very little reason to ask for briefing on 4623. and 4623 doesnt look like a winner for govt.

 

this is a tough case at intersection of admin/corp/sec/insolvency law.  too tough really for most district court judges, who usually are nose deep in trials.  to really get into the relevant case law, you have to have certain gravitas and ask searching questions.  neither lamberth nor caldwell were willing to do that.

[merkhet]

Just to clarify, my comments on the judicial herd are meant to focus on the APA claims brought by the Institutional Plaintiffs. The Class Plaintiffs have made an argument concerning monetary damages due to a breach of contract, which are specifically carved out of 4617(f). So Judge Caldwell's decision, which leans heavily on the lack of equitable relief available to plaintiffs is inapplicable.

[Steve_Berk]

That's right. And this is why I'm pinning my hopes and dreams on the Perry court. Say what you will about Ginsburg, but the guy really should've been on the Supreme Court--he was just too honest about his marijuana usage, and if it happened today, things would have been totally different. He's hardly going to be afraid to overturn a district court judge or ask for the development of a full record. Say what you will about Brown, but she is clearly unafraid and has a history of being outspoken and has a very distinct judicial philosophy and political viewpoint. This latest opinion is garbage--and we are definitely down, but certainly not out.

 

 

this is a tough case at intersection of admin/corp/sec/insolvency law.  too tough really for most district court judges, who usually are nose deep in trials.  to really get into the relevant case law, you have to have certain gravitas and ask searching questions.  neither lamberth nor caldwell were willing to do that.

[Guest cherzeca]

That's right. And this is why I'm pinning my hopes and dreams on the Perry court. Say what you will about Ginsburg, but the guy really should've been on the Supreme Court--he was just too honest about his marijuana usage, and if it happened today, things would have been totally different. He's hardly going to be afraid to overturn a district court judge or ask for the development of a full record. Say what you will about Brown, but she is clearly unafraid and has a history of being outspoken and has a very distinct judicial philosophy and political viewpoint. This latest opinion is garbage--and we are definitely down, but certainly not out.

 

 

this is a tough case at intersection of admin/corp/sec/insolvency law.  too tough really for most district court judges, who usually are nose deep in trials.  to really get into the relevant case law, you have to have certain gravitas and ask searching questions.  neither lamberth nor caldwell were willing to do that.

 

+1.  my thoughts exactly.  ginsburg is smartest guy in room, he knows it, and he's not about to be intimidated by anyone.

[Mephistopheles]

He's also apparently invested 150% or so of his net worth in the prefs...

 

How did you know that?  :o

But I guess that's normal with this guy. Having been burned by the Chinese reverse mergers, I guess he finally saved enough money to get back into the game again, so he is desperately needing to swing through the fence and make a large profit. Then he can start bragging about his legendary trade.

 

In his Seeking Alpha I believe he's disclosed taking out a loan and owns 60,000 prefs or something

 

https://twitter.com/donotlose/status/774516681334980608

[investorG]

Question, if the Perry appeals court remands, it goes back to lamberth (or someone else), and they rule for the gov't, and then it gets appealed again, will it go back to the same 3 judges (m,g,b) in the dc court of appeals, or a new roster is picked?

 

In other words, will G in particular want to make his mark on this case by either affirming or reversing rather than vacate/remand and leaving it up to others?

 

Thanks in advance for any replies

[Guest cherzeca]

Question, if the Perry appeals court remands, it goes back to lamberth (or someone else), and they rule for the gov't, and then it gets appealed again, will it go back to the same 3 judges (m,g,b) in the dc court of appeals, or a new roster is picked?

 

In other words, will G in particular want to make his mark on this case by either affirming or reversing rather than vacate/remand and leaving it up to others?

 

Thanks in advance for any replies

 

never seen that.  in theory, if there is remand, there will be an order for lower court to reconsider case consistent with opinion.  so if Ps think lamberth went off reservation and didn't follow contours of appellate opinion, Ps could always petition and seek direct relief from this panel arguing that lamberth didn't follow this specific panel's order, and i think this specific panel would consider that.  if there is re-appeal on some other point, then i think case would go back in queue.

 

EDIT:  in terms of G (or B for that matter) making a mark, there is something to the notion that some sort of finality 4 years after NWS is in everyone's interest, and a remand will only delay that, but i dont think that will motivate the court.  if G/B believe that treasury didnt have authority to "purchase" securities post 2009 and NWS is a purchase, then that is a simple reversal.  if they think that NWS is facially inconsistent with a C's duty under HERA, then that is a simple reversal.  but i think it more likely that G/B will, assuming they find they have jurisdiction notwithstanding 4617(f) and 4263, say there needs to be developed a full factual record to test whether NWS is consistent with C's duty.  of course, in that case, the court should be precise in setting forth the legal standard for the C's duty under HERA against which this factual record should be judged, and that involves a lot more heavy lifting for G/B than a simple reversal.

[Spekulatius]

He's also apparently invested 150% or so of his net worth in the prefs...

 

How did you know that?  :o

But I guess that's normal with this guy. Having been burned by the Chinese reverse mergers, I guess he finally saved enough money to get back into the game again, so he is desperately needing to swing through the fence and make a large profit. Then he can start bragging about his legendary trade.

 

In his Seeking Alpha I believe he's disclosed taking out a loan and owns 60,000 prefs or something

 

https://twitter.com/donotlose/status/774516681334980608

 

I think he posted in his newest article that he might default at the end of the month on his loan and/or sell some of his Fannies.

 

All balls and no brain.

[investorG]

thanks, cherzeca, for your response.

 

one more question:

 

is this win-win-win scenario possible (outside of the courts) -----  FNMA tenders for the junior preferred at a healthy discount to par (but still multiples of current levels),  the company books a large gain because the jr preferreds are carried on the balance sheet at par, and then rather than sending those earnings to Treasury, this one time they use the $ for a special dividend for common shareholders (the public 20pct portion)?

 

At this point I'd think many of the lawsuits would be dropped.

 

Thanks in advance for any comments.

[doughishere]

wut?

 

"Indeed, the very fact that FHFA itself has not brought suit to enjoin the Treasury from the alleged coercion it was subjected to suggest that FHFA was an independent, willing participant in its negotiations with the Treasury. FHFA’s interest in proceeding independently, if it felt such interest was jeopardized, is precisely the zone of interests congress sought to protect. Accordingly, Plaintiff lacks standing to pursue a claim pursuant to Section 4617(a)(7)"

[merkhet]

wut?

 

"Indeed, the very fact that FHFA itself has not brought suit to enjoin the Treasury from the alleged coercion it was subjected to suggest that FHFA was an independent, willing participant in its negotiations with the Treasury. FHFA’s interest in proceeding independently, if it felt such interest was jeopardized, is precisely the zone of interests congress sought to protect. Accordingly, Plaintiff lacks standing to pursue a claim pursuant to Section 4617(a)(7)"

 

[doughishere]

wut?

 

"Indeed, the very fact that FHFA itself has not brought suit to enjoin the Treasury from the alleged coercion it was subjected to suggest that FHFA was an independent, willing participant in its negotiations with the Treasury. FHFA’s interest in proceeding independently, if it felt such interest was jeopardized, is precisely the zone of interests congress sought to protect. Accordingly, Plaintiff lacks standing to pursue a claim pursuant to Section 4617(a)(7)"

 

 

+1

[Guest cherzeca]

thanks, cherzeca, for your response.

 

one more question:

 

is this win-win-win scenario possible (outside of the courts) -----  FNMA tenders for the junior preferred at a healthy discount to par (but still multiples of current levels),  the company books a large gain because the jr preferreds are carried on the balance sheet at par, and then rather than sending those earnings to Treasury, this one time they use the $ for a special dividend for common shareholders (the public 20pct portion)?

 

At this point I'd think many of the lawsuits would be dropped.

 

Thanks in advance for any comments.

 

i dont see any gain since jr pref not debt, so no debt retirement at discount gain

[investorG]

I believe a jr preferred tender offer / buyback below par value would increase the 'net worth' of the company, which would then be 'available to sweep' to the government (or in this case diverted for a 1-time common shareholder special dividend).

 

anyway, just an idea...

[Luke 532]

Republicans want more frequent discussion of ending Fannie, Freddie limbo

http://www.marketwatch.com/story/republicans-want-more-frequent-discussion-of-ending-fannie-freddie-limbo-2016-09-12

 

[Luke 532]

Judge’s ‘Paint By Numbers’ Decision Will Not Deter Shareholders

https://investorsunite.org/judges-paint-numbers-decision-will-not-deter-shareholders/

[Luke 532]

Thoughts?

 

Scroll down his feed: https://twitter.com/carney/with_replies

[Steve_Berk]

I have not studied the DE case like I have focused on Perry. But based on what I could determine, I believe that this is very bad for the DE case of Hindes/Jacobs. So in that case, in the federal district court of DE, the plaintiffs filed for a petition to certify a question of state law to the Supreme Court of DE. In other words, the district court would say, yes, I acknowledge that there is an important state law issue here that this case could rise and fall on, and we ought to recruit the experts in that area of law to weigh in on it. One of the critical arguments in Hindes/Jacobs is that the NWS provides for a dividend that is illegal under DE law. You'd think that an analysis of that DE law would be dispositive. But this court rejected the petition to certify this question and said "it is unclear to the court how an answer to Palintiff's general question of whether or not DE law permits this type of dividend right for preferred stock does much to aid in answering the more specific question at issue in this case: whether the FHFA, acting as a conservator....can amend the senior preferred stock agreements to pay the treasury a quarterly dividend in the amount of the positive net worth of the two GSEs" 

 

So it's not just a rejection of an attempt to engage in this process, but there's a statement by the court that it doesn't even think that answering the DE law question will resolve the case by itself. To make matters worse, the court also says "Additionally, another federal district court granted a motion to dismiss, precluding the plaintiff's claims in that case as a threshold matter, based on the same issues that Defendants present in their motion to dismiss..... While the court has not yet ruled on Defendant's motion to dismiss, it would be a waste of judicial resources to certify plaintiff's question to the DE Supreme Court when it is at least possible that the Defendant's motion will be granted."

 

Frustrating.... Down to Perry and Sweeney.

 

Thoughts?

 

Scroll down his feed: https://twitter.com/carney/with_replies

[merkhet]

It's definitely a negative.

 

I was somewhat flabbergasted by the same thing that Steve pointed out about how knowing the general question as to whether DE law allows for this kind of a security does not answer the specific question. In fact, it seems like the judge might be hinting that FHFA might have been granted some ability to do something that is generally prohibited as a result of HERA.

 

My initial thought is that this sort of collapses the DE case into the same inquiry as the Perry case, which is unfortunate. In other words, what might have been two uncorrelated bets is now the same linked bet.

[Guest cherzeca]

It's definitely a negative.

 

I was somewhat flabbergasted by the same thing that Steve pointed out about how knowing the general question as to whether DE law allows for this kind of a security does not answer the specific question. In fact, it seems like the judge might be hinting that FHFA might have been granted some ability to do something that is generally prohibited as a result of HERA.

 

My initial thought is that this sort of collapses the DE case into the same inquiry as the Perry case, which is unfortunate. In other words, what might have been two uncorrelated bets is now the same linked bet.

 

agreed.  as i read this, sleet is essentially saying that until i decide whether or not 4617(f) precludes jurisdiction, or better said, until perry appeals ct tells me what to do in this regard, even though not my circuit, then i am not going to certify a question that is important to decide only if 4617(f) doesnt preclude jurisdiction.

 

so hindes/jacobs will proceed only if the appeals court in perry says that i can proceed.  this has become a singularity centered around ginsburg and brown

[Eye4Valu]

This was always about Perry appeal and Sweeney. Not sure why the sideshows get so much airtime? I think it's going to boil down to Sweeney. It would be great to have a positive result come out of Perry appeal, but I'm not counting on it. My $$$ is on Sweeney. Time will tell.

[merkhet]

This was always about Perry appeal and Sweeney. Not sure why the sideshows get so much airtime? I think it's going to boil down to Sweeney. It would be great to have a positive result come out of Perry appeal, but I'm not counting on it. My $$$ is on Sweeney. Time will tell.

 

It's better to have three uncorrelated bets than two -- and the merits on Delaware are incredibly easy.

[Guest cherzeca]

i would point out that if perry ct remands, and doesnt reverse, that should mean that federal cts have jurisdiction under 4617(f).  if perry does this, then sleet "should" realize that he is empowered to address the delaware corp question.  so Ps dont need more than a perry opinion ordering development of a full admin record in order for sleet to see that lamberth was wrong on jurisdiction.  amazing how all of the district ct judges follow another district ct judge, waiting for an appeals ct panel to say yea or nay

[Guest cherzeca]

i have received two private messages asking about my view of perry appeals court probabilities, given the recent decisions by caldwell and sleet.  i will put this out publicly to all.  please feel free to criticize.

 

first, since caldwell was following lamberth, and i believe lamberth is wrong, i found nothing in caldwell that changes my view (in fact, after reading caldwell, i am even more convinced lamberth is wrong).  also, until sleet decides (or perry appeals court decides and sleet follows) that there is federal jurisdiction, certifying the state law question is not "outcome determinative".  so will perry appeals court overrule lamberth on the anti-injunction bar?

 

i wrote this elsewhere and will copy it here:

 

i think you will see a 2-1 ruling, with ginsburg and brown in majority, and millet in dissent.  i think you will see a remand to district court to develop a full administrative record.  implicit in this is a determination that there is no blanket bar injunction bar, but instead the district court must engage in a full inquiry into the facts to determine whether fhfa was acting within its authority.  i also think you will see a full discussion of the legal standard that the majority will tell the district court to apply in assessing the full administrative record. the devil will be in those details. say 60%.

 

i think there is a small chance there will be full reversal, instead of just vacate and remand. say 30%

 

i think there is a very small chance you will see affirmance.  even if affirmance, i think that at least the breach of contract and fiduciary duty claims will survive, even if in the unlikely scenario that the "purchase" and "bar on injunctive relief" claims are affirmed. say 10%.

 

if perry appeals court holds that there is no blanket anti-injunction bar, but the court must inquire whether fhfa was acting within it authority, then sleet should be empowered to determine whether the NWS is a valid security for it to cause the GSEs to issue, and then the delaware state corporate law question becomes front and center.

 

feel free to critique.

 

[Sunrider]

Oh man

Looking at this from outside the US, one would have to conclude that there is nary a judge there that has a bone of independent thought in their body (or any sort of backbone to speak of). What's wrong with these people and how lazy do they get?

 

Frustrating.