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

[doughishere]

fnma common up over 10% today. anyone hear rumors?

 

Hah no wonder my broker asked me a ton of questions about Fnma when I called him up this morning....I knew something was weird.

 

Chez, don't look at prices daily. Can't help ya.

 

Nothing could go wrong here.

http://m.ocregister.com/articles/percent-714878-credit-mortgage.html

 

cheez i often check prices.  you think i only read briefs?

 

 

Ya you and merk mainline briefs. lol kidding.

[Guest cherzeca]

for those who like to mainline briefs ( ;)) this recent "amtrak" opinion by judge brown is worthwhile reading:  https://www.cadc.uscourts.gov/internet/opinions.nsf/7DB0A5319D2F70D385257FA4004FAB2B/$file/12-5204-1611061.pdf

 

not on point with perry, but enough of a related situation as to indicate "where judge brown is coming from"

[doughishere]

Dont mind if I do.

 

 

We conclude PRIIA violates the Fifth Amendment’s Due Process Clause by authorizing an economically self-interested actor to regulate  its  competitors1  and violates  the  Appointments  Clause for  delegating  regulatory  power  to  an  improperly appointed arbitrator.

 

Edit: I always wish i picked being a lawyer if for the sole fact you could use cool latin phrases....i took latin in HS and kinda regret not following on that...cant do it all i guess.

 

 

 

Moar!

 

  It  alleged  PRIIA also  “violates  the  due  process  rights  of  the  freight  railroads  because  it  purports to  empower  Amtrak  to  wield  legislative  and  rulemaking  power to  enhance  its  commercial  position  at  the  expense  of  other  industry  participants.” [My edit: Sound Familiar?]      Id.    The freight  operators’  due process  claim  thus can  only  be  seen  as  premised  solely  on  Amtrak’s status as a private entity by reading paragraph 54 as redundant  of  53,  a  view  we  do  not  share

 

Because im a slow reader since the last edit:

 

Our  reading  of  the  freight  operators’  complaint  is  corroborated  by  their  summary  judgment  briefing,  which  attacks PRIIA’s  constitutionality  “even  if  Amtrak  were somehow deemed a government agency.”

 

I added that at the end......

 

No  clause  in  our  nation’s  Constitution  has  as  ancient  a  pedigree  as  the  guarantee  that  “[n]o  person  .  .  .  shall  be  deprived  of  life,  liberty,  or  property  without  due  process  of  law.”....blah blah blah Magna Carta......

 

 

I need to get a life.....

 

The specific fairness question we face here is whether an economically  self-interested  entity  may  exercise  regulatory  authority  over  its  rivals.

 

 

Sound like someone? Im pretty sure the NWS has "directly impacted" my investment operations. I suppose thats a mater of opinion though.

 

First, Amtrak is operated “as a for-profit corporation” charged with  “undertak[ing]  initiatives  .  .  .  designed  to  maximize  its  revenues. Second, Amtrak,  jointly  with  FRA,  is  tasked  with  developing  the 11 metrics  and  standards  for  passenger  train  operations,  which  directly impact freight train operations.”

 

 

 

I once had a turtle named lucky.

 

They  argue  an  economically  self-interested  actor may not exercise regulatory power, and yet here, Amtrak is a self-interested  market  participant wielding regulatory  power.  TheGovernment deniesAmtrak’s    self-interestis constitutionally  relevant  and  avers  the  established  procedures  accord all the process freight operators are due.

 

 

Redundant but i like to use the quotes button.

 

Our  view  of  this  case  can  be  reduced  to  a  neat  syllogism:  if  giving  a  self-interested  entity  regulatory  authority  over  its  competitors  violates due process (major premise); and  PRIIA gives a self-interested  entity  regulatory  authority  over  its  competitors(minor premise); then PRIIA violates due process.

 

 

see above.

 

The  abstract  legal  question  at  the  heart  of  this  case  is  whether  it  violates  due  process  for  Congress  to  give  a  self-interested  entity  rulemaking  authority  over  its  competitors.

 

 

interesting little tid bit....

 

 

The  Supreme  Court  has  confronted  the  question  only  once.  See  Carter  v.  Carter  Coal  Co.,  298 U.S  238  (1936).    The Carter  Coal  Court  invalidated  a  delegation  that  empowered  one  set  of  competitors  to  regulate  a  rival  set.    Id.at  311–12.  That  decision  predates  the Administrative  Procedure  Act  and  the    birth    of    the    Court’s    modern    administrative    law    jurisprudence.

 

 

Coal Something or anothter case:

 

Put  simply,  the  Act  endowed  these  majority  producers  and  employers  with  the  authority  to  set  wage  and  hour  requirements  the  minority  producers and employers had to comply with or else forfeit all their customers...This  is  legislative  delegation  in  its  most  obnoxious  form; for it is not even delegation to an official or an official  body,  presumptively  disinterested,  but  to  private persons whose interests may be and often are adverse  to  the  interests  of  others  in  the  same  business.

 

The    difference    between    producing    coal    and    regulating  its  production  is,  of  course,  fundamental.  The  former  is  a  private  activity;  the  latter  is  necessarily  a  governmental  function,  since,  in  the  very  nature  of  things,  one  person  may  not  be  intrusted  with  the  power  to  regulate  the  business  of  another,  and  especially  of  a  competitor.    And  a  statute    which    attempts    to    confer    such    power    undertakes    an    intolerable    and    unconstitutional    interference    with    personal    liberty    and    private    property.

 

 

One day we cleaned Luckys tank outside and left him in the tank..outside over night.

 

 

That naked  self-interest compromised  their  neutrality  and  worked  “an  intolerable  and  unconstitutional interference with personal liberty and private property.”

 

 

 

This is rich. Google that term.

 

 

The  Government’s  case  of  choice,  Association  of  National  Advertisers,  manifests  a  higher  tolerance  for  administrative  bias  than  the  Court’s  in  Carter  Coal.    It involved  a  different  kind  of  rulemaking  bias:  prejudgment.

 

 

 

The Cinderella  test.....im going to use that line more often. About half way though....shit PTI is on soon.

 

 

What  is  most  instructive  about  Association  of  National  Advertisers is not its holding, which is not directly controlling here, but rather its theory about permissible bias.  Ultimately, it  came  down  to  the  court’s  concern  over  the  propriety  of  judicial  interference  in  policy  debates.    Applying  the  usual  standard  of  a  “neutral  and  detached  adjudicator”  to  the  rulemaking  context  “would  plunge  courts  into  the  midst  of  political    battles    concerning    the    proper    formulation    of    administrative  policy.”Id.  at  1174.    The  court  observed,  “[w]e  serve  as  guarantors  of  statutory  and  constitutional  rights,  but  not  as  arbiters  of  the  political  process.

 

 

To  conclude  that  Amtrak’s  political  accountability—remote  as  it  is—removes  the  taint  of  any  potential  for  bias  would  be  a  simple  way  to  resolve  this  case.    After  all,  legislators  may  legislate  in  pursuit  of  their  own  naked  self-interest.    Congress  had  to  pass  the  STOCK  Act  just  to  put  a  stop to congressional insider trading.  SeeTamara Keith, How Congress  Quietly  Overhauled  Its  Insider-Trading  Law,  NPR, http://www.npr.org/sections/itsallpolitics/2013/04/16/177496734.    Those  whose  rights  may  be  trammeled  by  legislators  brazen enough to pursue their own economic self-interest “are protected  in  the  only  way  that  they  can  be  in  a  complex  society, by their power, immediate or remote, over those who make  the  rule.”

 

 

Noo.....self interest......I dont believe it.

 

 

 

Hamilton nod....nice.

 

The next day lucky was gone and his rock castle was dropped on the concrete next to the tank...

 

Indeed, government’s  increasing  reliance  on  public-private    partnerships    portends    an    even    more    ill-fitting accommodation between the exercise of regulatory power and concerns  about  fairness  and  accountability.

 

 

That sound you hear is your mind exploding....

 

Wherever Amtrak may fall along the spectrum between public accountability and private self-interest, the  ability—if  it  exists—to  co-opt  the  state’s  coercive  power  to  impose  a  disadvantageous  regulatory  regime on its market competitors would be problematic

 

Side note on the above last one....Muger has said that at least Allan Greenspan has admitted hes wrong.......very uncommon thing.

 

 

I like to think hes still alive today out in the stream near my parents old place.

 

We conclude, as did the Supreme Court in 1936, that  the  due  process  of  law  is  violated  when  a  self-interested entity is “intrusted with the power to regulate the business . . .

 

WHAT?!

 

Finally, Amtrak  is  “dependent  on  federal  financial  support”  to  the  tune  of  more  than  “$1  billion  annually.”Id.    “Given  the  combination  of  these    unique    features    and    its    significant    ties    to    the    Government,”  the  Court  concluded,  “Amtrak  is  not  an  autonomous private enterprise.”

 

 

ohhh.....

 

 

But concluding “Amtrak is not an autonomous private enterprise” is  not  the  same  as  concluding  it  is  not  economically  self-interested.

 

 

Get ready for this........seatbelt on?

 

 

Though  a  government  entity,  Amtrak  is  still  statutorily  obligated  to  “be  operated  and  managed  as  a  for-profit corporation.”

 

 

Put that in your pipe and smoke it.

 

 

Consistent with that  obligation,  Amtrak  is  “to  make  agreements  with  the  private sector and undertake initiatives that are consistent with good  business  judgment  and  designed  to  maximize  its  revenues    and    minimize    Government    subsidies.”

 

 

 

 

Side not this is what Buffet and Munger mean when they talk about incentive........and the power of the Gov't to change those....make no mistake folks.

 

Moreover,  Congress  built  financial  incentives  into its scheme to coax its profit-maximizing efforts, allowing Amtrak’s  officers  to  receive  pay  greater  than  “the  general  level  of  pay  for  officers  of  rail  carriers  with  comparable  responsibility” for any year in which Amtrak does not receive federal  assistance.

 

 

Too bad they arnt doing the above one with F&F. Anyone got a no credit score Fannie loan yet?

 

 

Do as i say not as I do.

 

The  Government  relies  on  Amtrak’s  obligation  to  fulfill  numerous other  statutory  goals  for  the  public  good  as  evidence that it is not economically self-interested.  But many corporations  are obligated  to  compromise  profit-seeking ambitions  pursuant  to  statutory  goals  aimed  at  public  goods.

 

 

This one time at band camp......

 

 

Amtrak’s  self-interest  is  readily  apparent  when  viewed,  by  contrast,  alongside  more  traditional  governmental  entities  that are decidedly not self-interested.  The government of the United States is not a business that aims to increase its bottom line  to  achieve  maximum  profitability.  Unlike  for-profit corporations,  government  strives—at  least  in  theory—for  an  equilibrium  of  revenues  and  expenditures,  where  the  revenue  obtained is no more and no less than the operating costs of the services  provided.    Amtrak’s  charter  stands  in  stark  contrast.  Its  economic  self-interest  as  it  concerns  other  market  participants is undeniable.

 

 

 

 

 

Congress delegated its legislative power to an entity that it    designed to    be    the    opposite of    “presumptively  disinterested.” The  Supreme  Court’s  conclusion  that  Amtrak  is  a  government  entity  resolved  the  nondelegation  issue  that  was  the  primary  focus  of  our  earlier  decision.    But  it  left  a  due  process  one.    Make  no  mistake; our  decision  today  does  not  foreclose Congress from tapping into whatever creative spark spawned  the  Amtrak  experiment  in  public-private  enterprise.  But  the  Due  Process  Clause  of  the  Fifth  Amendment  puts 

28 Congress  to  a  choice:  its  chartered  entities  may  either compete, as  market  participants, or  regulate,  as  official  bodies.  After all, “[t]he difference between producing . . . and regulating  .  .  .  production  is,  of  course,  fundamental.”  Id.(emphasis added).  To do both is an affront to “the very nature of things,” especially due process.

 

 

 

 

 

I got bored and left when it talked about the apointments clause........sorry if this post and its edits are a little overzealous.  could be the 24oz of coffee i had 4 hours ago...

[Steve_Berk]

The discussion of due process is really interesting. You see how Judge Brown framed the issue in that case. here is how Brown lays out the due process/fairness issue:

 

The specific fairness question we face here is whether an

economically self-interested entity may exercise regulatory

authority over its rivals....

 

We agree with the freight operators. Our view of this

case can be reduced to a neat syllogism: if giving a selfinterested

entity regulatory authority over its competitors

violates due process (major premise); and PRIIA gives a selfinterested

entity regulatory authority over its competitors

(minor premise); then PRIIA violates due process. 

 

-- the court is concerned with providing regulatory authority to an entity that has a conflict of interest/self interest. Of course we're not talking about the exact same type of conflict of interest, but we still are making a case where the Treasury is not acting in the interest of Fannie/Freddie or even the taxpayers, but in its own interest. And if that is the case, at least there should be an opportunity to litigate... because you can't have a statute that carves out basic due process of the law.

 

for those who like to mainline briefs ( ;)) this recent "amtrak" opinion by judge brown is worthwhile reading:  https://www.cadc.uscourts.gov/internet/opinions.nsf/7DB0A5319D2F70D385257FA4004FAB2B/$file/12-5204-1611061.pdf

 

not on point with perry, but enough of a related situation as to indicate "where judge brown is coming from"

[TonyG]

Going back on plaintiffs filing a judicial notice for court of appeals regarding watt and fnma ceo saying they need capital, what would be stopping plaintiffs from filing that?

 

[merkhet]

Going back on plaintiffs filing a judicial notice for court of appeals regarding watt and fnma ceo saying they need capital, what would be stopping plaintiffs from filing that?

 

They already mentioned that Watt said the GSEs need capital in their 4623 brief. (It's towards the end.) Not sure what the FNMA CEO says matters he is not part of FHFA.

[merkhet]

Another unsealing request

 

Jennifer Orr, Esq. -- one of Ms. Robinson's lawyers at Taft Stettinius & Hollister that represents her in the lawsuit filed in Kentucky -- filed a Motion (Doc. 321) today asking Judge Sweeney to unseal documents obtained by Fairholme and referenced in Ms. Robinson's amended complaint.  Because the Motion makes reference to confidential discovery materials it was filed under seal and is not available to the public at this time.  The docket entry suggests that Ms. Robinson is asking for dozens of documents to be unsealed.  Responses to Ms. Robinson's Motion are due by May 31, 2016.

 

I'd like to see some more pressure on the government. This has dragged long enough.

[doughishere]

http://giphy.com/gifs/michael-jackson-eating-popcorn--GjYjLvGErsggg

[doughishere]

Bill on F&F:

 

Fannie Mae (FNMA) / Freddie Mac (FMCC)Fannie’sand Freddie’s underlying earnings continued to progress modestly in the core mortgage guarantee business as the guarantee fee rate increased and credit costs declined. In addition, the non-core investment portfolio continued to shrink, resulting in a less risky and more capital-light business model. While underlying earnings improved, reported earnings remained volatile due to non-cash, accounting-based derivative losses in the non-core investment portfolio. As a result

5of the derivative losses and the Net Worth Sweep, the companies are at risk of requiring a capital draw from Treasuryto maintain a positive net worth. As a result, thererecentlyhave been a number of proposals from policymakers, trade groups, and industry analysts that seek to have the GSEs retain capitalso they are capitalized on a standalone basis.Inthe Perrycase in the D.C. Court of Appeals, new evidence came to light that shows Treasury entered intothe Net Worth Sweep immediately after learning from Fannie Mae’s CFO that the company expected to soon realize ~$50billionof profits from reversing a deferredtax allowance and expected to become sustainably profitable over time. We believe this new evidence further bolsters the Perryand Fairholmecases and our contention that the Net Worth Sweep is illegal

 

 

 

 

http://www.valuewalk.com/wp-content/uploads/2016/05/Pershing-Square-1Q2016-Investor-Letter_May-11-2016_PSH-1.pdf

[hardincap]

I've been rereading the transcript and I find myself more pessimistic (though not yet pessimistic overall) about the judges ruling in favor of the Ps. There were a few very subtle "bearish" indicators that were hard to pick up on the audio:

 

MR. OLSON:  -- into a sound and solvent situation if every nickel of profit you make is given to someone else. You cannot possibly, yet --

ahead.

JUDGE GINSBURG:  No, that's clearly true.  Go

...

JUDGE GINSBURG:  But they could avoid further spiraling down, right?

 

Here Ginsburg was actually bolstering Millett's argument that nws could be appropriate conservator action if they thought they were spiraling down.

 

JUDGE GINSBURG:  I don't know why we should go any further than that.

MR. OLSON:  Well, perhaps.  I think that you have enough, and I'll, I think I've taxed your patience, Judge Brown, so I will sit down.

JUDGE GINSBURG:  That's not what I meant, but I, but --

 

These are in addition to the fact that I dont think Olson had a strong reply to Brown's question of could they have morphed from conservator to receiver. Or have become a receiver and not given proper notice.

 

Millett in general sounded even more skeptical and biased towards the government than I had thought before, and she didn't give any indication that she was satisfied or agreed with Olson's rebuttals.

 

@merkhet @cherzeca curious what you guys think. have you guys gotten a chance to reread the transcript after maybe the emotional high of the moment has worn down?

[merkhet]

Haven't re-read the whole thing, but I don't disagree with your points.

[Guest cherzeca]

"JUDGE GINSBURG:  I don't know why we should go any further than that.

MR. OLSON:  Well, perhaps.  I think that you have enough, and I'll, I think I've taxed your patience, Judge Brown, so I will sit down.

JUDGE GINSBURG:  That's not what I meant, but I, but --"

 

context of this was right after an olson/ginsburg colloquy where ginsburg all but agreed that motivation of conservator was relevant, which augers for at least remand for further fact finding, so i disagree that this snippet is adverse to anything except a pure reversal...which ginsburg seemed to be inching towards with DOJ's lawyer

 

[Guest cherzeca]

after having listened and read, i think you will get a remand for further fact finding.  i actually think it will be unanimous.  the real issue is what kind of standard app ct gives d ct to judge merits of NWS after further fact finding.  millett will want loose standard, but i think ginsburg and brown will want stricter standard.

 

if i am right, then i believe the app ct will hold that the anti-injunction bar does not prevent judicial review/inquiry, since the holding is for further judicial inquiry into facts, which means that hindes/jacobs is open for analysis of preferred terms if that court follows app ct

[TonyG]

If remanded for further fact finding, whats your best estimate of how long that would take?

[Guest cherzeca]

If remanded for further fact finding, whats your best estimate of how long that would take?

 

very hard to say.  for example, will judge sweeney release from priviliege 11,000 docs? perry plaintiffs will want to see those. if she does, will there be an interlocutory appeal? can 't say i know whether govt will have the right to appeal her order to compel. etc.

 

judge lamberth is known to run a tight ship in terms of discovery but he was adverse to plaintiffs first time around. will lamberth try to stick it to perry plaintiffs?  who the f knows.

 

but if anti-injunction bar holding is vacated, then hindes/jacobs can proceed if that judge follows, and that is a question of law not fact, so the question whether delaware law applies to fnma pref stock terms and then the question of whether NWS is valid under delaware law can also proceed to decision.

[muscleman]

If remanded for further fact finding, whats your best estimate of how long that would take?

 

very hard to say.  for example, will judge sweeney release from priviliege 11,000 docs? perry plaintiffs will want to see those. if she does, will there be an interlocutory appeal? can 't say i know whether govt will have the right to appeal her order to compel. etc.

 

judge lamberth is known to run a tight ship in terms of discovery but he was adverse to plaintiffs first time around. will lamberth try to stick it to perry plaintiffs?  who the f knows.

 

but if anti-injunction bar holding is vacated, then hindes/jacobs can proceed if that judge follows, and that is a question of law not fact, so the question whether delaware law applies to fnma pref stock terms and then the question of whether NWS is valid under delaware law can also proceed to decision.

 

If we get the remanded decision soon, then MDL panel might decide that all cases go to judge Lamberth for consolidation, and the government suddenly gets a slam dunk.

 

I think the possibility of that is low but not zero.

[fareastwarriors]

http://www.wsj.com/articles/bets-on-fannie-and-freddie-get-help-from-lobbyists-1463087581.

 

Bets on Fannie and Freddie Get Help From Lobbyists

 

A group of hedge funds including Paulson & Co. and Perry Capital is helping to finance a lobbying campaign

[Guest cherzeca]

I've been rereading the transcript and I find myself more pessimistic (though not yet pessimistic overall) about the judges ruling in favor of the Ps. There were a few very subtle "bearish" indicators that were hard to pick up on the audio:

 

MR. OLSON:  -- into a sound and solvent situation if every nickel of profit you make is given to someone else. You cannot possibly, yet --

ahead.

JUDGE GINSBURG:  No, that's clearly true.  Go

...

JUDGE GINSBURG:  But they could avoid further spiraling down, right?

 

Here Ginsburg was actually bolstering Millett's argument that nws could be appropriate conservator action if they thought they were spiraling down.

 

JUDGE GINSBURG:  I don't know why we should go any further than that.

MR. OLSON:  Well, perhaps.  I think that you have enough, and I'll, I think I've taxed your patience, Judge Brown, so I will sit down.

JUDGE GINSBURG:  That's not what I meant, but I, but --

 

These are in addition to the fact that I dont think Olson had a strong reply to Brown's question of could they have morphed from conservator to receiver. Or have become a receiver and not given proper notice.

 

Millett in general sounded even more skeptical and biased towards the government than I had thought before, and she didn't give any indication that she was satisfied or agreed with Olson's rebuttals.

 

@merkhet @cherzeca curious what you guys think. have you guys gotten a chance to reread the transcript after maybe the emotional high of the moment has worn down?

 

@hardincap

 

put another way,think about what questions would have been asked if the judges were inclined to affirm judge lamberth's holding.  for example, would ginsburg have said that the word, "respectively," was implicit in the statute?  did you hear any judge agree with fhfa's assertion that the mere exercise of a "power" (such as amending the stock purchase agt re the NWS) insulated conservator from judicial review? 

 

there is a large space between affirmance and reversal, and where the majority of the merits panel ends up is hard to tell, but i just dont think i heard anything that sounded like enthusiasm for affirmance.

[doughishere]

http://www.wsj.com/articles/bets-on-fannie-and-freddie-get-help-from-lobbyists-1463087581.

 

Bets on Fannie and Freddie Get Help From Lobbyists

 

A group of hedge funds including Paulson & Co. and Perry Capital is helping to finance a lobbying campaign

 

I bet the #fanniegate cause gets more value in dollar amount every time he writes a shit article in the wsj front page than the hedge funds have spent in the article lol.....$325,000 over 3 years what does that pay for, staples?

 

I'm gonna go out on a limb here but I think there are bigger fish to fry in the anti-lobbying campaign.....must be a slow news week.

 

 

[Guest cherzeca]

letter of support from conservative groups for mulvaney bill:  http://www.housingwire.com/ext/resources/files/Editorial/Documents/HR-4913-Fannie-and-Freddie-Reform-Coalition-Letter.pdf

[merkhet]

It seems a little odd that the WSJ is reporting on the Fannie & Freddie lobbying just now. This has been going on for a while, no?

[Luke 532]

It seems a little odd that the WSJ is reporting on the Fannie & Freddie lobbying just now. This has been going on for a while, no?

 

They probably realize that recap is going to happen, so instead of trying to fight it they are working on the blame game of who will let it happen.

[merkhet]

http://blogs.wsj.com/moneybeat/2016/05/12/hedge-fund-cash-flows-to-gop-lawmakers-seeking-to-loosen-government-grip-on-fannie-and-freddie/?mod=WSJBlog

 

And another article on campaign contributions.

[doughishere]

It seems a little odd that the WSJ is reporting on the Fannie & Freddie lobbying just now. This has been going on for a while, no?

 

Slow news week I guess or is there some cognitive bias where you look for evidence of wrong doing everywhere but 10,000 documents that are under government seal....

[hardincap]

@cherzeca i agree none of the judges seemed inclined to affirm lamberth. if they affirm i would be quite shocked. but i would be equally shocked if they vote for reversal instead of remand on the apa claim, just given the skepticism and general confusion judges displayed towards the Ps arguments. breach of k claim seems more clear cut--hume did a really impressive job--but the fact that judges seemed so disengaged to this argument gives me significant pause.