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

[merkhet]

Here's the judicial notice request that we've been waiting for...

2016-05-25_Perry_Motion_for_Further_Judicial_Notice.pdf

[doughishere]

Choice selections.

 

Among the newly released documents, emails sent by James Parrott, a White House official who was intimately involved in the development and rollout of the Net Worth Sweep, confirm that the Net Worth Sweep was in direct contravention to FHFA’s duties as conservator. For example, on August 17, 2012—the same day the Net Worth Sweep was enacted—Mr. Parrott indicated in an email exchange with Congressional staff that the purpose of the Net Worth Sweep was “ensuring that [the Companies] can’t recapitalize” by “clos[ing] off [the] possibility that they every [sic] go (pretend) private again.”

 

 

At same day, Mr. Parrott told “fellow traveler” Peter Wallison of the American Enterprise Institute that the Net Worth Sweep would ensure that the Companies “can’t repay their debt and escape” and said that Mr. Wallison’s comments to Bloomberg News were “exactly right on substance and intent.”

 

 

Earlier that day, Mr. Wallison had told Bloomberg News that:  [t]he  most  significant  issue  here  is  whether  Fannie  and  Freddie  will  come back to life because their profits will enable them to re-capitalize themselves  and  then  it  will  look  as  though  it  is  feasible  for  them  to  return  as  private  companies  backed  by  the  government  .  .  .  What  the Treasury Department seems to be doing here, and I think it’s a really good idea, is to deprive them of all their capital so that doesn’t happen/

 

 

I wish is could just quote the whole thing.

 

 

Mr. Parrott tellingly described the Net Worth Sweep in an email to his team at Treasury as a “very high risk exercise” and a “policy change of enormous importance.”

 

 

More....

 

 

In July 2012, a Treasury official observed that releases of loan loss reserves could “increase the [Companies’] net [worth] substantially. And Treasury’s number one question for the Companies when it met with their senior management on August 9, 2012, was “how quickly they forecast releasing credit reserves.” 

 

 

It is thus apparent that Defendants knew that Treasury would reap massive, windfall profits from the Net Worth Sweep and that this fact—together with a desire to permanently prevent the Companies from rebuilding capital and returning to soundness and solvency—was the true rationale for the agency action at issue in this case.

 

 

 

as one Fannie Mae executive commented during a July 2012 board meeting (the minutes of which were forwarded to FHFA officials), the “next 8 years” after 2012 were likely to be “the golden years of GSE earnings” and strong profitability. FHFA00047889 (Exhibit 12, A063).

 

 

 

Finally, these documents further undermine the veracity of the sworn declaration by Mario Ugoletti to the district court stating, on behalf of FHFA, that “the intention of the [Net Worth Sweep] was not to increase compensation to Treasury.” Ugoletti Decl. ¶ 19, JA2426. Treasury’s August 16, 2012, internal Q&A document highlights the Companies’ “improving operating performance” and “potential for near-term earnings to exceed the 10% dividend” as among th 8 reasons for “putting in place a better deal for taxpayers” by promptly adopting the Net Worth Sweep.

[doughishere]

Wish I understood the legal aspects of this case better.  Common sense and a basic understanding of capitalism indicate wrongdoing resulting in reversal, but the practical world consists of a government with its own self interests and a law which can be counter-intuitive to the layman. 

 

The majority of what is being written/vocalized is from the perspective of the the bull side of the thesis.  Maybe this is warranted - but it regardless creates bias from anyone trying to follow the details of the case.  I'd be very curious to read a 360 page thread with individuals on the other side (maybe they would have nothing of substance to say).  I know the WSJ has acted in this capacity and I have been following. 

 

From my lay perspective, the section of the FNMA 10Q around the time of the NWS referencing 'volatility in earnings' but risk that they likely would not be able to meet the 10% dividend seems inconsistent with some of the other information that has recently come to light (CFO stating future profitability and reversal of DTA allowance, 'golden years of GSEs ahead').  I know this was brought up in the appeals hearing and it seems like a potential road block (I could be totally off base and bringing this conversation down to an elementary level) - is there a strong retort to this element of the case?

 

 

 

I will say this there are more and more people interested in this now and the coverage is only getting larger.....and larger.

 

 

[hardincap]

Here's the judicial notice request that we've been waiting for...

 

im sure rand acolyte brown would be delighted to see this </sarcasm>

[Luke 532]

(3) Government has to provide documents under the motion to compel to Sweeney by EOB today, and they're going to have to get POTUS to sign off on executive privilege by two weeks from now.

 

What if POTUS refuses to sign off on those documents?  Or, even worse, what if POTUS does sign off on the documents and they are found to be false/lying to the courts?

[Guest cherzeca]

finally, the briefing is getting pointed: 

 

"Mr. Parrott’s endorsement of those comments directly contradicts

Defendants’ representations to the district court (e.g., that the Net Worth Sweep

was enacted to avoid a “downward spiral”) and makes clear that the Net Worth

Sweep was imposed for a perverse and illegitimate reason: the Companies were

becoming too profitable for Defendants to accomplish their actual goal of

preventing the Companies from being rehabilitated and operating in a sound

manner, i.e., with capital and in accord with FHFA’s obligations as conservator."

[hardincap]

finally, the briefing is getting pointed: 

 

"Mr. Parrott’s endorsement of those comments directly contradicts

Defendants’ representations to the district court (e.g., that the Net Worth Sweep

was enacted to avoid a “downward spiral”) and makes clear that the Net Worth

Sweep was imposed for a perverse and illegitimate reason: the Companies were

becoming too profitable for Defendants to accomplish their actual goal of

preventing the Companies from being rehabilitated and operating in a sound

manner, i.e., with capital and in accord with FHFA’s obligations as conservator."

 

seems like the only way the govt can escape appeals now is to convince the panel judges that motivation doesn't matter (as lamberth opined). we know thats not going to work with g, so they have to convince m and b to be successful

[doughishere]

finally, the briefing is getting pointed: 

 

"Mr. Parrott’s endorsement of those comments directly contradicts

Defendants’ representations to the district court (e.g., that the Net Worth Sweep

was enacted to avoid a “downward spiral”) and makes clear that the Net Worth

Sweep was imposed for a perverse and illegitimate reason: the Companies were

becoming too profitable for Defendants to accomplish their actual goal of

preventing the Companies from being rehabilitated and operating in a sound

manner, i.e., with capital and in accord with FHFA’s obligations as conservator."

 

 

Isnt this perjury or Obstruction of justice? I seem to remember a Impeachment trial for Clinton on the definition "sexual relations. I was still in grammar school but this seems way more loaded.

[doughishere]

finally, the briefing is getting pointed: 

 

"Mr. Parrott’s endorsement of those comments directly contradicts

Defendants’ representations to the district court (e.g., that the Net Worth Sweep

was enacted to avoid a “downward spiral”) and makes clear that the Net Worth

Sweep was imposed for a perverse and illegitimate reason: the Companies were

becoming too profitable for Defendants to accomplish their actual goal of

preventing the Companies from being rehabilitated and operating in a sound

manner, i.e., with capital and in accord with FHFA’s obligations as conservator."

 

seems like the only way the govt can escape appeals now is to convince the panel judges that motivation doesn't matter (as lamberth opined). we know thats not going to work with g, so they have to convince m and b to be successful

 

 

I think thats a large reason why people stay out of it.....and thats the biggest argument against.......the argument that "well Fannie and Freddie should have never existed" or they are a cause......In reality it just seems like a concerted effort to punish "big business" so Parrott can make a name for himself as the guy who found funding for Obamacare. The idea that the motivation/behavior doesnt matter, the government is doing the larger good.

 

This almost sounds like the public is at "Peak Big Business" hate.....and no politician will do what the government originally agreed to because they wont get reelected.

 

 

I know my approach seems a bit..., as I think one of you put it.....end of the world. I dont think it is the end of the world but I do think that there was lying and as we can see there is at bare minimum "misrepresentation to the public"

 

 

 

 

 

Please tell me if i am wrong in thinking this.....I take the silence as either 1) hes right and no one really wants to say anything or 2) i will now dawn my tinfoil hat.

 

 

[doughishere]

I mean with out the hedge funds these emails would have never seen the day of light and we all would be oblivious to what happend........this is a murder where everyone involved is a witness and no one is willing to testify all because  right now in America its not cool to be "pro business."

 

http://learning.blogs.nytimes.com/2012/03/13/march-13-1964-new-york-woman-killed-while-witnesses-do-nothing/?_r=0

 

 

It is mystifying that we would rather talk about transgender bathrooms than this.....Call me out if I'm wrong. I dont mind being wrong, its a significant portion of how I learn.

[Steve_Berk]

The papers address the 10-Q issue I raised a couple of days ago. They say that the 10-Q is consistent with McFarlane's conservative projections and that at most would have required a small draw to pay the Treasury. And that even the 10-Q is inconsistent with the death spiral narrative that the gov't adopted to support the NWS and that the small draws that may have been required would not have triggered a tailspin, not to mention the fact that there would have been an option to go for a payment in kind option instead of cash payments. I don't think that  this completely defeats the 10-Q issue, however. The defendant will still say that if the GSE's believed that the profits earned by the GSE's would not approach the 10% owed to the Treasury given the dividend owed, that they would still be helping the GSE's by sweeping profits, and preventing a draw.

 

But I think the way to really look at this from the plaintiff's perspective is that even if the 10-Q provides a theoretical legitimate purpose that still doesn't overcome the actual evidence of an impermissible motive, which the emails clearly lay out. I will be very annoyed if the judges continue harping on the 10-Q in light of the evidence that has emerged. It's extremely common for SEC filings to contain extremely conservative forward looking statements--companies are trying to cover themselves to avoid any allegations that they are misleading investors or setting benchmarks that they can't hit. For a court to take a line from such a filing and use it to overlook clear evidence of acting on an impermissible purpose would be beyond disappointing.

[Guest cherzeca]

fnma v fnmas price action:

 

1 month: fnma: +36%; fnmas: +19%

 

3 months:  fnma: +35%; fnmas: +45%

 

6 months:  fnma:  +11%; fnmas:  +20%

 

my simple minded takewaway:  fnmas better on way down, fnma better on the way up.  no surprise there

[Mephistopheles]

https://twitter.com/carney/status/737666479882133505

 

What a clown. "No news", are you fucking kidding me?

[doughishere]

https://twitter.com/carney/status/737666479882133505

 

What a clown. "No news", are you fucking kidding me?

 

 

Wanna be in charge of documenting his "calls" on the way up?..I know he deletes them......on the other side why waste your time...got better sh*t to do....ohh well.

 

 

Side not....theres some quote out there that someone once told me a long time ago you "dont go broke taking a profit"......sh*t quote

[doughishere]

http://www.valuewalk.com/2016/05/banks-liquidate-fannie-mae-holdings

 

 

Bove.

[Guest cherzeca]

see "the administrative constitution in exile"  http://wmlawreview.org/sites/default/files/10%20-%20Sohoni-FINAL.pdf

 

discussion of nws in section that begins on p. 956

 

edit:  this seems almost written for judge ginsburg

 

"The continued vitality of the Third Amendment would signify that two major regulators—FHFA and the Treasury—can exert an ongoing role in determining key aspects of domestic housing policy without check by administrative constitutional norms." p 962-3

[Guest cherzeca]

i have been wondering, whether assuming remand in perry, the app ct would require both treasury and fhfa to provide full administrative records, or only treasury.

 

fhfa claims it does not have to produce an admin record under (a)(2) below.  lamberth seemed to refer to (a)(1) below:

 

(a) This chapter applies, according to the provisions thereof, except to the extent that—

(1) statutes preclude judicial review; or

(2) agency action is committed to agency discretion by law.

 

it is hard to be definitive, but if there is remand, i expect the app ct will find neither 1 nor 2 apply, and require fhfa to produce its full record.  this will be very important imo since any lack of a real independent decision making process by fhfa would be best evidence of fhfa being subject to treasury's direction, in contravention of HERA.

 

[Luke 532]

Below is a letter from several housing advocacy and civil rights organizations to Mel Watt...

 

May 31, 2016

 

The Honorable Mel Watt, Director

Federal Housing Finance Agency

400 7th Street, SW

Washington, D.C. 20219

 

Dear Director Watt:

 

Our organizations are deeply concerned that under the Preferred Stock Purchase Agreements with the Treasury Department, the capital buffers of Fannie Mae and Freddie Mac will be completely eliminated by the end of 2017. This course of action is likely to destabilize the housing economy, undermine efforts to make housing finance more accessible and affordable, and drive up the costs of homeownership.

 

In the wake of the 2008 economic crisis, financial institutions worldwide were required to increase their capital reserves. Having reasonable buffers in place is a cornerstone of sound financial regulation, as they protect companies themselves and the overall system from the impact of temporary financial losses. In 2012, however, your predecessor at FHFA and the Treasury Department decided to go in the completely opposite direction with respect to Fannie Mae and Freddie Mac, by sweeping all profits and gradually eliminating their capital altogether. We have heard of no justification for this continued arrangement.

 

Recently, you voiced concerns over the declining capital buffers, and said there could be negative market and policy ramifications if either company is forced to “draw” more money from Treasury – a risk that, as you said, will continue to escalate in the future. We strongly agree with this assessment.

 

As the conservator of Fannie Mae and Freddie Mac, acting in place of the Boards of Directors of the two enterprises, you have the “sole discretion” to declare or not declare quarterly dividends on GSE Senior Preferred Stock. The Housing and Economic Recovery Act of 2008 states that as conservator, FHFA “shall not be subject to the direction or supervision of any other agency of the United States” in the exercise of your authority. Accordingly, we urge you to suspend GSE dividend payments to Treasury, and require the GSEs to develop and implement capital restoration plans so they have enough capital to safely manage their business and to support America’s housing finance system.

 

Thank you for your consideration. We would be pleased to meet with you to further discuss this issue.

 

Sincerely,

 

Amalgamated Bank

Center for Responsible Lending

Community Home Lenders Association

Community Mortgage Lenders of America

Corporation for Enterprise Development (CFED)

The Leadership Conference on Civil and Human Rights

Leading Builders of America

NAACP

National Action Network

National Community Reinvestment Coalition

 

http://www.valuewalk.com/2016/05/fannie-mae-capital-buffers/

[colinwalt]

Not sure if this was linked previously, apologies if it's a duplicate...

 

Robinson 11-Feb-16 Response to motion to dismiss, originally filed under seal, now unsealed... really (IMO - not a lawyer) covers everything...

 

http://gselinks.com/Court_Filings/Robinson/15-00109-0030.pdf

[doughishere]

Legal Eagles,

 

Do you think theres a case in Dissenting Shareholder Appraisal Rights and Shareholder Oppression Claims, Weinberger  v.  UOP decision in the State of Delaware.

 

 

http://www.willamette.com/insights_journal/15/autumn_2015_2.pdf

[Guest cherzeca]

Legal Eagles,

 

Do you think theres a case in Dissenting Shareholder Appraisal Rights and Shareholder Oppression Claims, Weinberger  v.  UOP decision in the State of Delaware.

 

 

http://www.willamette.com/insights_journal/15/autumn_2015_2.pdf

 

i'll take this.

 

no.

 

appraisal rights is a statutory remedy for shareholders who object to a merger.  not applicable

[doughishere]

Legal Eagles,

 

Do you think theres a case in Dissenting Shareholder Appraisal Rights and Shareholder Oppression Claims, Weinberger  v.  UOP decision in the State of Delaware.

 

 

http://www.willamette.com/insights_journal/15/autumn_2015_2.pdf

 

i'll take this.

 

no.

 

appraisal rights is a statutory remedy for shareholders who object to a merger.  not applicable

 

I though maybe since there are often disagreements on valuation it might be help. Shoot first, apologize later.  Thanks

[Luke 532]

MDL panel decision on govt's motion to consolidate cases: denied.

[Guest cherzeca]

8)

MDL panel decision on govt's motion to consolidate cases: denied.

 

+1.  thanks luke

[hardincap]

thapur in robinson case has indicated that he's ready to rule on the govt's motion to dismiss.. do we get that ruling any day now?

 

im assuming sleet in delaware case is ready to rule on the certification motion as well, also due any day now?