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

[beaufort]

Is it me or does he always excessively raise his eyebrows when talking about fannie and freddie?  Also the pause and careful wording is probably another tell.

 

And while typing that above I've realized how insane this trade has become.  I still keep taking a step back and think there's only one realistic outcome but I also am conscious of how silly this is becoming.

 

He always strikes me as being deliberate and careful re FnF.  He seems to be a cautious user of language in general.

[Guest cherzeca]

when bankers "restructure", they are talking about the capital structure.  while there may be a host of other things that mnuchin will try to do with fhfa, i think that when he says restructure, as a former banker what he is looking to do is make FnF capital structures sound again...and not expose taxpayer to bailout risk in future.  and he didnt talk about other guarantors or introducing further competition, which is what the leaked sen bnk ctee staff draft #29 was looking to do

[Eye4Valu]

Mnuchin's recent comments seems pretty consistent with his past comments. Restructuring the GSEs into privately owned utilities makes the most sense. I think Mnuchin knows that, or at least that's what I hope.

[DRValue]

https://www.bloomberg.com/news/videos/2018-03-07/mnuchin-says-dodd-frank-bill-will-be-good-for-economy-banks-video

 

We've talked about housing reform. I'm not sure that's something that will get done this summer before the elections, but we are determined to try to get Fannie and Freddie restructured in some format so that we don't put taxpayers at risk.

 

This was Mnuchin's comment about FnF when asked what Treasury's near-term priorities are.

 

 

Less taxpayer risk would have to mean more private capital. Unfortunately current shareholders are not going to contribute any more future capital unless there is a rights offering of some sort.

 

"Restructured" can have ominous overtones as well. Could that possibly mean anything other than the capital structure? And why would the capital structure need an overhaul anyway?

 

Had a listen to this. I didn't read too much into it as to me it felt like yet another political statement of "saying something while saying nothing at all".

 

The choice of words restructuring does jump out but as has been commented retiring the sr. prefs could be a restructuring, exercising the warrants could be a restructuring depends on how fast and loose Mnuchin used the word.

 

The delay could be for a number of reasons. If i put my political hat on, I'd be trying to get all the funding I could from congress i.e. for infrastructure, and then only falling back on the $100B from warrants for other uses or funding if I need to. Basically trying to get all you can before using the warrant money.

 

I doubt this will gain traction before the 2018 mid-terms.

 

I would guess that Watt's potential end of term in Feb '19 will be Mnuchin's leverage to get something done. I've started to read that the ultimatum for Dem's will be either you do something bipartisan before Feb '19 or Trump puts in the most capitalist, free-market Director and Dem's get nothing.

 

I'd project that this will get resoloved after the mid-terms and before Feb '19.

 

What's another 11 months?

[investorG]

hopefully he wants the charters changed to remove any implicit guaranty, which is reasonable.  or some problematic alternative meanings.

 

I'm not sure a change of charter is possible without Congressional action, which I highly doubt is forthcoming.

 

that's why he's punting until 2019 - he likely wants / needs congress to be the vehicle for reform.  he's said this many times.  phillips also said it a month ago (it's no coincidence the securities have been in a downtrend since).  Reluctantly, I choose to believe them rather than think it's a smokescreen for something hidden that's positive for us.  true administrative action, if it occurs, is likely a late 2019 event if the congressional route fails in both 18 and 19.  this is not a priority for him, sadly.    a bullish view in 2018 imo requires some unexpected court win. 

[investorG]

https://www.bloomberg.com/news/videos/2018-03-07/mnuchin-says-dodd-frank-bill-will-be-good-for-economy-banks-video

 

We've talked about housing reform. I'm not sure that's something that will get done this summer before the elections, but we are determined to try to get Fannie and Freddie restructured in some format so that we don't put taxpayers at risk.

 

This was Mnuchin's comment about FnF when asked what Treasury's near-term priorities are.

 

 

Less taxpayer risk would have to mean more private capital. Unfortunately current shareholders are not going to contribute any more future capital unless there is a rights offering of some sort.

 

"Restructured" can have ominous overtones as well. Could that possibly mean anything other than the capital structure? And why would the capital structure need an overhaul anyway?

 

Had a listen to this. I didn't read too much into it as to me it felt like yet another political statement of "saying something while saying nothing at all".

 

The choice of words restructuring does jump out but as has been commented retiring the sr. prefs could be a restructuring, exercising the warrants could be a restructuring depends on how fast and loose Mnuchin used the word.

 

The delay could be for a number of reasons. If i put my political hat on, I'd be trying to get all the funding I could from congress i.e. for infrastructure, and then only falling back on the $100B from warrants for other uses or funding if I need to. Basically trying to get all you can before using the warrant money.

 

I doubt this will gain traction before the 2018 mid-terms.

 

I would guess that Watt's potential end of term in Feb '19 will be Mnuchin's leverage to get something done. I've started to read that the ultimatum for Dem's will be either you do something bipartisan before Feb '19 or Trump puts in the most capitalist, free-market Director and Dem's get nothing.

 

I'd project that this will get resoloved after the mid-terms and before Feb '19.

 

What's another 11 months?

 

there's a reasonable chance the warrants (tied to infrastructure or wall maybe) are a political weapon that they are simply waiting to fire closer to their planned re-election campaign.  this would be another reason for mnuchin to keep delaying.

[orthopa]

 

And while typing that above I've realized how insane this trade has become.  I still keep taking a step back and think there's only one realistic outcome but I also am conscious of how silly this is becoming.

 

I agree 100%. At this point we are left to searching for clues no matter how small when the answer as to what will/should happen is obvious.

 

I think anyone in this investment is trying to not count the chickens before they have hatched, but we have all counted over and over....

[orthopa]

Mnuchin didnt mention keeping the 30 yr mortgage just restructuring FnF. FnF is the 30 yr mortgage in Mnuchins eyes and IMO he does not see them going away. Now he only mentions not putting the tax payer at risk. So now we have in Mnuchins eyes and what he has said:

 

1. Out of conservatorship

2. Maintain 30 yr mortgage -> FnF not going away

3.  Not put tax payers at risk

4. "Restructured"

 

So we get a new/different gov guarantee and capital structure.

 

2-3 years ago there was a legitimate thought or chance that FnF as an entity were going away. That is gone now. Now its "just" shareholder treatment and how it relates to "restructured". Im still comfortable holding but agree it is annoying. Best way to not get annoyed is to lower expectations. Plan on this getting done before Trumps out of office. Thats how I look at it. Any news otherwise is good news.

[muscleman]

Gary Cohn gone. It seems like Trump won't be swayed by these big WS bank guys.

[rros]

In my view, nothing seems as it appears. And the only real Mnuchin is the one that, at the last Senate hearing, told Corker he must word things carefully not to roil the markets. This was his answer when asked about Treasury's options should Congress reform fails.

 

In that line, Mnuchin's words are carefully chosen so that the last thing that happens is a rush in/rush out of FF stocks. We are then left speculating. Succinctly, none of us here can say with any degree of certainty whether this is a 2018, 2019 or a never issue.

 

What may happen instead, could happen in the dark of the night and without Mnuchin showing his hand in advance. Which is not the same as saying things may happen in the darkest hour.

 

Have some faith and keep your shares.

 

edit: i think he said "roil" not reel. Sorry.

[blackcoffee]

I'd love to hear this board's thoughts on the media coverage of this topic.

 

[DRValue]

With very few exceptions the media deserve the bullet

 

Figuratively, of course.

[rros]

The judges here are well read with the case. Listen to questions they asked FHFA lawyer.

 

http://www.glenbradford.com/2018/03/fnma-fanniegate-collins-oral-arguments/

Thank you for the link. Some questions were excellent, yes. But will they have the balls?

[DRValue]

The judges here are well read with the case. Listen to questions they asked FHFA lawyer.

 

http://www.glenbradford.com/2018/03/fnma-fanniegate-collins-oral-arguments/

 

Thanks for that. Gave it a listen. Sounded like the plaintiffs had good arguments then as always the defendants speak and I feel like almost immediately the judges side with defendants. The way this is going it seems like the answer always is "yes plaintiffs we here what you're saying but it doesn't matter cos the fhfa can do whatever it wants cos of the statute" regardless of the implications.

[rros]

The judges here are well read with the case. Listen to questions they asked FHFA lawyer.

 

http://www.glenbradford.com/2018/03/fnma-fanniegate-collins-oral-arguments/

 

Thanks for that. Gave it a listen. Sounded like the plaintiffs had good arguments then as always the defendants speak and I feel like almost immediately the judges side with defendants. The way this is going it seems like the answer always is "yes plaintiffs we here what you're saying but it doesn't matter cos the fhfa can do whatever it wants cos of the statute" regardless of the implications.

One of the judges used the word "confusion" regarding the nws. That's not only new but hopeful.

[Eye4Valu]

Love how one of the judges asked if the conservatorship was the government's version of Hotel California

[Guest cherzeca]

judge willett in collins likely will come down as per judge brown in perry.  how the other two judges vote in collins is up for grabs.  hopefully they just shrug their shoulders, tell willett to write the opinion inasmuch as he was the most into the case, and know that scotus will get a final say.

[DRValue]

In the vein of "where did the money go" does anyone know whether the mbs reps ahs warranties lawsuit money went to the gse's or fhfa?

[Guest cherzeca]

In the vein of "where did the money go" does anyone know whether the mbs reps ahs warranties lawsuit money went to the gse's or fhfa?

 

went to the GSEs...and then swept to treasury

[rros]

In the vein of "where did the money go" does anyone know whether the mbs reps ahs warranties lawsuit money went to the gse's or fhfa?

 

went to the GSEs...and then swept to treasury

http://metrowestvacuums.com/images/vacuum.jpg

[blackcoffee]

Jesus H Christ

 

https://howardonmortgagefinance.com/2018/02/05/waiting-for-mr-corker/comment-page-1/#comment-6149

 

[rros]

There could be another judge in that panel with specific bias. Take a look:

On the recommendation of Senators John Cornyn and Kay Bailey Hutchison, Haynes was nominated on July 17, 2007 by President George W. Bush to fill a vacancy on the Fifth Circuit...

 

Senator John Cornyn had strong views re Fannie and Freddie 2008 bailout.

https://www.cornyn.senate.gov/content/cornyn-statement-fannie-mae-freddie-mac

 

Have faith and keep your shares.

[DRValue]

Jesus H Christ

 

https://howardonmortgagefinance.com/2018/02/05/waiting-for-mr-corker/comment-page-1/#comment-6149

 

Wow.

[Luke 532]

https://www.insidemortgagefinance.com/imfnews/1_1310/daily/federal-reserve-worries-about-nonbank-mortgage-firms-1000045140-1.html?ET=imfpubs:e10636:73599a:&st=email&s=imfnews

With GSE reform looking deader than a $31,000 conference room table ordered (and then cancelled) by HUD, weve come up with a simple plan that might be amenable to all the different warring factions who waste their time slamming each other on Twitter. Here is a rough outline: Let Fannie and Freddie live but as government utilities with three classes of stock (senior preferred, junior preferred and subordinated juniors). Each class of stock pays a quarterly dividend based on profits, with the seniors earning the most. Only Treasury can own the seniors and all profits would go into the general fund and would be used exclusively to pay down the nations debt. The other two classes of stock would be given to current shareholders with their existing holdings retired. (Investment bankers, after completing a course in business ethics, can work out the ratios.) This would be done in exchange for dropping all legal claims. The federal guarantee on MBS would remain implicit (yes, implicit) for federal budget purposes and loan limits would be reduced and kept flat for a 10-year period while the private sector explores whether it can really make (enough) money as guarantors. And one last thing: never ever give Fannie and Freddie the right to lobby Congress or the states. This is just a basic outline. Congress can fill in the details or maybe Craig Phillips and Mel Watt

[blackcoffee]

If you missed this - even if you didn't - it's time to revisit

http://www.fidererongses.com/params/post/1120535/perry-v-mnuchin-a-case-study-in-disingenuity