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

[Luke 532]

https://www.insidemortgagefinance.com/imfnews/1_1412/daily/mick-mulvaney-shows-interest-in-fannie-freddie-1000047053-1.html

We’ve heard chatter around Washington that acting CFPB Director Mick Mulvaney has taken an interest in GSE reform. As to why…

 

https://www.insidemortgagefinance.com/imfnews/1_1413/daily/white-house-assembles-team-to-find-watt-successor-1000047055-1.html?ET=imfpubs:e11221:73599a:&st=email&s=imfnews

Meanwhile, two industry sources who spoke under the condition they not be identified said the White House has assembled a dedicated team to find a successor to Watt, believing an early departure is a possibility.

 

Maybe these two stories are connected.  Maybe not.

[Sunrider]

Emily,

 

I think some people tried to tell you this before on the board. Your last post is a perfect example of why you should not get back in, and probably should take a big step back from stock investing.

 

Greed and Fear. It kills you.

 

I’ve been there and it took me a long time before I could look at quietly accept that the stocks in my portfolio weren’t doing what they were supposed to be doing ... AND not react much one way or the other. Whether FNMA or FMCK, just ask yourself if your thesis has changed. If yes, act. If not, don’t.

 

Hope that helps.

 

[Guest cherzeca]

interesting motion for amended complaint in Fairholme:  http://gselinks.com/wp-content/uploads/2018/08/13-465-0412-Motion-to-Amend-Complaint-8-3-18.pdf

 

"Plaintiffs should be afforded the opportunity to test on the merits the Fifth Circuit’s recent separation of powers ruling. While the Fifth Circuit in Collins declined to unwind the Net Worth Sweep, its decision indicates that the Net Worth Sweep was adopted at a time when FHFA was operating unconstitutionally and that FHFA has been operating unconstitutionally ever since. This has implications for this case, because this Court has jurisdiction to hear claims “to recover . . . exactions said to have been illegally imposed by federal officials.” Eastport S. S. Corp. v. United States, 372 F.2d 1002, 1008 (Ct. Cl. 1967). “[T]he Tucker Act’s waiver” of sovereign immunity thus “encompasses claims where the plaintiff has paid money over to the Government, directly or in effect, and seeks return of all or part of that sum.” Ontario Power Generation, Inc. v. United States, 369 F.3d 1298, 1301 (Fed. Cir. 2004) (quotation marks omitted). That is what Plaintiffs seek here. Plaintiffs allege that the Government has, in effect, exacted Plaintiffs’ stock and that the Government has Fannie and Freddie’s “money in its pocket,” id., from hundreds of billions of dollars’ worth of Net Worth Sweep dividend payments. Plaintiffs seek the return of the value of their stock directly for themselves, see Casa de CambioComdiv S.A. de C.V. v. United States, 48 Fed. Cl. 137, 145 (2000) (“Several cases hold that, under the illegal exaction doctrine, a plaintiff may seek the return of the monetary value of property seized or otherwise obtained by the government.”), and the return of Fannie’s and Freddie’s money derivatively on behalf of the Companies. The new theories Plaintiffs propose to add to their illegal exaction claims simply provide additional grounds for finding that the exaction was unauthorized—namely, that FHFA has been operating in violation of the separation of powers."

 

this is an illegal exaction theory that may be pursued in federal court of claims on theory established by 5th circuit in collins that fhfa did not have authority to enter into act (NWS) because unconstitutionally structured

 

[rros]

interesting motion for amended complaint in Fairholme:  http://gselinks.com/wp-content/uploads/2018/08/13-465-0412-Motion-to-Amend-Complaint-8-3-18.pdf

 

"Plaintiffs should be afforded the opportunity to test on the merits the Fifth Circuit’s recent separation of powers ruling. While the Fifth Circuit in Collins declined to unwind the Net Worth Sweep, its decision indicates that the Net Worth Sweep was adopted at a time when FHFA was operating unconstitutionally and that FHFA has been operating unconstitutionally ever since. This has implications for this case, because this Court has jurisdiction to hear claims “to recover . . . exactions said to have been illegally imposed by federal officials.” Eastport S. S. Corp. v. United States, 372 F.2d 1002, 1008 (Ct. Cl. 1967). “[T]he Tucker Act’s waiver” of sovereign immunity thus “encompasses claims where the plaintiff has paid money over to the Government, directly or in effect, and seeks return of all or part of that sum.” Ontario Power Generation, Inc. v. United States, 369 F.3d 1298, 1301 (Fed. Cir. 2004) (quotation marks omitted). That is what Plaintiffs seek here. Plaintiffs allege that the Government has, in effect, exacted Plaintiffs’ stock and that the Government has Fannie and Freddie’s “money in its pocket,” id., from hundreds of billions of dollars’ worth of Net Worth Sweep dividend payments. Plaintiffs seek the return of the value of their stock directly for themselves, see Casa de CambioComdiv S.A. de C.V. v. United States, 48 Fed. Cl. 137, 145 (2000) (“Several cases hold that, under the illegal exaction doctrine, a plaintiff may seek the return of the monetary value of property seized or otherwise obtained by the government.”), and the return of Fannie’s and Freddie’s money derivatively on behalf of the Companies. The new theories Plaintiffs propose to add to their illegal exaction claims simply provide additional grounds for finding that the exaction was unauthorized—namely, that FHFA has been operating in violation of the separation of powers."

 

this is an illegal exaction theory that may be pursued in federal court of claims on theory established by 5th circuit in collins that fhfa did not have authority to enter into act (NWS) because unconstitutionally structured

I guess my extremely limited legal knowledge doesn't let me understand your point. Being unconstitutionally structured was not enough in 5th circuit eyes to break the limit on the judicial review logjam. J. Sweeney has not yet hinted that she is ready to leap forward even when she allowed Cooper's foot in the door (discovery/depositions).

 

If we can't cross that Rubicon, we will never be able to take over Rome. Illegal exaction or not.

[rros]

And I just found this... J. Willet was on Trump's Supreme Court list. Did not know but members here perhaps already did.

https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-supreme-court-list/

 

And related...

https://www.finregreform.com/single-post/2018/07/18/fifth-circuit-holds-fhfa-unconstitutionally-structured/

[allnatural]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

The plaintiffs are asking for review on two issues:

 

"The first is whether Congress has empowered the Federal Housing Finance Agency, as conservator of Fannie Mae and Freddie Mac, to effectively nationalize these highly profitable private companies, thus confiscating the equity of their private shareholders. This is an important question for this Nation’s economy and the rule of law generally. And it is a question that sharply divided the panel in this case. See Op. 58 (Willett, J., dissenting); see also Perry Capital v. Mnuchin, 864 F.3d 591, 635 (D.C. Cir. 2017) (Brown, J., dissenting).

 

The second is whether Petitioners are entitled to any meaningful relief from an action taken by a federal agency operating contrary to the separation of powers. The panel answered no, but that answer provides insufficient protection to the separation of powers, and it is in significant tension with Supreme Court authority. See, e.g., Lucia v. SEC, 138 S. Ct. 2044, 2055 (2018)."

 

It will be interesting to see if the government decides to go the same route (or go straight to SCOTUS) with regards to FHFA being constitutionally structured or not.

[rros]

This may not directly relate to that... But what would be the fastest and surest way to nail the former Obama administration as the  most communist, leftist and confiscatory administration to have ever governed the US?

 

I bet Trump would love to hit Obama as the nationalizer-in-chief. Much, much more than getting the 100 bill from the warrants.

[allnatural]

Post Trump/Mnuchin, the thesis shifted a bit to- Why should the Trump administration continue to protect and defend the illegal takings of the previous administration (Obama admin.)?

 

There was potential for a quick win with Trump "solving" the GSE situation, something that the Obama administration wasn't able to achieve (+1 for Trump, -1 for Obama as you described), getting tax payers off the hook, earning close to $400b in a deal (~$300b in div payments to date + monetizing $100b in warrants), and not paying out a penny to shareholders in a settlement. Unfortunately we are now 18 months into the administration with no solution in sight other than some promises by Mnuchin (and continuing to vigorously defend the NWS action in courts)... Is it as simple as Mnuchin waiting for post midterms or cover by one of the courts before signing off on something administratively? Not sure...

 

This may not directly relate to that... But what would be the fastest and surest way to nail the former Obama administration as the  most communist, leftist and confiscatory administration to have ever governed the US?

 

I bet Trump would love to hit Obama as the nationalizer-in-chief. Much, much more than getting the 100 bill from the warrants.

[rros]

Perhaps the outcome desired by some within the Trump circle is an unforgettable lesson of something that should never had happened and make sure it never will.

[Midas79]

This may not directly relate to that... But what would be the fastest and surest way to nail the former Obama administration as the  most communist, leftist and confiscatory administration to have ever governed the US?

 

I bet Trump would love to hit Obama as the nationalizer-in-chief. Much, much more than getting the 100 bill from the warrants.

 

This was plausible when Trump was elected, but with 18 months of inaction and only vague promises from Mnuchin that keep getting pushed back, Occam's razor would point to this theory not being true. It would ring kind of hollow at this point to use this to bash Obama this far into his term.

[Midas79]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote.

 

  In their reading of the relevant statute, however, appellants fail to acknowledge 12 U.S.C. §1821(d)(2)(D), which states explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency.

 

This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning?

[Guest cherzeca]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote.

 

  In their reading of the relevant statute, however, appellants fail to acknowledge 12 U.S.C. §1821(d)(2)(D), which states explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency.

 

This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning?

 

saw that Midas.

 

this is the predecessor statute on which HERA was based, and it says: 

 

(D) Powers as conservator

The Corporation may, as conservator, take such action as may be—

(i) necessary to put the insured depository institution in a sound and solvent condition; and

(ii) appropriate to carry on the business of the institution and preserve and conserve the assets and property of the institution.

 

you will notice that the word "only" is not in the statute, although a fair reading of the statute would assume so.  McAllister court inserts the word only into its opinion, per your page 18 quote.

 

wonder why this case was central to Ps argument? 

 

 

 

[Midas79]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote.

 

  In their reading of the relevant statute, however, appellants fail to acknowledge 12 U.S.C. §1821(d)(2)(D), which states explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency.

 

This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning?

 

saw that Midas.

 

this is the predecessor statute on which HERA was based, and it says: 

 

(D) Powers as conservator

The Corporation may, as conservator, take such action as may be—

(i) necessary to put the insured depository institution in a sound and solvent condition; and

(ii) appropriate to carry on the business of the institution and preserve and conserve the assets and property of the institution.

 

you will notice that the word "only" is not in the statute, although a fair reading of the statute would assume so.  McAllister court inserts the word only into its opinion, per your page 18 quote.

 

wonder why this case was central to Ps argument?

 

Good catch, I hadn't noticed the court adding "only" in its interpretation. I just saw that the FIRREA and HERA wordings were essentially identical (only changing "corporation" to "agency" and "insured depository institution" to "regulated entity").

 

If the 5th Circuit interpreted the "may" as exclusionary in the past, i.e. that FHFA as conservator can't do anything other than those two things, why would they not be bound to continue doing so? Under that interpretation the NWS is clearly ultra vires since it does the opposite of both (i) and (ii).

 

I'm just afraid that I have my wires crossed: the different cases and the arguments in them are mixing together in my mind, so I don't remember if the Collins plaintiffs tried to challenge the NWS on these grounds at all.

[Guest cherzeca]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote.

 

  In their reading of the relevant statute, however, appellants fail to acknowledge 12 U.S.C. §1821(d)(2)(D), which states explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency.

 

This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning?

 

saw that Midas.

 

this is the predecessor statute on which HERA was based, and it says: 

 

(D) Powers as conservator

The Corporation may, as conservator, take such action as may be—

(i) necessary to put the insured depository institution in a sound and solvent condition; and

(ii) appropriate to carry on the business of the institution and preserve and conserve the assets and property of the institution.

 

you will notice that the word "only" is not in the statute, although a fair reading of the statute would assume so.  McAllister court inserts the word only into its opinion, per your page 18 quote.

 

wonder why this case was central to Ps argument?

 

Good catch, I hadn't noticed the court adding "only" in its interpretation. I just saw that the FIRREA and HERA wordings were essentially identical (only changing "corporation" to "agency" and "insured depository institution" to "regulated entity").

 

If the 5th Circuit interpreted the "may" as exclusionary in the past, i.e. that FHFA as conservator can't do anything other than those two things, why would they not be bound to continue doing so? Under that interpretation the NWS is clearly ultra vires since it does the opposite of both (i) and (ii).

 

I'm just afraid that I have my wires crossed: the different cases and the arguments in them are mixing together in my mind, so I don't remember if the Collins plaintiffs tried to challenge the NWS on these grounds at all.

 

midas, you are onto the core issue in collins, which is that in the 5th circuit, the Mcallister case interpreted "may" as "only may".  McAllister for the 5th circuit is even stronger than CedarMinn for the 8th circuit.

 

I don't know why Cooper & Kirk aren't making a big stink about this in their motion for rehearing.  they mention Mcallister, but only in passing.

[rros]

"The Collins Plaintiffs have asked the Fifth Circuit for a larger number of judges to review the three-judge panel’s decision finding that FHFA is unconstitutionally structured and upholding the Net Worth Sweep." (http://www.glenbradford.com/wp-content/uploads/2018/08/17-20364-00514582948.pdf)

 

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote.

 

  In their reading of the relevant statute, however, appellants fail to acknowledge 12 U.S.C. §1821(d)(2)(D), which states explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency.

 

This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning?

 

saw that Midas.

 

this is the predecessor statute on which HERA was based, and it says: 

 

(D) Powers as conservator

The Corporation may, as conservator, take such action as may be—

(i) necessary to put the insured depository institution in a sound and solvent condition; and

(ii) appropriate to carry on the business of the institution and preserve and conserve the assets and property of the institution.

 

you will notice that the word "only" is not in the statute, although a fair reading of the statute would assume so.  McAllister court inserts the word only into its opinion, per your page 18 quote.

 

wonder why this case was central to Ps argument?

 

Good catch, I hadn't noticed the court adding "only" in its interpretation. I just saw that the FIRREA and HERA wordings were essentially identical (only changing "corporation" to "agency" and "insured depository institution" to "regulated entity").

 

If the 5th Circuit interpreted the "may" as exclusionary in the past, i.e. that FHFA as conservator can't do anything other than those two things, why would they not be bound to continue doing so? Under that interpretation the NWS is clearly ultra vires since it does the opposite of both (i) and (ii).

 

I'm just afraid that I have my wires crossed: the different cases and the arguments in them are mixing together in my mind, so I don't remember if the Collins plaintiffs tried to challenge the NWS on these grounds at all.

I am not sure the nws does the opposite of ii). At least, not completely. That has been one of the winning arguments by Howard Cayne who said both Fannie and Freddie are operating just fine, carrying on their businesses and extrapolating that to a stable real estate market. Giving away their earnings and depleting their net worth is more akin to a nationalization than to not preserving/conserving their assets. Here, in ii), we may depend on Cooper's best effort to explain the unexplainable.

 

Obama issue. I was thinking more in terms of letting courts -specially SCOTUS- decide whether or not the action taken by the Obama administration has been confiscatory. One thing is for Trump -always politically motivated- to say Obama is a communist. A very different one, with a more profound effect, would be for the supreme court to rule on it. But perhaps you are right. Trump may have become guilty "by continuation" eliminating the possibility of him taking our side on a nws defeat in court.

 

In Saxton's oral argument Cooper made the point that Agencies are like a blank paper. And that Congress provides them with specific powers. Thus, the word "may" becomes exclusionary. As any power that hasn't been "may'ed", it does not exist. The 5th must have reasoned exactly this to have used the word "only" in Mcallister's.

[Midas79]

I am not sure the nws does the opposite of ii). At least, not completely. That has been one of the winning arguments by Howard Cayne who said both Fannie and Freddie are operating just fine, carrying on their businesses and extrapolating that to a stable real estate market. Giving away their earnings and depleting their net worth is more akin to a nationalization than to not preserving/conserving their assets. Here, in ii), we may depend on Cooper's best effort to explain the unexplainable.

 

Obama issue. I was thinking more in terms of letting courts -specially SCOTUS- decide whether or not the action taken by the Obama administration has been confiscatory. One thing is for Trump -always politically motivated- to say Obama is a communist. A very different one, with a more profound effect, would be for the supreme court to rule on it. But perhaps you are right. Trump may have become guilty "by continuation" eliminating the possibility of him taking our side on a nws defeat in court.

 

In Saxton's oral argument Cooper made the point that Agencies are like a blank paper. And that Congress provides them with specific powers. Thus, the word "may" becomes exclusionary. As any power that hasn't been "may'ed", it does not exist. The 5th must have reasoned exactly this to have used the word "only" in Mcallister's.

 

I would rebut as follows:

 

1) The statute has "and", not "or", so actions taken by a conservator must conform to both (i) and (ii).

2) The argument for the companies continuing as going concerns can justify the original SPSPA, but the NWS makes it more difficult for the companies going foward due to the inability to build capital. Treasury's funding commitment, while large, is finite.

 

I fully agree with the last part, and Willett's dissent (if I am remembering the correct source) said the same, that agencies formed by Congress can only do what Congress specifically allowed. Like the Constitution, you don't start with the assumption of unlimited power and subtract from there, you start with the assumption of no power and only what's specifically added is allowed.

 

midas, you are onto the core issue in collins, which is that in the 5th circuit, the Mcallister case interpreted "may" as "only may".  McAllister for the 5th circuit is even stronger than CedarMinn for the 8th circuit.

 

I don't know why Cooper & Kirk aren't making a big stink about this in their motion for rehearing.  they mention Mcallister, but only in passing.

 

I agree. The CedarMinn argument seemed a bit flimsy on closer inspection actually.

[rros]

Midas, I agree with most of what you've written.

 

But in my mind, it has become an impossibility to analyze the nws in terms of the statute. A logical impossibility. Because the nws does neither receive nor it conserves. Yet, the companies are functioning. So depending on which judge reads it, it does i) but not ii) or vice versa and any analysis becomes a moot point.

 

What is not in the statute is what really happened: companies changed owners. On paper, we are. HERA says it (so it must be true). But when it comes to markets, Treasury is the owner. It owns their earnings and their net worth.

 

Because nationalization is not in the statute, and really nowhere to be found within our borders, the government created the illusion of companies continuing to operate as private entities and this has confused judges all along. What aggravates issues even more is that Judges are trained to read the statutes. And this particular one says there is conservation and there is receiving. And there is shareholder's owned entities. And they stop there. That is their observable universe. Whatever is absent in the law, like a nationalization, does not exist. Thus, it becomes an unassailable, unreachable conclusion.

[Luke 532]

Lobbying on the GSE Issue Moves from Congress to the Executive Branch

https://www.insidemortgagefinance.com/imfnews/1_1415/daily/lobbying-on-the-gse-issue-moves-to-the-executive-branch-1000047121-1.html

[Wiggins]

And I just found this... J. Willet was on Trump's Supreme Court list. Did not know but members here perhaps already did.

https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-supreme-court-list/

 

And related...

https://www.finregreform.com/single-post/2018/07/18/fifth-circuit-holds-fhfa-unconstitutionally-structured/

 

Hello fine folks! I've been lurking here for a while reading the many fine thoughts of the posters here. Thought I'd say hi and also add to rros' post above that Judge Stras is also on the Trump short-list for SCOTUS and he is one of the 3 judges in the Saxton 8th circuit court. Like many I have been following the court cases with rapt attention and hope that the rule of law prevails in the end. Best to all!

[rros]

And I just found this... J. Willet was on Trump's Supreme Court list. Did not know but members here perhaps already did.

https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-supreme-court-list/

 

And related...

https://www.finregreform.com/single-post/2018/07/18/fifth-circuit-holds-fhfa-unconstitutionally-structured/

 

Hello fine folks! I've been lurking here for a while reading the many fine thoughts of the posters here. Thought I'd say hi and also add to rros' post above that Judge Stras is also on the Trump short-list for SCOTUS and he is one of the 3 judges in the Saxton 8th circuit court. Like many I have been following the court cases with rapt attention and hope that the rule of law prevails in the end. Best to all!

Thank you! Maybe we get lucky and get 1 more dissent.

[Eye4Valu]

And I just found this... J. Willet was on Trump's Supreme Court list. Did not know but members here perhaps already did.

https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-supreme-court-list/

 

And related...

https://www.finregreform.com/single-post/2018/07/18/fifth-circuit-holds-fhfa-unconstitutionally-structured/

 

Hello fine folks! I've been lurking here for a while reading the many fine thoughts of the posters here. Thought I'd say hi and also add to rros' post above that Judge Stras is also on the Trump short-list for SCOTUS and he is one of the 3 judges in the Saxton 8th circuit court. Like many I have been following the court cases with rapt attention and hope that the rule of law prevails in the end. Best to all!

Thank you! Maybe we get lucky and get 1 more dissent.

 

Exactly. A dissent in support of the Lamberth/DC Circuit/5th Circuit Opinions on the APA Claim.

[rros]

Lol

[Luke 532]

Moelis met with FHFA two weeks ago

 

-Go here: https://www.fhfa.gov/SupervisionRegulation/RegulationFederalRegister/Pages/Commentonrule.aspx

 

-Search "Moelis"

 

Results:

Meeting on 7/26

Moelis uploads report 8/1

7-26-18_Meeting_with_Moelis_and_Co_LLC.pdf

32_Moelis_and_Co_LLC-u.pdf

[Midas79]

Moelis met with FHFA two weeks ago

 

-Go here: https://www.fhfa.gov/SupervisionRegulation/RegulationFederalRegister/Pages/Commentonrule.aspx

 

-Search "Moelis"

 

Results:

Meeting on 7/26

Moelis uploads report 8/1

 

Good stuff. I read through their presentation late last week. It's very thorough, though I think Tim Howard will disagree with much of it because he thinks that FHFA's numbers are far too conservative and will lead to unreasonably high g-fees to ensure a competitive return on capital, while Moelis largely supports FHFA's numbers as-is.

 

Moelis references Basel III requirements extensively. If the GSEs are designated as SIFIs post-release (a good chance in my mind given their enormous size), they will be subject to stringent capital requirements, at least partially based on those Basel III standards.

 

This quote on page 28 has me somewhat confused:

 

U.S. Basel III risk-based capital requirements do not explicitly limit junior preferred stock, but do implicitly limit the portion of JPS that can be used to achieve minimum Tier 1 capital ratios by establishing an additional minimum capital ratio (e.g., CET1 > 7% of RWA for SIFIs)

 

Is the $33B of combined junior pref equity going to be too much? If so, will the companies selectively redeem some series, redeem them all, or offer a conversion to common? All of which could be followed by issuing new (junior) prefs to fine-tune the ratio.

 

 

 

It would also be nice if we hear about Moelis meeting with Treasury. Anything Moelis proposes requires Treasury to agree and help move things forward.

[rros]

Is the $33B of combined junior pref equity going to be too much? If so, will the companies selectively redeem some series, redeem them all, or offer a conversion to common? All of which could be followed by issuing new (junior) prefs to fine-tune the ratio.

Basel III (GSIB)

JPS effectively limited to 1.5% of RWAs (or ~$30bn) at minimum capital requirements

Moelis and FHFA: No limitations re JPS included in core capital. (Page 16)

 

Does this relate to your inquiry? Looks like 3 billion will have to go on Basel III?

 

* Thank you for the links, Luke.