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

[allnatural]

The beauty of this case is even in the event that the NWS is deemed legal (thus far all courts agree it is), we are still owed compensation for our private party as whether it was legal or not, the NWS was still a taking of private shareholder property that had value. Im not so sure the relevance of HERA/the original bailout terms in this specific case. Other than new separation of powers theory being brought up with Sweeney which claims HERA itself which created FHFA is unconstitutional.

[investorG]

I'd be interested to hear thoughts on how Sweeney could be lost. AIG was ruled as a taking but with no restitution to shareholders since the shares were deemed worthless at the time of taking. However, it is pretty clear that AIG had a liquidity crisis at the time of the taking; it's pretty clear that Fannie and Freddie did not. The 5th circuit court of appeals majority has stated this. And of course we have all seen the independent forensic accounting. At no time during the takings, which still continue, did Fannie and Freddie face a liquidity crisis. The capital infusion from Treasury was based on balance sheet manipulation, not a liquidity problem. So I do not see how shareholders lose this case. Could it be statute of limitations? Or judicial corruption? I just don't see the loss, thus would like to hear any disconfirming thesis.

 

could wait a few years from now and even with a win could get paid a couple dollars per share (where it was in 2012) with some interest sprinkled on.  or lose. 

 

hopefully the Moelis team realizes that the par value transaction was a stretch goal and goes for a reasonable number at some discount to par that's well above current levels.

[investorG]

fairholme fund is underperforming again this year, by around 23pct.  hard to imagine him not having further withdrawals and some forced selling. 

 

[Guest cherzeca]

 

 

 

 

Just to clarify unlike the AIG case, this case has nothing to do with the original bailout terms, and everything to do with the net worth sweep. The action of the net worth sweep itself was the takings here (it was a nationalization). Therefore, a judge should be asking if there was expected value for shareholders at the time of the imposition of the net worth sweep (if there was any doubt, the evidence uncovered throughout the discovery process makes this clear as day), and not at the time of the original bailout terms (10% dividend + 79.99% equity via warrants), which shareholders ARE NOT disputing .

 

I'd be interested to hear thoughts on how Sweeney could be lost. AIG was ruled as a taking but with no restitution to shareholders since the shares were deemed worthless at the time of taking. However, it is pretty clear that AIG had a liquidity crisis at the time of the taking; it's pretty clear that Fannie and Freddie did not. The 5th circuit court of appeals majority has stated this. And of course we have all seen the independent forensic accounting. At no time during the takings, which still continue, did Fannie and Freddie face a liquidity crisis. The capital infusion from Treasury was based on balance sheet manipulation, not a liquidity problem. So I do not see how shareholders lose this case. Could it be statute of limitations? Or judicial corruption? I just don't see the loss, thus would like to hear any disconfirming thesis.

 

Yes the taking took place with the NWS, that's where the confiscation began. But the thought being that given the NWS has been deemed legal, Sweeney rules it was the original bailout/HERA authorization where the taking took place since that was the legislation responsible for creating the power to enact the NWS and the taking. And the statute of limitations has run out on challenging HERA. Just wondering if anyone else considered that possibility. I'm just trying to figure out a way a judge could (again) royally screw something up that is so f-ing obvious.

 

If everyone believes that the taking is a slam-dunk and the preferreds are the way to go then why not back up the truck? I guess the only question then is how much is awarded?

Doesn't a takings take place when the actual action occurs? In our case, 8/17/12.

 

an argument can be made, and I would expect fairholme counsel to make it, that there is an ongoing taking every time a dividend is swept to treasury to eliminate any positive net worth of GSEs

[rros]

 

 

 

 

Just to clarify unlike the AIG case, this case has nothing to do with the original bailout terms, and everything to do with the net worth sweep. The action of the net worth sweep itself was the takings here (it was a nationalization). Therefore, a judge should be asking if there was expected value for shareholders at the time of the imposition of the net worth sweep (if there was any doubt, the evidence uncovered throughout the discovery process makes this clear as day), and not at the time of the original bailout terms (10% dividend + 79.99% equity via warrants), which shareholders ARE NOT disputing .

 

I'd be interested to hear thoughts on how Sweeney could be lost. AIG was ruled as a taking but with no restitution to shareholders since the shares were deemed worthless at the time of taking. However, it is pretty clear that AIG had a liquidity crisis at the time of the taking; it's pretty clear that Fannie and Freddie did not. The 5th circuit court of appeals majority has stated this. And of course we have all seen the independent forensic accounting. At no time during the takings, which still continue, did Fannie and Freddie face a liquidity crisis. The capital infusion from Treasury was based on balance sheet manipulation, not a liquidity problem. So I do not see how shareholders lose this case. Could it be statute of limitations? Or judicial corruption? I just don't see the loss, thus would like to hear any disconfirming thesis.

 

Yes the taking took place with the NWS, that's where the confiscation began. But the thought being that given the NWS has been deemed legal, Sweeney rules it was the original bailout/HERA authorization where the taking took place since that was the legislation responsible for creating the power to enact the NWS and the taking. And the statute of limitations has run out on challenging HERA. Just wondering if anyone else considered that possibility. I'm just trying to figure out a way a judge could (again) royally screw something up that is so f-ing obvious.

 

If everyone believes that the taking is a slam-dunk and the preferreds are the way to go then why not back up the truck? I guess the only question then is how much is awarded?

Doesn't a takings take place when the actual action occurs? In our case, 8/17/12.

 

an argument can be made, and I would expect fairholme counsel to make it, that there is an ongoing taking every time a dividend is swept to treasury to eliminate any positive net worth of GSEs

I have completely forgotten about that argument. Thank you for the reminder.

[locutusoftexas]

Regarding the cases before Sweeney, the key element of the nationalization argument is the implementation of the net worth sweep in perpetuity.  If I were the government, I would merely state that the NWS will not operate in perpetuity, thereby implying that the earnings and the company will be returned to shareholders at some time in the future. At this point, Sweeney can and should decree that the government provide a timeline and a blueprint for implementing this change. The government then requests a length of time to do so. This essentially delays any verdict and any action to remunerate shareholders and could go on for years.

 

If Sweeney is worth anything, she should then demand data to determine the profitability of FnF and further to determine whether the government expenditures have been fully repaid via the senior preferred dividends and the net worth sweep.  This will take time - again perhaps a lot of time. However, eventually Sweeney should temporarily suspend the NWS, while the government plans its exit. Given the judgment that the government's expenditures and been returned or repaid, subsequent earnings minus the senior preferred dividends should then be paid to private shareholders or alternatively, should be held in an escrow account or deferred  according to provisions of HERA.

 

All of these actions could be manipulated by the government to delay a verdict by Sweeney and any payments to shareholders for a very long time. This is no surprise, as civil defendants with a losing case can exploit the design of our legal system to delay any losing verdict until plaintiffs are dead or broke. So private shareholders pay a massive opportunity cost on invested funds and essentially lose all of the original investment.

 

Please tell me that I am in error on this. Thanks in advance.

[rros]

The government cannot say that the NWS will not operate in perpetuity. It has been designed to run perpetually. Amending it, means changing it. And if so, Sweeney will not be dealing with the NWS that we know any longer, but something different. The consequences of the NWS -the past takings w/o compensation- are a permanent picture of the past. The takings continues to this day. But amending the NWS only fixes issues on a forward basis.

 

Even if Sweeney were to force the government to set a timeline and a blueprint to eradicate the sweep as is, the damage created is frozen in time. The repair requested is not just to fix the present, but the past. It is almost like asking an arsonist to put out the fire set on an abandoned building believing a solution has been reached. But the building is now history.

 

An injunction on the sweep or ruling against the government to produce a timeline and a blueprint would have been fine in other lawsuits that sought a repricing of the securities. In Sweeney's court you look for compensation. As far as my little understanding of the legal issues goes.

[locutusoftexas]

The government cannot say that the NWS will not operate in perpetuity. It has been designed to run perpetually. Amending it, means changing it. And if so, Sweeney will not be dealing with the NWS that we know any longer, but something different. The consequences of the NWS -the past takings w/o compensation- are a permanent picture of the past. The takings continues to this day. But amending the NWS only fixes issues on a forward basis.

 

Even if Sweeney were to force the government to set a timeline and a blueprint to eradicate the sweep as is, the damage created is frozen in time. The repair requested is not just to fix the present, but the past. It is almost like asking an arsonist to put out the fire set on an abandoned building believing a solution has been reached. But the building is now history.

 

An injunction on the sweep or ruling against the government to produce a timeline and a blueprint would have been fine in other lawsuits that sought a repricing of the securities. In Sweeney's court you look for compensation. As far as my little understanding of the legal issues goes.

 

Thanks very much. Your first sentence answers my implied question. If the NWS will, by design or definition (that is, a priori), run perpetually, then the nationalization has occurred without remuneration to owners and is therefore incomplete. In this case, the plaintiffs (or claimants) must win. With regard to future earnings, the only apparent alternative for the government, instead of distributing earnings to private shareholders (or deferring those payments according to HERA), is to terminate the conservatorship and restore the companies to shareholders, whatever that means. That is what I was attempting to imply in the rest of my comment. I am afraid that implementing such an action is well beyond my competence to analyze.

 

I believe that your other major point, which sounds good to me, is that damage (i.e., the nationalization and the concomitant unconstitutional taking of funds) has already occurred and that compensation is due for activities prior to the case in Claims Court.

 

Thank you again.

[Luke 532]

Not that anybody expects Congress to get something done, but I still find this interesting regarding Hensarling...

 

Odd to hear any Chairman call his new bill bad policy, but that’s just what @RepHensarling called his bipartisan housing bill w/@RepJohnDelaney.

 

Jeb Hensarling quips "that he shared his plan with the administration- however they don't always like what I have to say"

[rros]

Truly, he did not say his plan was bad policy but that the WH did not like it (or may have not). At least, that is how I read the quoted sentence. Even better, if it happened that way.

[rros]

I thank you, Locus. And everyone else here for greater insights than mine.

[rros]

On another front, i see on my times and sales sheet what looks like quite a bit of buying of fnmas and fmckj. Not retail. These are chunks of 5k to 10k to 20k shares at a time... Looking like a buying program as the trades go on for an hour so. Maybe it's Berkowitz speculating. He already said over the years he made good change trading around them.

[rros]

But since Watt doesn’t have a supervisor, he said no one could take action against him.

There you go. Someone bring some kryptonite!

 

https://www.bloomberg.com/amp/news/articles/2018-09-14/fannie-regulator-mel-watt-refused-to-aid-sexual-harassment-probe?__twitter_impression=true

[rros]

Just brainstorming...

 

What happens if treasuries have a huge rally, yields collapse and Fannie and Freddie record big losses from their hedging with more money from Treasury needed?

 

1. Will the government use the occasion to justify the nws and Treasury's commitment?

2. Or will they be seen as irresponsible for prolonging the status quo, which may force administrative measures?

 

Other issues affecting Fannie and Freddie. At 4.5% for 30 y loans mortgage market is cooling down while the housing market has been suffering from higher costs (qualified labor and incremental costs > lumber, steel, concrete). Less loans, less securitization.

 

An adverse scenario may lead to what? Recap? Liquidation? Hard to see the status quo surviving another possible crisis.

[investorG]

if Mel finishes his term, it's likely due to mnuchin quietly requesting that the congressional republicans hold back fire.  With the 10pct moment coming in 10 days, here's to hoping a plan has been in place for the 4th quarter that could include some finalization of capital requirements and/or another amendment that replaces the sweep.  most likely these could occur late in the fourth quarter but that doesn't mean the stocks need to wait for then for action.  good luck everyone.

[Luke 532]

Brian Brooks leaves Fannie...

http://fortune.com/2018/09/19/coinbase-brian-brooks/

[rros]

Wow. Brian Brooks going to Coinbase. That's a surprise. Or may be not. If Mnuchin wants to see what is happening under the cryptocurrency hood. May also mean cryptoland is a lot more important to M than anything else. Yes, good luck to all and thanks investorG.

[Guest cherzeca]

if Mel finishes his term, it's likely due to mnuchin quietly requesting that the congressional republicans hold back fire.  With the 10pct moment coming in 10 days, here's to hoping a plan has been in place for the 4th quarter that could include some finalization of capital requirements and/or another amendment that replaces the sweep.  most likely these could occur late in the fourth quarter but that doesn't mean the stocks need to wait for then for action.  good luck everyone.

 

10% moment soon for Fannie, but already happened for Freddie, no?

[Midas79]

if Mel finishes his term, it's likely due to mnuchin quietly requesting that the congressional republicans hold back fire.  With the 10pct moment coming in 10 days, here's to hoping a plan has been in place for the 4th quarter that could include some finalization of capital requirements and/or another amendment that replaces the sweep.  most likely these could occur late in the fourth quarter but that doesn't mean the stocks need to wait for then for action.  good luck everyone.

 

10% moment soon for Fannie, but already happened for Freddie, no?

 

Yes, according to this.

 

https://ethercalc.org/r9ddbdfjw46x

 

Freddie passed it with Q2 2017's dividend.

[Guest cherzeca]

Does this case strengthen Plaintiff’s court cases? Especially Sweeney’s?

 

https://ecf.rid.uscourts.gov/cgi-bin/show_public_doc?2017cv0005-39

 

Does this also not strengthen the separation of powers case against FHFA? It  implies that he has been doing whatever he wants without regards for legality as we know NWS is not legal and he is not conserving either.

 

“But since Watt doesn’t have a supervisor, he said no one could take action against him.”

 

https://www.bloomberg.com/news/articles/2018-09-14/fannie-regulator-mel-watt-refused-to-aid-sexual-harassment-probe

 

This is too much happening in plain sight. May be nothing matters at this point.

 

 

But since Watt doesn’t have a supervisor, he said no one could take action against him.

There you go. Someone bring some kryptonite!

 

https://www.bloomberg.com/amp/news/articles/2018-09-14/fannie-regulator-mel-watt-refused-to-aid-sexual-harassment-probe?__twitter_impression=true

 

case is clearly good for fairholme in front of Sweeney.

 

[investorG]

Brian Brooks leaves Fannie...

http://fortune.com/2018/09/19/coinbase-brian-brooks/

 

with all due respect to both Brian Brooks (who probably is an excellent lawyer) and Coinbase, if FNMA is to raise many tens of billions of dollars to recapitalize, there needs to be a black belt Ceo in place with material expertise in real estate and capital raising.  The compensation caps would need to be adjusted by congress, which is another reason why mnuchin and phillips are likely trying for the legislative route in 1h19 before any comprehensive administrative action.  Looking at it from Trump's angle, I think it's best for him if it goes legislatively and the warrants pay for the wall and/or infrastructure.

 

In the mean time, if our leaders want to do the right thing, please replace the sweep with a commitment fee over the holidays!!

[rros]

Brian Brooks leaves Fannie...

http://fortune.com/2018/09/19/coinbase-brian-brooks/

 

with all due respect to both Brian Brooks (who probably is an excellent lawyer) and Coinbase, if FNMA is to raise many tens of billions of dollars to recapitalize, there needs to be a black belt Ceo in place with material expertise in real estate and capital raising.  The compensation caps would need to be adjusted by congress, which is another reason why mnuchin and phillips are likely trying for the legislative route in 1h19 before any comprehensive administrative action.  Looking at it from Trump's angle, I think it's best for him if it goes legislatively and the warrants pay for the wall and/or infrastructure.

 

In the mean time, if our leaders want to do the right thing, please replace the sweep with a commitment fee over the holidays!!

We were not blindsided and I doubt the payment cap was an issue here. Most likely, Mnuchin -and the Treasury Dpt. in general- see Coinbase as a backdoor entrance into the cryptocurrency world and want to have the inside scoop through a long time trusted advisor. It makes sense for exchanges to hire these government linked counselors. But when it comes to Coinbase, it is not a coincidence that the chosen name has been a close associate to Mnuchin.

 

Now, Treasury can have a bird's-eye view at the underworld and their venues of operation. Nothing like bitcoin or monero to laundry money or finance rouge industries, including terrorism. Besides this, this move gives absolute credibility to cryptocurrencies and the implied message is they are here to stay. Invest!

[Wiggins]

Brian Brooks leaves Fannie...

http://fortune.com/2018/09/19/coinbase-brian-brooks/

 

with all due respect to both Brian Brooks (who probably is an excellent lawyer) and Coinbase, if FNMA is to raise many tens of billions of dollars to recapitalize, there needs to be a black belt Ceo in place with material expertise in real estate and capital raising.  The compensation caps would need to be adjusted by congress, which is another reason why mnuchin and phillips are likely trying for the legislative route in 1h19 before any comprehensive administrative action.  Looking at it from Trump's angle, I think it's best for him if it goes legislatively and the warrants pay for the wall and/or infrastructure.

 

In the mean time, if our leaders want to do the right thing, please replace the sweep with a commitment fee over the holidays!!

We were not blindsided and I doubt the payment cap was an issue here. Most likely, Mnuchin -and the Treasury Dpt. in general- see Coinbase as a backdoor entrance into the cryptocurrency world and want to have the inside scoop through a long time trusted advisor. It makes sense for exchanges to hire these government linked counselors. But when it comes to Coinbase, it is not a coincidence that the chosen name has been a close associate to Mnuchin.

 

Now, Treasury can have a bird's-eye view at the underworld and their venues of operation. Nothing like bitcoin or monero to laundry money or finance rouge industries, including terrorism. Besides this, this move gives absolute credibility to cryptocurrencies and the implied message is they are here to stay. Invest!

 

 

The big money to be made in cryptocurrencies are the fees. And Coinbase is the most established. Have you seen their fees and volume? Brooks is going from a low 6-figure salary to a 7-figure salary in his equity stake alone, and Coinbase gets Treasury legitimacy. This is in the no-brainer pile. Brooks will be using some of this cash to invest in Fannie and Freddie. The only question is will it be preferred or common shares?

[rros]

Brian Brooks leaves Fannie...

http://fortune.com/2018/09/19/coinbase-brian-brooks/

 

with all due respect to both Brian Brooks (who probably is an excellent lawyer) and Coinbase, if FNMA is to raise many tens of billions of dollars to recapitalize, there needs to be a black belt Ceo in place with material expertise in real estate and capital raising.  The compensation caps would need to be adjusted by congress, which is another reason why mnuchin and phillips are likely trying for the legislative route in 1h19 before any comprehensive administrative action.  Looking at it from Trump's angle, I think it's best for him if it goes legislatively and the warrants pay for the wall and/or infrastructure.

 

In the mean time, if our leaders want to do the right thing, please replace the sweep with a commitment fee over the holidays!!

We were not blindsided and I doubt the payment cap was an issue here. Most likely, Mnuchin -and the Treasury Dpt. in general- see Coinbase as a backdoor entrance into the cryptocurrency world and want to have the inside scoop through a long time trusted advisor. It makes sense for exchanges to hire these government linked counselors. But when it comes to Coinbase, it is not a coincidence that the chosen name has been a close associate to Mnuchin.

 

Now, Treasury can have a bird's-eye view at the underworld and their venues of operation. Nothing like bitcoin or monero to laundry money or finance rouge industries, including terrorism. Besides this, this move gives absolute credibility to cryptocurrencies and the implied message is they are here to stay. Invest!

 

 

The big money to be made in cryptocurrencies are the fees. And Coinbase is the most established. Have you seen their fees and volume? Brooks is going from a low 6-figure salary to a 7-figure salary in his equity stake alone, and Coinbase gets Treasury legitimacy. This is in the no-brainer pile. Brooks will be using some of this cash to invest in Fannie and Freddie. The only question is will it be preferred or common shares?

I started this thread to minimize pollution here. If you can post the link with the hiring agreement over there I will appreciate it.

[rros]

Does this case strengthen Plaintiff’s court cases? Especially Sweeney’s?

 

https://ecf.rid.uscourts.gov/cgi-bin/show_public_doc?2017cv0005-39

 

Does this also not strengthen the separation of powers case against FHFA? It  implies that he has been doing whatever he wants without regards for legality as we know NWS is not legal and he is not conserving either.

 

“But since Watt doesn’t have a supervisor, he said no one could take action against him.”

 

https://www.bloomberg.com/news/articles/2018-09-14/fannie-regulator-mel-watt-refused-to-aid-sexual-harassment-probe

 

This is too much happening in plain sight. May be nothing matters at this point.

 

 

But since Watt doesn’t have a supervisor, he said no one could take action against him.

There you go. Someone bring some kryptonite!

 

https://www.bloomberg.com/amp/news/articles/2018-09-14/fannie-regulator-mel-watt-refused-to-aid-sexual-harassment-probe?__twitter_impression=true

 

case is clearly good for fairholme in front of Sweeney.

But then, wouldn't it impact Perry the opposite way (breach of contract among private actors)?