investorG Posted November 29, 2019 Share Posted November 29, 2019 Judge Sweeney transcript attached... Big day today, our SC filing is due. Should be interesting to see if the lawyers indirectly ask for the SC to take up the APA given Calabria and Mnuchin shockingly defend the NWS day after day in court and publicly. Link to comment Share on other sites More sharing options...
allnatural Posted November 29, 2019 Share Posted November 29, 2019 Plaintiffs have asked SCOTUS to take the APA claim, and rightfully so using the same rationale ask that they take the constitutional remedy claim. https://www.supremecourt.gov/DocketPDF/19/19-563/123839/20191127103429028_USSC%2019-563%20Brief%20for%20Respondents.pdf Judge Sweeney transcript attached... Big day today, our SC filing is due. Should be interesting to see if the lawyers indirectly ask for the SC to take up the APA given Calabria and Mnuchin shockingly defend the NWS day after day in court and publicly. Link to comment Share on other sites More sharing options...
muscleman Posted November 29, 2019 Share Posted November 29, 2019 Plaintiffs have asked SCOTUS to take the APA claim, and rightfully so using the same rationale ask that they take the constitutional remedy claim. https://www.supremecourt.gov/DocketPDF/19/19-563/123839/20191127103429028_USSC%2019-563%20Brief%20for%20Respondents.pdf Judge Sweeney transcript attached... Big day today, our SC filing is due. Should be interesting to see if the lawyers indirectly ask for the SC to take up the APA given Calabria and Mnuchin shockingly defend the NWS day after day in court and publicly. Thank you. When will SC say if it takes the case or not? Link to comment Share on other sites More sharing options...
allnatural Posted November 29, 2019 Share Posted November 29, 2019 According to David Thompson during the Sweeney oral arguments, Dec 13. Link to comment Share on other sites More sharing options...
Luke 532 Posted November 29, 2019 Share Posted November 29, 2019 Judge Sweeney transcript attached... Tim Howard's comments posted this afternoon on the transcript... https://howardonmortgagefinance.com/2019/10/21/some-simple-facts/#comment-13727 NOVEMBER 29, 2019 AT 1:43 PM I’ve now finished reading the entire 392-page transcript of the Oral Argument in the Defendant’s Motion to Dismiss the various lawsuits in Judge Sweeney’s Court of Federal Claims, and agree that the Washington Federal case—the only one which challenges the 2008 conservatorships—is likely to survive the motion to dismiss. The government made two arguments for dismissal—that the Washington Fed suit needed to be filed within the 30-day window applicable to the companies were they to have challenged the conservatorships, rather than the general six-year statute of limitations that applies to the other suits, and that the Washington Fed plaintiffs had failed to state a valid takings claim. My reading of the transcript is that Sweeney will side with the plaintiffs on both issues, allowing the Washington Fed suit to continue. Most if not all of the suits against the August 17, 2012 net worth sweep are likely to survive as well. Sweeney all but said as much when, just prior to breaking for an afternoon recess, she said, ““I want the parties to have their day — well, we’ll have many days in court, but I mean, for this initial oral argument…”. I also was struck by Sweeney’s clear and direct statements about how she sees the merits of both the 2008 conservatorship challenge and the 2012 net worth sweep. On the former she said, “I’m very concerned that Treasury approaches the board of directors of the enterprises and says, you either agree to the conservatorship or you’re out. That’s – that sounds like undue influence, if not a death grip,” and “The enterprises were never able to repay the debt to the United States taxpayer… and so the– Freddie — the enterprises were never able to right their financial ships of state and then make their profits while not borrowing anything from the U.S. taxpayer and then pay what dividend they can to their shareholders. And that doesn’t seem cricket. That doesn’t seem cricket to the way our government operates.” She was even more unambiguous in her description of the net worth sweep: “I hate to say it, I’m not — this is going to sound so flip, and I don’t mean for it to, but this is like the mob. And it’s not, of course, but, I mean, you have all the money is being turned over to the Treasury.” The substance and tone of Sweeney’s comments throughout the hearing was strikingly different from we’ve noted in the recordings or transcripts from other cases concerning Fannie and Freddie, and of course there’s a reason for it. All of the proceedings so far have dealt solely with issues of law, and the government has consistently given a false rendition of the facts leading up to and surrounding the companies’ initial placement into conservatorship as well as the subsequent net worth sweep. Judge Sweeney permitted discovery in her case, and she therefore has become intimately familiar with the facts, which to put it mildly do not favor the government. Sweeney’s view of the merits of the case thus is not just a harbinger for how she might rule if the cases in her court ever make it to trial, it’s a foreshadowing of how the judges in other cases likely will react once they focus on the actual facts of the issues they’re being asked to adjudicate. Link to comment Share on other sites More sharing options...
Luke 532 Posted November 29, 2019 Share Posted November 29, 2019 Guys, what do you think about the 3 possible scenarios Gaby Heffesse lays out regarding the Supreme Court (1) not taking the case, (2) taking the case and gov't wins, (3) taking the case and gov't loses. I'm trying to figure out how juniors prefs get hurt in any of those scenarios. Thanks. Video: at around 9:30 https://www.realvision.com/tv/shows/trade-ideas/videos/an-update-on-fannie-and-freddie-the-road-to-recapitalization Here's the transcript... GABRIELLA HEFFESSE:There's three scenarios. There's one, the Supreme Court does not take this up, in which I think we can see the PSPA amendment around the second quarter because it, I think,forces the government's hand to settle because as they said,it frustrates their policy objectives. They can't do it. B, Supreme Court decision in June,there's two outcomes,either the government wins or the government loses. I think both of them and then a pretty similar outcome actually. Because if they win, then they can just do whatever they want. They have more flexibility. If they lose, they settle the litigation and they have great political cover to really not have the headline of you've made hedge funds billions of dollars. I don't think there is a bad outcome for the administration given what their policy goals are. JUSTINE UNDERHILL:What about in terms of shareholders, do you see negative outcomes there or positive? GABRIELLA HEFFESSE:That gets into the timing. If the Supreme Court takes the case, and they go in June, I don't think we'll see the PSPA amendment until late summer next year. Really, if they don't take it, and it signals a settlement, it's somewhat positive. I think that the shareholders think there is a good chance of winning this case in the Supreme Court. If it's legally decided the benefit that you get from it isyou can't retroactively change it. If there is a different president and they would change their policy objectives, having the net worth sweep deemed to be illegal in the first place, make sure that it will never happen again and gives more investor confidence in investing in the enterprises. Link to comment Share on other sites More sharing options...
allnatural Posted November 30, 2019 Share Posted November 30, 2019 I think she is right. The case is more of a battle for the common dilution and how fast a recap will take. If plaintiffs win Collins (best case), admin has cover for a settlement that would include paydown of pfds + tax credit of ~$30b for overage payments which helps common dilution and accelerates recap. Pfds are money good here. If plaintiffs lose, admin doesn't have the cover to be as aggressive and may look to monetize a portion of their snrs which hurts common with more dilution. But again as pfd holder you are fine as any residual value for common means money good for pfd. If SCOTUS rejects the case you are probably somewhere in the middle (write down snr pfds but no tax credit). Link to comment Share on other sites More sharing options...
Luke 532 Posted November 30, 2019 Share Posted November 30, 2019 Gary Hindes on recent developments (attached)... Finally_J_a_judge_who_gets_it.pdf Link to comment Share on other sites More sharing options...
Guest cherzeca Posted November 30, 2019 Share Posted November 30, 2019 An additional point to be made in connection with Collins cert petitions. You need to add fairholme and wash federal to the mix. Based upon transcript it would appear that judge Sweeney will deny both motions to dismiss so even if Ps lose both Collins claims in scotus there would still be three trials before Sweeney and Lamberth sitting there next summer that would impede any capital raises. And it looks like Sweeney may be releasing her decision sooner than one might expect. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 1, 2019 Share Posted December 1, 2019 “Sweeney’s, Chief Judge of US Court of Federal Claims, decision will be based on discovery and her writings will play a huge role in Scotus decision and other court cases. No need to reinvent the wheel for other courts when rendering their decision” this is actually an interesting point. good for you Emily. you will recall in the collins en banc oral argument that govt tried to introduced its own version of facts and judge jones jumped down the govt lawyer's throat, saying on a motion to dismiss the Ps allegations must be accepted as fact. govt repeated this trick in its cert petition to which Cooper & Kirk had to rebut in its reply. and in the fairholme oral argument in front of Sweeney, the govt lawyer referred to the record showing the GSEs were insolvent, and Cooper & Kirk having to say there is no record, there is only the complaint. having judge Sweeney decide the motion to dismiss on the basis of discovery will be the first time in this GSE judicial saga that a judge has actually weighed testimony and evidence in connection with a decision. this should be a helpful opinion for Ps to reference in the event SCOTUS grants cert. Link to comment Share on other sites More sharing options...
Luke 532 Posted December 2, 2019 Share Posted December 2, 2019 Rule of Law Guy's post today on Tim Howard's blog: https://howardonmortgagefinance.com/2019/10/21/some-simple-facts/#comment-13752 Link to comment Share on other sites More sharing options...
TonyG Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips great post tonyG. private citizen Phillips sounding very sane. the choir is growing and getting into key Link to comment Share on other sites More sharing options...
Midas79 Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking? Link to comment Share on other sites More sharing options...
onyx1 Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking? Phillips: "I also believe that there is not only consensus but complete cooperation between all the relevant parties, particularly Secretary Mnuchin and Director Calabria. I am very supportive of the recommendations in the Treasury report and believe they are possible to achieve." Sounds like they are all harmonizing Kumbaya. Link to comment Share on other sites More sharing options...
Luke 532 Posted December 2, 2019 Share Posted December 2, 2019 Bloomberg Law quote... https://news.bloomberglaw.com/banking-law/fannie-freddie-investors-should-be-paid-ex-treasury-aide-says Fannie Mae and Freddie Mac’s existing shareholders should be compensated as part of any overhaul that ends U.S. control of the companies, according to a former top adviser to Treasury Secretary Steven Mnuchin. Link to comment Share on other sites More sharing options...
onyx1 Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips "The junior preferred stock should be exchanged for common stock on a basis that is viewed as fair, based on capital markets standards and the prevailing market value of those securities." --Phillips What is he referring to when he says "those securities"? If he is referencing the common, no issue. But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair". Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 2, 2019 Share Posted December 2, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking? I agree that this is the question and it would be lazy to think phillips is in effect representing treasury's view. while he did work at treasury 2 years with full responsibility to work on the issue, he is now a private citizen. I would say, however, that he seems to regard the issue as a banker, understanding what would be necessary in the capital markets in order to proceed with the plan....and of course, Mnuchin has the same mortgage finance/capital markets background as phillips. you may recall that whenever Calabria has been asked about litigation, he says something to the effect that most of that will go away as they proceed with the plan...just another indication that what Ps are asking for the Ps will effectively get...though Ps are asking for about $25B more than just the cancelling of the senior preferred that phillips just told us is a necessary condition to raising common equity capital. the Washington federal case is an outlier for the govt though. this suit seeks $41B in damages from the USA, not the GSEs, so that it is not necessarily a case that must be settled in order to raise capital, though I would bet that the govt wants everything settled at the same time...and to my mind, the most interesting part of judge Sweeney's transcript is the way she credited Washington federal's allegations in her open court remarks. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 2, 2019 Share Posted December 2, 2019 @onyx "If he is referencing the common, no issue. But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"." this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation. now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs Link to comment Share on other sites More sharing options...
Midas79 Posted December 2, 2019 Share Posted December 2, 2019 @onyx "If he is referencing the common, no issue. But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"." this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation. now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs I took the "prevailing market prices" part of Phillips's exchange comment to refer to the common share price, i.e. the juniors will be offered a conversion at a common share price based on that in the market at the time of conversion. Citi offered their prefs a conversion at 85-95% of par at $3.25, where $3.25 was the average of the previous 22 trading days' common closing prices. That's what I'm expecting with FnF, and is the basis for the tweet I made earlier today. Shorting the commons to buy prefs, driving the common price down for a bigger conversion ratio, and then covering the short with some of the converted shares is highly tempting if there is a strong reason to believe that FnF's conversion will work like Citi's. https://twitter.com/midas79_/status/1201551381733281792 Link to comment Share on other sites More sharing options...
allnatural Posted December 2, 2019 Share Posted December 2, 2019 @cherzeca - if the above is true, does SCOTUS delaying the decision to accept/reject the petition to Jan change the Collins timeline at all (oral arguments expected March/April with decision to follow in June/July). Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 2, 2019 Share Posted December 2, 2019 @cherzeca - if the above is true, does SCOTUS delaying the decision to accept/reject the petition to Jan change the Collins timeline at all (oral arguments expected March/April with decision to follow in June/July). I wonder why the scotus conference might be delayed, but for all we know, the trial in senate with Roberts presiding might delay things even further. I would think that if one or more petition are granted cert in collins, there will be a decision by end of summer 2020. Link to comment Share on other sites More sharing options...
investorG Posted December 3, 2019 Share Posted December 3, 2019 @onyx "If he is referencing the common, no issue. But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"." this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation. now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs I think those hoping for something like an 8-10x exchange ratio for jr pref to common are likely to be disappointed. If we even get to the point of a deal / exchange, the Jr pref has less leverage than most assume given the govt's warrants and commoners interests are likely aligned plus the threat of not turning on the non-cumulative dividends for many years (I don't think a common dividend is necessary to sell shares). Moelis was more like 3x. If they would fairly retire the sr pref I guess the jr pref holders would take something near or slightly above Moelis. Link to comment Share on other sites More sharing options...
investorG Posted December 3, 2019 Share Posted December 3, 2019 https://housingfinancestrategies.com/235-2/ Latest from Craig Phillips There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking? Phillips: "I also believe that there is not only consensus but complete cooperation between all the relevant parties, particularly Secretary Mnuchin and Director Calabria. I am very supportive of the recommendations in the Treasury report and believe they are possible to achieve." Sounds like they are all harmonizing Kumbaya. unfortunately the only complete cooperation we see right now is mnuchin spending the last 3 months appealing the Collins ruling while Calabria muzzles his prior honorable commentary and remains a party of the anti-shareholder litigation. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted December 3, 2019 Share Posted December 3, 2019 @IG I believe that the GSE bankers will want the junior prefs gone (as well as the senior prefs of course), and to do this there needs to be a package offered to junior pref holders to incent 2/3rds of each class to accept. the most interesting aspect of the package will be the exchange into common feature, but it may also involve a distribution of below market rights to common stock. the only thing not likely on offer is cash. Link to comment Share on other sites More sharing options...
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