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

[investorG]

when Mnuchin said last week he was contemplating, it probably was likely. when he now says it's likely, it is probably time to make book.

 

To paraphrase the old joke:

If he says "no" he means "maybe".

If he says "maybe" he means "yes".

If he says "yes", he's no poker player.

 

Between Mnuchin, Calabria and Crapo's statements and the WSJ editorial opinion, something seems to be brewing.

 

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I think the market is applying some small discount to account for the risk that Mnuchin doesn't sign the amendment, but have to imagine a large portion of the PSPA amendment is already baked into the price at this point.  I could be totally wrong here, given that the details of the amendment are key variables and unknown (simply end NWS?  partial write-down of senior pref?  details of commitment fee?) but I'm not sure I'd expect a 50-100% increase in prices even in a better-case scenario. 

 

I think the market wants closure on the implications of a SCOTUS decision + more specific views on Biden's likelihood of playing nice nice with any consent decree (for example-  could Biden not assign a new FHFA director quickly and dramatically increase the capital requirements to make it near impossible to raise private capital and therefore keep the GSE's as cashflowing entities for the govt?  The SCOTUS decision won't be final until June so a capital raise won't happen until June - and by then a new FHFA director can come into play and quickly raise the capital standards) 

 

Just typing out some random thoughts.  Obviously moving in a positive direction but I'm skeptical that the market is just so obviously dumb that it's missing the upcoming PSPA amendment. 

 

Thoughts?

 

Welcome to reality.  Liquid Jr pref trading @ 43pct of par IMO due to:  a) mnuchin might not act on sr pref writedown.  b) consent order uncertainty re: FHFA and admin transition  c)  jr pref have little leverage due to non-cumulative nature of dividends -- would expect a potential exchange at discount to par.  d) other unidentifiable pitfalls.    Despite most of the propaganda on the message boards there are no free lunches and the market should be respected as a decent leading indicator.

[COBFInfinity]

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside?

 

I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

[SnarkyPuppy]

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside?

 

I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

 

He put out a lengthy Treasury plan and signed an interim agreement w/ FHFA to suspend the net worth sweep.  He's going to sign the PSPA amendment and the market knows it. 

[COBFInfinity]

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside?

 

I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

 

He put out a lengthy Treasury plan and signed an interim agreement w/ FHFA to suspend the net worth sweep.  He's going to sign the PSPA amendment and the market knows it.

 

Ok, but's what's in the amendment? What if the NWS is ended, but the Senior Preferred isn't written down? If you are 100% sure what's going to happen, you have me beat by about 70%.

[SnarkyPuppy]

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside?

 

I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

 

He put out a lengthy Treasury plan and signed an interim agreement w/ FHFA to suspend the net worth sweep.  He's going to sign the PSPA amendment and the market knows it.

 

Ok, but's what's in the amendment? What if the NWS is ended, but the Senior Preferred isn't written down? If you are 100% sure what's going to happen, you have me beat by about 70%.

 

Prices go down in this case.

[WB_fan82]

Finally, somebody (COBF) takes off the rosy glasses.

 

The sr pfd balance does not need to be written down to accomplish Calabria's objectives.  Frankly, I don't think Mnuchin's self-respect and ego is compatible with simply writing it down.  It's just a stupid thing to do and embarrassing to give hundreds of billions to GSE shareholders.

 

The NWS can end and the sr pfd be left outstanding as a non-cumulative instrument, and calabria will happily not declare those dividends.  That sets the GSEs on an inevitable recap path.  As long as the sr pfd is also made repayable, eventually private capital can be raised to pay it down.  Yes, this is a slow process, though accelerated by the fact that sr pfd with non-cum now qualifies as a huge slug of capital, but the only people who look at this really thinking there is urgency to the recapitalization are us security holders...

 

And Mnuchin's comments do not seem accidental to me... an alternative to what I wrote above is to convert some or all of the sr pfd into common.  But then what happens when the SC remands the NWS and shareholders get lucky and win in Texas on the overages?  Then TSY gets sued all over again b/c they ultimately benefited from those overages after all with the new common shares they got from any exchange.  It's messy.  And messy doesn't get done with a tight deadline.

 

 

 

 

 

[COBFInfinity]

Have to be honest here- something seems off.  The market, while sometimes inefficient when structural/technical reasons exist (applicable here) and therefore can be slow to react to emerging phenomenon, cannot be this stupid to allow for a 50-100% increase in prices at PSPA 4th amendment signing.

 

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside?

 

I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

 

He put out a lengthy Treasury plan and signed an interim agreement w/ FHFA to suspend the net worth sweep.  He's going to sign the PSPA amendment and the market knows it.

 

Ok, but's what's in the amendment? What if the NWS is ended, but the Senior Preferred isn't written down? If you are 100% sure what's going to happen, you have me beat by about 70%.

 

Prices go down in this case.

 

Lol, that explains why no one is paying more today, doesn't it?

[investorG]

Finally, somebody (COBF) takes off the rosy glasses.

 

The sr pfd balance does not need to be written down to accomplish Calabria's objectives.  Frankly, I don't think Mnuchin's self-respect and ego is compatible with simply writing it down.  It's just a stupid thing to do and embarrassing to give hundreds of billions to GSE shareholders.

 

The NWS can end and the sr pfd be left outstanding as a non-cumulative instrument, and calabria will happily not declare those dividends.  That sets the GSEs on an inevitable recap path.  As long as the sr pfd is also made repayable, eventually private capital can be raised to pay it down.  Yes, this is a slow process, though accelerated by the fact that sr pfd with non-cum now qualifies as a huge slug of capital, but the only people who look at this really thinking there is urgency to the recapitalization are us security holders...

 

And Mnuchin's comments do not seem accidental to me... an alternative to what I wrote above is to convert some or all of the sr pfd into common.  But then what happens when the SC remands the NWS and shareholders get lucky and win in Texas on the overages?  Then TSY gets sued all over again b/c they ultimately benefited from those overages after all with the new common shares they got from any exchange.  It's messy.  And messy doesn't get done with a tight deadline.

 

Anything is possible. 

 

But I'd recommend reading footnote 30 of the August 2020 CBO report on recapitalizing the GSEs through Admin options.

 

Also some of Craig Phillips' comments.

 

of course, however, could act isn't the same as will act...

 

 

[investorG]

Now that the case has been heard would the SC still rule on Calabria's constitutionality even if Collins sees a 4th amendment that is satisfactory to them regarding NWS and sr pref balance?

[COBFInfinity]

Finally, somebody (COBF) takes off the rosy glasses.

 

The sr pfd balance does not need to be written down to accomplish Calabria's objectives.  Frankly, I don't think Mnuchin's self-respect and ego is compatible with simply writing it down.  It's just a stupid thing to do and embarrassing to give hundreds of billions to GSE shareholders.

 

The NWS can end and the sr pfd be left outstanding as a non-cumulative instrument, and calabria will happily not declare those dividends.  That sets the GSEs on an inevitable recap path.  As long as the sr pfd is also made repayable, eventually private capital can be raised to pay it down.  Yes, this is a slow process, though accelerated by the fact that sr pfd with non-cum now qualifies as a huge slug of capital, but the only people who look at this really thinking there is urgency to the recapitalization are us security holders...

 

And Mnuchin's comments do not seem accidental to me... an alternative to what I wrote above is to convert some or all of the sr pfd into common.  But then what happens when the SC remands the NWS and shareholders get lucky and win in Texas on the overages?  Then TSY gets sued all over again b/c they ultimately benefited from those overages after all with the new common shares they got from any exchange.  It's messy.  And messy doesn't get done with a tight deadline.

 

Anything is possible. 

 

But I'd recommend reading footnote 30 of the August 2020 CBO report on recapitalizing the GSEs through Admin options.

 

Also some of Craig Phillips' comments.

 

of course, however, could act isn't the same as will act...

 

Hey, we're all in the same boat hoping here, but I have reasonable doubt as to what will be executed. By far, the most tempting thing said by any of the major players over the past two years was Calabria saying that after the next PSPA amendment, the lawsuits will "go away". In our minds, we know that the lawsuits only go away if the Senior Preferred is written down (at least in part, if not in whole) and we know Calabria is a smart guy with smart people working for him, so we assume that he understood that. But is it possible he didn't? What if thought just ending the NWS without a Sr Pfd writedown was good enough to end the lawsuits? I think it's certainly possible that we have all read more into these bits and pieces than we should have.

 

To be clear, I haven't sold a single share. I think there's a pretty good chance my Jr Pfd go to par in the next couple years. But if we're wrong, we are going to be holding this bag for many more years. Seems logical for a healthy discount to par. If there is a PSPA amendment that wipes out the Sr Pfd, I think the Jr Pfds go straight to 70% of par. That would still leave a discount for the uncertainty as to when Jr Pfd might get exchanged into common or the unlikely scenario where dividends are turned back on.

[Midas79]

Finally, somebody (COBF) takes off the rosy glasses.

 

The sr pfd balance does not need to be written down to accomplish Calabria's objectives.  Frankly, I don't think Mnuchin's self-respect and ego is compatible with simply writing it down.  It's just a stupid thing to do and embarrassing to give hundreds of billions to GSE shareholders.

 

The NWS can end and the sr pfd be left outstanding as a non-cumulative instrument, and calabria will happily not declare those dividends.  That sets the GSEs on an inevitable recap path.  As long as the sr pfd is also made repayable, eventually private capital can be raised to pay it down.  Yes, this is a slow process, though accelerated by the fact that sr pfd with non-cum now qualifies as a huge slug of capital, but the only people who look at this really thinking there is urgency to the recapitalization are us security holders...

 

And Mnuchin's comments do not seem accidental to me... an alternative to what I wrote above is to convert some or all of the sr pfd into common.  But then what happens when the SC remands the NWS and shareholders get lucky and win in Texas on the overages?  Then TSY gets sued all over again b/c they ultimately benefited from those overages after all with the new common shares they got from any exchange.  It's messy.  And messy doesn't get done with a tight deadline.

 

I disagree that ending the NWS but leaving the seniors in place (though changed to non-cumulative) accomplishes Calabria's (or even Mnuchin's) objectives. Retained earnings alone will take around a decade to hit the full capital levels. Calabria is guaranteed not to be in office for the last half of that, and might not be past next summer. Calabria knows he could be replaced by a do-nothing like Watt or an anti-conservator like DeMarco. He will need to do FHFA's part towards recap and release (most prominently consent orders) quickly.

 

Raising private capital while the seniors are in place is equally impossible. Any newly-issued shares, which would have to be commons to conform to the capital rule, would have zero economic value due to the seniors' massive liquidation and dividend preferences. Even if FnF are allowed to pay down the seniors, they will lack the regulatory capital buffers with which to do so for the next decade. Then it would take another decade or so to actually pay them off. Only then could private capital be raised, though at that point not much would be needed.

 

I maintain that if Mnuchin wants third-party capital to be raised, as his words suggest, he knows that the NWS and seniors have to be gone so that the newly-issued shares will actually have value.

 

As to rose-colored glasses, those without them are unlikely to own shares, and therefore post in this thread, anyway. I'm not sure what you are expecting here.

[WB_fan82]

Midas,

 

Yes, it's about a decade of just retained earnings, if nothing else changes.  But once we have a couple years of stability and as capital approaches capital requirements, it becomes very easy to bridge the gap with a big external raise.  I think $75B is easily doable, that gets you down to 7 years worst case.

 

And then there are other things that would likely happen over the next 7 years:

 

1.  Calabria leaves and his replacement may lower the capital requirements somewhat

2.  The GSEs could lobby his replacement to change the capital requirements, for example accepting those unamortized upfront fees as capital.

3.  The GSEs could lobby his replacement to change the mix of preferred vs common equity, thereby letting the entire massive slugs of non-cum govt preferred count as massive increases to both capital requirements (statutory and adjusted)

4.  Other steps that would accelerate release but dilute the common:  jr pfd exchange, corp bond exchange, sr pfd exchange

5.  Lawsuit resolution on NWS overage (a win bringing $120B back).

 

Any or some of those 5 things can vastly accelerate the timeframes to sub 3 years from now.  Whether common fares better than the preferred is more scenario dependent, but at this stage it's all about Mnuchin and just getting to a place where the above can happen.  Regardless of timing.  A lot of shareholders look at this like urgency or the lawsuits matter, and they don't. 

[typicalvalue]

Finally, somebody (COBF) takes off the rosy glasses.

 

The sr pfd balance does not need to be written down to accomplish Calabria's objectives.  Frankly, I don't think Mnuchin's self-respect and ego is compatible with simply writing it down.  It's just a stupid thing to do and embarrassing to give hundreds of billions to GSE shareholders.

 

The NWS can end and the sr pfd be left outstanding as a non-cumulative instrument, and calabria will happily not declare those dividends.  That sets the GSEs on an inevitable recap path.  As long as the sr pfd is also made repayable, eventually private capital can be raised to pay it down.  Yes, this is a slow process, though accelerated by the fact that sr pfd with non-cum now qualifies as a huge slug of capital, but the only people who look at this really thinking there is urgency to the recapitalization are us security holders...

 

And Mnuchin's comments do not seem accidental to me... an alternative to what I wrote above is to convert some or all of the sr pfd into common.  But then what happens when the SC remands the NWS and shareholders get lucky and win in Texas on the overages?  Then TSY gets sued all over again b/c they ultimately benefited from those overages after all with the new common shares they got from any exchange.  It's messy.  And messy doesn't get done with a tight deadline.

 

I disagree that ending the NWS but leaving the seniors in place (though changed to non-cumulative) accomplishes Calabria's (or even Mnuchin's) objectives. Retained earnings alone will take around a decade to hit the full capital levels. Calabria is guaranteed not to be in office for the last half of that, and might not be past next summer. Calabria knows he could be replaced by a do-nothing like Watt or an anti-conservator like DeMarco. He will need to do FHFA's part towards recap and release (most prominently consent orders) quickly.

 

Raising private capital while the seniors are in place is equally impossible. Any newly-issued shares, which would have to be commons to conform to the capital rule, would have zero economic value due to the seniors' massive liquidation and dividend preferences. Even if FnF are allowed to pay down the seniors, they will lack the regulatory capital buffers with which to do so for the next decade. Then it would take another decade or so to actually pay them off. Only then could private capital be raised, though at that point not much would be needed.

 

I maintain that if Mnuchin wants third-party capital to be raised, as his words suggest, he knows that the NWS and seniors have to be gone so that the newly-issued shares will actually have value.

 

As to rose-colored glasses, those without them are unlikely to own shares, and therefore post in this thread, anyway. I'm not sure what you are expecting here.

 

Agree. This either gets done well (NWS stopped and Sr pfds gone) o doesn't. GSE's need to raise capital ASAP and no one is going to put a dime with the seniors outstanding to get no economic value. Calabria and Mnuchin know this. Retained earnings can be part of the equation, but raising capital is the most important part imho. The question is if Mnuchin pulls the trigger. Perhaps the market needs action and is tired of empty words. On 20th of January we will be out of doubt.

[investorG]

Midas,

 

Yes, it's about a decade of just retained earnings, if nothing else changes.  But once we have a couple years of stability and as capital approaches capital requirements, it becomes very easy to bridge the gap with a big external raise.  I think $75B is easily doable, that gets you down to 7 years worst case.

 

And then there are other things that would likely happen over the next 7 years:

 

1.  Calabria leaves and his replacement may lower the capital requirements somewhat

2.  The GSEs could lobby his replacement to change the capital requirements, for example accepting those unamortized upfront fees as capital.

3.  The GSEs could lobby his replacement to change the mix of preferred vs common equity, thereby letting the entire massive slugs of non-cum govt preferred count as massive increases to both capital requirements (statutory and adjusted)

4.  Other steps that would accelerate release but dilute the common:  jr pfd exchange, corp bond exchange, sr pfd exchange

5.  Lawsuit resolution on NWS overage (a win bringing $120B back).

 

Any or some of those 5 things can vastly accelerate the timeframes to sub 3 years from now.  Whether common fares better than the preferred is more scenario dependent, but at this stage it's all about Mnuchin and just getting to a place where the above can happen.  Regardless of timing.  A lot of shareholders look at this like urgency or the lawsuits matter, and they don't.

 

Possible. Hopefully not probable. Share prices go lower in this scenario, not sure why you're invested if this is your view.

[COBFInfinity]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

[Guest cherzeca]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

 

makes no sense...except that maybe Mnuchin wanted to see if scotus pissed all over Ps....which it didnt. bugs the shit out of me because from where I come from, you dont 'use" scotus as a tool. no respect

[undervalued]

https://www.scotusblog.com/2020/12/argument-analysis-very-hard-questions-in-dispute-over-fannie-mae-freddie-mac-shareholder-suit/

 

Not sure if this is helpful but interesting read.

[investorG]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

 

Some theoretical possibilities:

 

- Plaintiffs were asking too much pre-SCOTUS hearing (i.e. the full boat, sr pref write down Plus overage) due to over-confidence

- He doesn't intend to settle.  Rather enter into a PSPA amendment with Calabria outside of legal world

- Good public policy for SCOTUS to decide on FHFA head constitutionality even if PSPA amendment meets Collins' demands re: NWS and sr pref

- He thinks trump might still win

 

Or, more pessimistically, he plans to do nothing on Sr pref between now and jan20.

[COBFInfinity]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

 

Some theoretical possibilities:

 

- Plaintiffs were asking too much pre-SCOTUS hearing (i.e. the full boat, sr pref write down Plus overage) due to over-confidence

- He doesn't intend to settle.  Rather enter into a PSPA amendment with Calabria outside of legal world

- Good public policy for SCOTUS to decide on FHFA head constitutionality even if PSPA amendment meets Collins' demands re: NWS and sr pref

- He thinks trump might still win

 

Or, more pessimistically, he plans to do nothing on Sr pref between now and jan20.

 

Thanks for the thoughts.

- Were there any actual negotiations where plaintiffs asked for anything? I expect none of us on this board calling for par value is actually Bruce Berkowitz.

-But this gets to my concern that no settlement might mean he is willing to let the lawsuits play out, meaning he may not be interested in putting his thumb on the scale enough to write down the Sr Pfd.

-Not sure that Mnuchin would care much about FHFA structure constitutionality.

-Assuming for a moment that Mnuchin thinks Trump might succeed in stealing the election, why does that make him want SCOTUS case to go forward?

[muscleman]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

 

Some theoretical possibilities:

 

- Plaintiffs were asking too much pre-SCOTUS hearing (i.e. the full boat, sr pref write down Plus overage) due to over-confidence

- He doesn't intend to settle.  Rather enter into a PSPA amendment with Calabria outside of legal world

- Good public policy for SCOTUS to decide on FHFA head constitutionality even if PSPA amendment meets Collins' demands re: NWS and sr pref

- He thinks trump might still win

 

Or, more pessimistically, he plans to do nothing on Sr pref between now and jan20.

 

Has anyone tracked the SCOTUS ruling on the Texas vs Pennsylvania case? If black and white cases like that one can be thrown out, I can't see how they will rule in favor of shareholders for FnF.....

Trump's entire re-election hope seems to be on SCOTUS and it is a loss. Just like FnF shareholder's entire hope seems to be on SCOTUS at this moment.

But there is a powerful magic hand that pulls the dolls on the front stage, and those dolls start to dance however the powerful hand orders them to dance.

 

I don't know what else to say... My charts finally get a buy setup right now after the 2019 May top. But I have completely lost faith in the fundamentals.

 

 

[DocSnowball]

What is underneath my concerns is that I can't figure out why Mnuchin wanted the SCOTUS hearing to occur, then come out and say he's likely to do a PSPA amendment. Was it just to add political cover so that he could write down Sr Pfd? If so, do we actually believe he got that cover? Sure, tough questions were asked of the government, but they were asked of plaintiffs, too. And people like John Carney (him again) or still saying today that nothing has changed - shareholders will lose.

 

So does anyone have a compelling logic as to why the SCOTUS hearing went forward if Mnuchin is going to give us what we want anyway? I'm at a loss.

 

Some theoretical possibilities:

 

- Plaintiffs were asking too much pre-SCOTUS hearing (i.e. the full boat, sr pref write down Plus overage) due to over-confidence

- He doesn't intend to settle.  Rather enter into a PSPA amendment with Calabria outside of legal world

- Good public policy for SCOTUS to decide on FHFA head constitutionality even if PSPA amendment meets Collins' demands re: NWS and sr pref

- He thinks trump might still win

 

Or, more pessimistically, he plans to do nothing on Sr pref between now and jan20.

 

Has anyone tracked the SCOTUS ruling on the Texas vs Pennsylvania case? If black and white cases like that one can be thrown out, I can't see how they will rule in favor of shareholders for FnF.....

Trump's entire re-election hope seems to be on SCOTUS and it is a loss. Just like FnF shareholder's entire hope seems to be on SCOTUS at this moment.

But there is a powerful magic hand that pulls the dolls on the front stage, and those dolls start to dance however the powerful hand orders them to dance.

 

I don't know what else to say... My charts finally get a buy setup right now after the 2019 May top. But I have completely lost faith in the fundamentals.

I think we're left at the whims of Treasury-FHFA agreement here in the next few weeks. Otherwise things can exist as they are for eternity...

[Guest cherzeca]

@muscleman

 

texas v Pa et al was a case that if scotus took seriously Texas would have won. they ran away from it. so this clearly was a case where scotus worked back from what it thought was the proper result, and found the way to get there. Roberts may have his institutional reasons not to have given Texas its due, but this is not the rule of law but rather rule of the institutionally desired outcome.

 

you saw some of that in the Collins argument, with the acting D hypo getting way more than its due...because the acting D was not removable at will on the merits.  but that would be the only way to decide the constitutional claim in favor of govt, without being inconsistent with seila, so scotus embraced it at least as a hypo to see where it would lead.

[locutusoftexas]

Has anyone tracked the SCOTUS ruling on the Texas vs Pennsylvania case? If black and white cases like that one can be thrown out, I can't see how they will rule in favor of shareholders for FnF.....

Trump's entire re-election hope seems to be on SCOTUS and it is a loss. Just like FnF shareholder's entire hope seems to be on SCOTUS at this moment.

But there is a powerful magic hand that pulls the dolls on the front stage, and those dolls start to dance however the powerful hand orders them to dance.

 

I don't know what else to say... My charts finally get a buy setup right now after the 2019 May top. But I have completely lost faith in the fundamentals.

 

First of all, this investment was never about fundamentals. Yes, the numbers tell us what the government has taken unfairly from private shareholders, but the investment was always predicated on government doing the right thing, including abiding by the Constitution.

 

Secondly, I cannot fathom what you are talking about with regard to the decision on the Texas complaint. The decision was easy and straightforward; even by Alito's and Thomas's reckoning the ultimate intent of the lawsuit was simply to waste time (my inference) with no hope of relief (what Alito said). Read the Constitution. There is no analogy between the FnF court cases and the ridiculous Texas lawsuit. Sorry, just the facts.

 

Finally, since I joined the thread four years ago, I have asked a lot of questions and have read a large number of articles. I am no authority, like Cherzecha or some of the others on the thread. However, I decided that this was going to be about court cases because no one in the government is going to give up a steady, potentially eternal stream of free money of order $ billions in today's dollars. I said this more than once. I even provided a simple probability model of shareholder success based on the total number of court cases.

 

Obama's folks did the original deed. Trump's folks have just gladly accepted the free money. Without a positive court ruling, I believe that private shareholders will continue to suck wind. As I said a few years ago, I would very much like to be wrong. However, there is no evidence that I am, other than perhaps Calabria's possibly right-minded intentions. According to a number of analyses by the really smart folks on this thread, that is probably not enough.

[Gregmal]

This is a straight forward, asymmetric wager/investment. Nothing more, nothing less. I own some of the preferreds.

[Guest cherzeca]

This is a straight forward, asymmetric wager/investment. Nothing more, nothing less. I own some of the preferreds.

 

oh god, maybe is time to sell....