Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3435128 times)

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10640 on: October 16, 2018, 02:02:39 PM »
Why would you need Fannie and Freddie when you want to repeal their charters and ask them to pay for insurance?  Fannie Mae and Freddie Mac will be no different than JPM, Wells Fargo and other banks. The mortgage rates will skyrocket. 

It is rhetoric by MBA and large banks to get all of the mortgage market and then raise interest rates on people like me so high that no one can afford and finally stick it to the government.  We have been through this discussion for a decade and saw what banks did in 2008.



by involving congress there will be a controversy regarding duty to serve underserved neighborhoods/low income housing.  you eliminate GSE charters and make all guarantors simple business entities without a public purpose and democrats will scream bloody murder (as well as some republicans).  this will not be a simple piece of legislation by any means, and given the animosity between the parties I am doubtful that this can be passed on a bi-partisan basis...especially when I expect all of the nonGSE future guarantors will balk at low income housing mandates


there is a lot of money from Treasury's current warrant value (or other areas) that can be carved out for explicit affordable housing mandates that might appeal to the Democrats even more than the status quo.  this is likely why Mnuchin keeps saying that housing reform needs to be comprehensive and involve HUD also.

the system will need someone like Fnma and Fmcc.  There's no guarantee they will be the final major players but it's like running a 100yd dash and they get to start halfway there.

it appears the security level MBS govt backstop is the key that mnuchin wants.  this ensures consistent global financing, even in bad times.  so he's going to have to wiggle to make other players in this process happy.


emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10641 on: October 16, 2018, 02:20:32 PM »
The only reason Fannie Freddie exists : implicit guarantee that keeps interest rates low for each one of us by using cheap money from overseas.  Fannie and Freddie reciprocate even more by helping with affordable goals. With the charter repealed, and paying for an explicit guarantee, there is no need to keep Fannie and Freddie around, we have many shark banks with shark loans already.

I now understand why large banks want CSP and why Watt wants to be still around till February i.e. IP of both companies they built over a century,  give it up for free and make both useless. Brilliant.

blackcoffee

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10642 on: October 16, 2018, 02:57:17 PM »
Why would you need Fannie and Freddie when you want to repeal their charters and ask them to pay for insurance?  Fannie Mae and Freddie Mac will be no different than JPM, Wells Fargo and other banks. The mortgage rates will skyrocket. 

It is rhetoric by MBA and large banks to get all of the mortgage market and then raise interest rates on people like me so high that no one can afford and finally stick it to the government.  We have been through this discussion for a decade and saw what banks did in 2008.



by involving congress there will be a controversy regarding duty to serve underserved neighborhoods/low income housing.  you eliminate GSE charters and make all guarantors simple business entities without a public purpose and democrats will scream bloody murder (as well as some republicans).  this will not be a simple piece of legislation by any means, and given the animosity between the parties I am doubtful that this can be passed on a bi-partisan basis...especially when I expect all of the nonGSE future guarantors will balk at low income housing mandates


there is a lot of money from Treasury's current warrant value (or other areas) that can be carved out for explicit affordable housing mandates that might appeal to the Democrats even more than the status quo.  this is likely why Mnuchin keeps saying that housing reform needs to be comprehensive and involve HUD also.

the system will need someone like Fnma and Fmcc.  There's no guarantee they will be the final major players but it's like running a 100yd dash and they get to start halfway there.

it appears the security level MBS govt backstop is the key that mnuchin wants.  this ensures consistent global financing, even in bad times.  so he's going to have to wiggle to make other players in this process happy.

Ahh yes - Howard's Superfecta for the banks. Goldmans gonna goldman right?

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10643 on: October 16, 2018, 03:46:56 PM »

Ahh yes - Howard's Superfecta for the banks. Goldmans gonna goldman right?

rather than commenting on what i'm hoping for or think is best (mel watt's utility proposal), i'm attempting to observe what seems to be actually happening in the most practical manner possible.  of course i could be mis-reading it all. 

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10644 on: October 16, 2018, 04:00:06 PM »
recent commentary in the FnF Twitter/blog universe is fairly weak.  it's like they think the guys in charge are lying with some secret alternative strategy.

it seems quite clear that mnuchin wants to do this legislatively.  It's not impossible to get done, it's permanent, and the backstop MBS-level govt guarantee is important to consistently have access to the global capital markets (as a replacement for the implied guarantee on the 2 entities, which everyone wants gone).

imo people should just accept this is the primary plan and focus their writing energy on more relevant things like stopping the NWS immediately or creating a new $15bn buffer instead of $3bn.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close.

Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely.


they might not have a choice.  It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress.  What's left is carving out some $ for affordable housing to get the Dems on board.
And where does that plan leave legacy shareholders?

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10645 on: October 16, 2018, 04:05:17 PM »
recent commentary in the FnF Twitter/blog universe is fairly weak.  it's like they think the guys in charge are lying with some secret alternative strategy.

it seems quite clear that mnuchin wants to do this legislatively.  It's not impossible to get done, it's permanent, and the backstop MBS-level govt guarantee is important to consistently have access to the global capital markets (as a replacement for the implied guarantee on the 2 entities, which everyone wants gone).

imo people should just accept this is the primary plan and focus their writing energy on more relevant things like stopping the NWS immediately or creating a new $15bn buffer instead of $3bn.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close.

Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely.


they might not have a choice.  It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress.  What's left is carving out some $ for affordable housing to get the Dems on board.
And where does that plan leave legacy shareholders?


the current market cap of all common and jr preferred shareholders is maybe around $10bn?  that is very small relative to the role the minority shareholders have played the last 10 years, the current earnings profile and future valuation of the 2 companies.  all we need is a true American leader, a politician or judge, who has the power to do the right thing.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10646 on: October 16, 2018, 05:44:21 PM »
recent commentary in the FnF Twitter/blog universe is fairly weak.  it's like they think the guys in charge are lying with some secret alternative strategy.

it seems quite clear that mnuchin wants to do this legislatively.  It's not impossible to get done, it's permanent, and the backstop MBS-level govt guarantee is important to consistently have access to the global capital markets (as a replacement for the implied guarantee on the 2 entities, which everyone wants gone).

imo people should just accept this is the primary plan and focus their writing energy on more relevant things like stopping the NWS immediately or creating a new $15bn buffer instead of $3bn.

The commentary is not as weak as the odds of legislation happening. It's been a decade and nothing. Polarization is at an all time high. I wouldn't say impossible but it's damn close.

Additionally, do we know how current beneficiaries of the GSE charters are reacting politically to the admin threatening their entire lines of business? I know for a fact that these businesses are valued at hundreds of millions of dollars. Do we think the people with pull at that level are going to go quietly? Not bloodly likely.


they might not have a choice.  It seems like the Tsy / OMB wants to go with the MBA plan, and likely so do the 2019 Republicans in Congress.  What's left is carving out some $ for affordable housing to get the Dems on board.
And where does that plan leave legacy shareholders?


the current market cap of all common and jr preferred shareholders is maybe around $10bn?  that is very small relative to the role the minority shareholders have played the last 10 years, the current earnings profile and future valuation of the 2 companies.  all we need is a true American leader, a politician or judge, who has the power to do the right thing.
I am not sure how to interpret this. But I can't think of aligning with MBA is going to make "shareholders great again".

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10647 on: October 17, 2018, 06:55:14 AM »
Josh Rosners take on Phillips comments (FWIW):

@JoshRosner
People are reading too much into @CraigPhillipsDC's comment. They aligned w/ OMB's statements re legislative goals. He didn't suggest they would sit on their hands pending legislation. I expect administrative reform is a separate track & UST may begin work with a post Watt @FHFA.

@JoshRosner
Watt has not proactive & was willing to sit & wait for legislation for which there are no votes. I suspect they decided, given it is so close to the end of his term, it would be easier to coordinate policy goals when they have a counterparty who shares their staging & priorities.

@JoshRosner
Until recently, GSE & mortgage market reform were not near the top of the priority list. Given it has now moved up the list there isn’t much need to rush rather than wait until after Jan 6th. I believe they are engaged in planning but I don’t think they see a reason rush today.
« Last Edit: October 17, 2018, 06:57:31 AM by allnatural »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10648 on: October 17, 2018, 07:15:38 AM »
Josh Rosners take on Phillips comments (FWIW):

@JoshRosner
People are reading too much into @CraigPhillipsDC's comment. They aligned w/ OMB's statements re legislative goals. He didn't suggest they would sit on their hands pending legislation. I expect administrative reform is a separate track & UST may begin work with a post Watt @FHFA.

@JoshRosner
Watt has not proactive & was willing to sit & wait for legislation for which there are no votes. I suspect they decided, given it is so close to the end of his term, it would be easier to coordinate policy goals when they have a counterparty who shares their staging & priorities.

@JoshRosner
Until recently, GSE & mortgage market reform were not near the top of the priority list. Given it has now moved up the list there isnít much need to rush rather than wait until after Jan 6th. I believe they are engaged in planning but I donít think they see a reason rush today.

thanks for this allnatural.  I quit twitter awhile ago.  I don't think josh is part of the conversation, but at least he is closer to it than we are.

seems to me that if polls are prescient (ha!), Rs will keep senate and Ds will retake house.  does everyone agree with me that this is a recipe for no GSE legislation passage?  does anyone think any legislation will pass with this political profile? 

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10649 on: October 17, 2018, 08:49:52 AM »
I agree legislative reform will be difficult to pass / low probability event regardless of the makeup of congress (all gop, half gop/dems, all dems). The bigger question is what happens if they fail down this path that OMB/Whitehouse/Phillips discussed? Will they turn to administrative options or not?

Regarding the current proposal. The GSEs will be probably weakened (difficult to handicap to what extent without more details), but will still retain value (even if you assume they lose 50% of their market share overnight which is a large leap of faith they will still generate over $10b+ in net profits combined). So as long as they are generating profitable earnings, the preferred shares should still be money good in that event and if legislative reform actually passes, its not the worse thing in the world for pref holders imo. One consistent point of discussion is they want the GSEs re-privatized and out of conservatorship (read, not liquidated/removed from existence). This is also the only way the admin can monetize their warrants.


Josh Rosners take on Phillips comments (FWIW):

@JoshRosner
People are reading too much into @CraigPhillipsDC's comment. They aligned w/ OMB's statements re legislative goals. He didn't suggest they would sit on their hands pending legislation. I expect administrative reform is a separate track & UST may begin work with a post Watt @FHFA.

@JoshRosner
Watt has not proactive & was willing to sit & wait for legislation for which there are no votes. I suspect they decided, given it is so close to the end of his term, it would be easier to coordinate policy goals when they have a counterparty who shares their staging & priorities.

@JoshRosner
Until recently, GSE & mortgage market reform were not near the top of the priority list. Given it has now moved up the list there isnít much need to rush rather than wait until after Jan 6th. I believe they are engaged in planning but I donít think they see a reason rush today.

thanks for this allnatural.  I quit twitter awhile ago.  I don't think josh is part of the conversation, but at least he is closer to it than we are.

seems to me that if polls are prescient (ha!), Rs will keep senate and Ds will retake house.  does everyone agree with me that this is a recipe for no GSE legislation passage?  does anyone think any legislation will pass with this political profile?
« Last Edit: October 17, 2018, 08:52:19 AM by allnatural »