Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3009505 times)

hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11750 on: February 19, 2019, 10:05:18 AM »
I don’t think recap is that controversial? Especially given no one seemed to object in calabrias confirmation hearing. Also Calabria said multiple times as soon as 2015 that receivership is legally required, so I hope otting prevents the possibility of Calabria going rogue by moving to recap before Calabria is confirmed. Releasing f&f after they’ve been recapped however is certainly going to be controversial and here a court opinion would help greatly


cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11751 on: February 19, 2019, 10:22:57 AM »
I don’t think recap is that controversial? Especially given no one seemed to object in calabrias confirmation hearing. Also Calabria said multiple times as soon as 2015 that receivership is legally required, so I hope otting prevents the possibility of Calabria going rogue by moving to recap before Calabria is confirmed. Releasing f&f after they’ve been recapped however is certainly going to be controversial and here a court opinion would help greatly

what I heard calabria say was that receivership was available instead of conservatorship and NWS (which he said was illegal). 

who knows, but my best guess is that no action by otting who will wait until calabria is confirmed since if admin is going to "bypass" congress, admin will want to do it with an fhfa director that the senate itself confirmed

hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11752 on: February 19, 2019, 10:27:06 AM »
https://pbs.twimg.com/media/DzTgayUXQAAz0pM.png

admin bypassed congress in allowing 3bn capital buffer. i dont think its controversial to allow them to build more given clear signs global economy is slowing and a real possibility of a downturn next year or two. also, its FHFA's job to ensure sound and solvent
« Last Edit: February 19, 2019, 10:41:55 AM by hardincap »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11753 on: February 19, 2019, 10:47:38 AM »
https://pbs.twimg.com/media/DzTgayUXQAAz0pM.png

admin bypassed congress in allowing 3bn capital buffer. i dont think its controversial to allow them to build more given clear signs global economy is slowing and a real possibility of a downturn next year or two. also, its FHFA's job to ensure sound and solvent

with trump "bypassing" congress on wall funding, this has become an intramural spitting match.  congress has no clue what to do with GSE reform, and couldn't pass anything if it did.  I think admin will introduce something that has a role for congress somewhere down the line, but I think it is being careful with optics right now

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11754 on: February 19, 2019, 12:37:01 PM »
As optimistic as one can get about Collins case... if we are back to relying on courts for any progress from here... Not a good sign IMO.

IF the government is intent on getting something going in 2019, it seems natural that potential upside price targets on both the common and jr preferred would be influenced by the collins case outcome.

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11755 on: February 19, 2019, 12:50:41 PM »
Silly question - if the new directors direct changes without congressional action, what's to stop future Pres Harris or Pres. Warren from reversing the decision and declaring a large dividend to treasury.

fwiw I don't think this is a silly question - unless Congress passes something permanent, there will be a large subset of investors who balk at fronting the $100bn+ in capital likely required for any recap.  and from the administrations point of view, a failed deal is unacceptable.  so they will likely go for the security blanket by using congress with Calabria's help (if confirmed) and see if a dedicated pile of money for affordable housing can bring them along.  after all, many Dems recently voted for Trump's criminal justice reform and perhaps will also vote yes for paid family leave if it comes up this congress.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11756 on: February 19, 2019, 01:11:56 PM »
Silly question - if the new directors direct changes without congressional action, what's to stop future Pres Harris or Pres. Warren from reversing the decision and declaring a large dividend to treasury.

fwiw I don't think this is a silly question - unless Congress passes something permanent, there will be a large subset of investors who balk at fronting the $100bn+ in capital likely required for any recap.  and from the administrations point of view, a failed deal is unacceptable.  so they will likely go for the security blanket by using congress with Calabria's help (if confirmed) and see if a dedicated pile of money for affordable housing can bring them along.  after all, many Dems recently voted for Trump's criminal justice reform and perhaps will also vote yes for paid family leave if it comes up this congress.

once GSEs are out of conservatorship, HERA becomes a pure regulatory statute.  potus warren would have no authority to "reverse decision and declare a large dividend to treasury".  if still in conservatorship when potus warren takes office, it is hard to see how a 180 could be justified.  perhaps however if this is a real concern to potential investors, treasury could insert a poison pill into its recap plan.  there is always a solution...unless you are billy McFarland

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11757 on: February 19, 2019, 01:23:23 PM »
Silly question - if the new directors direct changes without congressional action, what's to stop future Pres Harris or Pres. Warren from reversing the decision and declaring a large dividend to treasury.

fwiw I don't think this is a silly question - unless Congress passes something permanent, there will be a large subset of investors who balk at fronting the $100bn+ in capital likely required for any recap.  and from the administrations point of view, a failed deal is unacceptable.  so they will likely go for the security blanket by using congress with Calabria's help (if confirmed) and see if a dedicated pile of money for affordable housing can bring them along.  after all, many Dems recently voted for Trump's criminal justice reform and perhaps will also vote yes for paid family leave if it comes up this congress.

once GSEs are out of conservatorship, HERA becomes a pure regulatory statute.  potus warren would have no authority to "reverse decision and declare a large dividend to treasury".  if still in conservatorship when potus warren takes office, it is hard to see how a 180 could be justified.  perhaps however if this is a real concern to potential investors, treasury could insert a poison pill into its recap plan.  there is always a solution...unless you are billy McFarland
And adding to the pile...

The authority for Treasury to invest in the GSEs terminated at the end 2009, as per HERA. So Treasury is really unable to buy any *future* security issued by Fannie and Freddie. Stressing the importance of eliminating the hanging threat of the Seniors. Once removed, it is over. Hopefully, replaced by a line of credit that relies on a commitment fee. But something must be done about the PSPAs so they become "the past" as the future -no possible investments- is already set.

HERA has a subchapter where it authorizes the modification of the charters of each company to allow for a Treasury bailout. However, the authority given to Treasury was narrow and temporary.

Once all this is fixed (terminated), there should not be any worries about future administrations reinstating a sweep or meddling with dividends. They can't.
« Last Edit: February 19, 2019, 01:27:55 PM by rros »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11758 on: February 19, 2019, 03:53:58 PM »
Ill let you guys do the worrying and hand wringing for me. I still think par or just below +/- some arbitrage opportunity is possible.

That being said, surprised this hasn't been posted yet but lots of juicy details here. Probably one of the most leveled headed thought out assessments of the current situation in both time frame and price expectation.

https://www.realvision.com/tv/shows/trade-ideas/videos/a-new-fannie-mae-play

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11759 on: February 19, 2019, 04:51:02 PM »
Ill let you guys do the worrying and hand wringing for me. I still think par or just below +/- some arbitrage opportunity is possible.

That being said, surprised this hasn't been posted yet but lots of juicy details here. Probably one of the most leveled headed thought out assessments of the current situation in both time frame and price expectation.

https://www.realvision.com/tv/shows/trade-ideas/videos/a-new-fannie-mae-play

Thanks ortho

notice she said it was their understanding (she works at DC firm that advises financial entities on govt policy implications) that treasury is looking for a financial advisor.  this is important. you dont do that unless you have decided to proceed.  advisor can take a little time gear up, but Mnuchin will push them.
she was wrong to say collins Ps only want senior pref written off.  they want the $19B overpayment as well. what Ps get by way of relief in event of a favorable holding is not clear. also I dont know why she thinks that treasury would think a loss in collins would upset the recap and raise? this would be true only if treasury wanted to extract additional value from the senior pref, in addition to the common.  one reason why the "trade" works is that a loss to treasury in collins doesn't frustrate the admin plan.