Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3323201 times)

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12190 on: April 22, 2019, 10:16:48 AM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).


cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12191 on: April 22, 2019, 11:06:20 AM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

"Charters and paid-for explicit government guarantee may require legislation".  I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan.  recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization.  so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively
« Last Edit: April 22, 2019, 11:08:06 AM by cherzeca »

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12192 on: April 22, 2019, 11:31:25 AM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

"Charters and paid-for explicit government guarantee may require legislation".  I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan.  recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization.  so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively
Precisely! (explicit/ may)...
This will be the year.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12193 on: April 22, 2019, 11:56:29 AM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

"Charters and paid-for explicit government guarantee may require legislation".  I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan.  recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization.  so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively
Precisely! (explicit/ may)...
This will be the year.

this tracks from the POTUS memo, which asks for treasury to address in its plan the need for an explicit or implicit guarantee.  I may be reading too much into this, but this says to me that the administration is serious about moving forward with an administrative recap/release plan since it knows it cant do an explicit guarantee without congress and knows that the major complaint is that the federal charters imply a federal implicit guarantee, so POTUS is saying fine the GSEs will have to pay for the implicit guarantee, pay for their charters in effect. 

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12194 on: April 22, 2019, 01:26:42 PM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

"Charters and paid-for explicit government guarantee may require legislation".  I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan.  recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization.  so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively
Precisely! (explicit/ may)...
This will be the year.

this tracks from the POTUS memo, which asks for treasury to address in its plan the need for an explicit or implicit guarantee.  I may be reading too much into this, but this says to me that the administration is serious about moving forward with an administrative recap/release plan since it knows it cant do an explicit guarantee without congress and knows that the major complaint is that the federal charters imply a federal implicit guarantee, so POTUS is saying fine the GSEs will have to pay for the implicit guarantee, pay for their charters in effect.

Do you feel like the WH will act in short order once presented with plans from Treasury/HUD in June-ish time frame from article? This incessant urging and waiting for congress to act/help although good lip service is getting very tiring. 

The non optimistic part of me see this whole process easily continuing back and forth until the fall. Govts only seem to react to deadlines and the next will be the re election campaign. 

A part of me also reads the article layout with a time line very convenient for the en-banc opinion either positive or negative.
« Last Edit: April 22, 2019, 01:32:40 PM by orthopa »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12195 on: April 22, 2019, 02:09:21 PM »
@orthopa

been thinking about this. 

my best guess at moment is that i) Treasury will produce a roadmap/plan without too much specificity, but enough for it to say, ok it is time for us to hire an investment banker, and ii) say to FHFA (or fhfa will simply pronounce on its own), ok it is time for fhfa to require each GSE to come up with a capital restoration plan (required under HERA), and iii) each GSE will then hire its own investment banker to do this, and iv) fhfa will announce the capital targets that the GSEs will be required to shoot for.

this will be a dance that, while orchestrated, will look like Treasury is doing only what it should do and FHFA will do only what it should do, and then the collection of investment bankers (and lawyers, all will hire lawyers) will work as a team to get the recap done.  in reality, there will be much cross-checking in the background.

« Last Edit: April 22, 2019, 02:55:32 PM by cherzeca »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12196 on: April 22, 2019, 02:47:18 PM »
@orthopa

been thinking about this. 

my best guess at moment is that i) Treasury will produce a roadmap/plan without too much specificity, but enough for it to say, ok it is time for us to hire an investment banker, and ii) say to FHFA (or fhfa will simply pronounce on its own), ok it is time for fhfa to require each GSE to come up with a capital restoration plan (required under HERA), and iii) each GSE will then hire its own investment banker to do this, and iv) fhfa will announce the capital targets that the GSEs will be required to shoot for.

this will be a dance that, while orchestrated, will look like Treasury is doing only what it should do and FHFA will do only what it should do, and then the collection ton of investment bankers (and lawyers, all will hire lawyers) will work as a team to get the recap done.  in reality, there will be much cross-checking in the background.

Otting said capital rules by July-ish correct? So hopefully we are getting to some of the more specifics of a framework by then.  If things start falling in line the June-Sept time period should hopefully be eventful.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12197 on: April 22, 2019, 02:57:12 PM »
@orthopa

been thinking about this. 

my best guess at moment is that i) Treasury will produce a roadmap/plan without too much specificity, but enough for it to say, ok it is time for us to hire an investment banker, and ii) say to FHFA (or fhfa will simply pronounce on its own), ok it is time for fhfa to require each GSE to come up with a capital restoration plan (required under HERA), and iii) each GSE will then hire its own investment banker to do this, and iv) fhfa will announce the capital targets that the GSEs will be required to shoot for.

this will be a dance that, while orchestrated, will look like Treasury is doing only what it should do and FHFA will do only what it should do, and then the collection ton of investment bankers (and lawyers, all will hire lawyers) will work as a team to get the recap done.  in reality, there will be much cross-checking in the background.

Otting said capital rules by July-ish correct? So hopefully we are getting to some of the more specifics of a framework by then.  If things start falling in line the June-Sept time period should hopefully be eventful.

I think that is right.  hopefully the plan and marching orders are set before July/august, by which time collins en banc will have been decided
« Last Edit: April 22, 2019, 03:19:36 PM by cherzeca »

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12198 on: April 22, 2019, 05:10:32 PM »
For those that have not seen it:
https://www.wsj.com/articles/trump-appointed-official-promises-full-push-to-overhaul-plumbing-of-mortgage-market-11555938001

I am curious as to others' thoughts are on what Calabria thinks Congress needs to act on? Is this statement related to new charters for other guarantors or something else?

Excerpt:
"Part of his job, Mr. Calabria said, will be urging Congress to act, since there are limits on what the administration can do with Fannie and Freddie absent legislation

“A lot of responsibility lies upon Congress to get us to a different model,” he said. “And I think we should go to a different model.”"
Charters and paid-for government guarantee may require legislation. Modifying PSPAs doesn't (commitment fee, nws, etc.).

"Charters and paid-for explicit government guarantee may require legislation".  I think Calabria's willingness to do an interview on day 1 is good, as is his desire for Treasury to lead off the festivities with its plan.  recapping and releasing GSEs will be done w/o congressional action, but congress will be pissed and will want to be told by Calabria all of the things it can do post release (ie competition), none of which can be expected to happen given current political polarization.  so Calabria is wise to this (former senate staffer) and will keep talking about future plans while recap and release proceeds administratively

This goes back to the point I was trying to raise a couple of weeks ago.  How the hell do you (efficiently) recapitalize ~$150bn when you're also pitching removal of one of the most important advantages of this business (charters)?   I can't figure this one out.  Seems entirely contradictory for these guys to try to raise significant amounts of money while also diminishing the business prospects. 

Even if these clowns do believe removing charter is important - why not wait until fnma/fmcc are recapitalized?  Congress can't stop them.  Why not just raise the capital first and then go to congress and say ok lol time to remove charters.  Congress hasn't and can't do shit - but with a level headed and intelligent leader (Calabria) steering their direction it's possible he brings all of the clowns of Congress together to do something that hasn't been done before.   

Why not be silent on the charters until capital has been raised?

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12199 on: April 23, 2019, 03:26:31 AM »

This goes back to the point I was trying to raise a couple of weeks ago.  How the hell do you (efficiently) recapitalize ~$150bn when you're also pitching removal of one of the most important advantages of this business (charters)?   I can't figure this one out.  Seems entirely contradictory for these guys to try to raise significant amounts of money while also diminishing the business prospects. 

Even if these clowns do believe removing charter is important - why not wait until fnma/fmcc are recapitalized?  Congress can't stop them.  Why not just raise the capital first and then go to congress and say ok lol time to remove charters.  Congress hasn't and can't do shit - but with a level headed and intelligent leader (Calabria) steering their direction it's possible he brings all of the clowns of Congress together to do something that hasn't been done before.   

Why not be silent on the charters until capital has been raised?

One idea, offer the new investors a deal they won't want to refuse.  which likely means a larger % ownership of the pro forma companies to provide them a margin of safety to offset for the lack of future earnings clarity. 

this is likely why the common stays low; when including warrants each $1 rise is ~ $10bn of mkt cap that new investors wouldn't receive.   and the jr pref may get a haircut on their par value in any potential deal, perhaps depending on the outcome of the Collins appeal.

imo the moelis plan set unrealistic expectations relative to the goals of current political leaders.  it did however raise attention to the situation, which I believe was its main purpose. 

good luck everyone