Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3211454 times)

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12410 on: May 15, 2019, 06:39:14 PM »
TwoCitiesCapital hit the nail on the head.

Also keep in mind - Calabria is one side of the equation - and he is the regulator.  He's shoving the idea of capital down the throats of anti-gse crowd/congress because it's difficult to defend against.  I think he provides a subtle hint in mentioning that he will have to sit down and meet in the middle with Treasury in negotiations, as Treasury (80% common holder) wants to maximize its investment.   

My speculation is Calabria is acting as a safety/soundness regulator asking for as much capital as possible - and will be "disappointed" when he has to lower his capital standards to execute a recap given negotiations with Treasury. 



SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12411 on: May 16, 2019, 05:19:10 AM »
Can someone articulate a practical bear case for the preferreds which would result in permanent loss of capital?

I agree there are situations where the returns aren't significant (large haircut to par if we lose 5th circuit en banc, recap primarily through long term retention of earnings)

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12412 on: May 16, 2019, 05:45:12 AM »
I never understood the argument that if shareholders lose Collins, pfd shareholders would have to take a haircut. As much as pfd shareholders need the government to signoff on this, the government needs them more. Is the us government really going to hold up the biggest ipo of the decade which is in their best interests (monetize ~$100b + get taxpayers off the hook) for an extra ~$5b of value that they may be able to extract from shareholders (whom are going to be the participants of the new recap...)? Never made sense to me. Pfds are a small piece of the pie, but unless treated fairly, the admin plan goes nowhere without pfd shareholders signing off on it. That's a position of power if you ask me!

More likely result of losing the Collins case is potentially the GSEs not getting the ~$20b+ of tax credits for the overpayments that plaintiffs are asking for in remedy in addition to writing down the senior pfds.


Can someone articulate a practical bear case for the preferreds which would result in permanent loss of capital?

I agree there are situations where the returns aren't significant (large haircut to par if we lose 5th circuit en banc, recap primarily through long term retention of earnings)

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12413 on: May 16, 2019, 06:00:13 AM »
Treasury beginning to line up w/ Calabria.

@KatyODonnell_
Craig Phillips, Treasury counselor, on GSEs this morning: “The current state is the worst possible state. We can preserve the system and reform it – we want to get Fannie and Freddie out of conservatorship, and we want to use private capital to do that.”

*PHILLIPS: WE WANT TO GET FANNIE-FREDDIE OUT OF CONSERVATORSHIP
*PHILLIPS: WE'VE HAD WORKING SESSIONS ON RECAPITALIZING GSES
*PHILLIPS: CALABRIA'S PLAN FOR GSES FOOTPRINT HAS BEEN DISCUSSED
*TREASURY'S CRAIG PHILLIPS SAYS COMPETITION WOULD BE GOOD

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12414 on: May 16, 2019, 06:16:53 AM »
Treasury beginning to line up w/ Calabria.

@KatyODonnell_
Craig Phillips, Treasury counselor, on GSEs this morning: “The current state is the worst possible state. We can preserve the system and reform it – we want to get Fannie and Freddie out of conservatorship, and we want to use private capital to do that.”

*PHILLIPS: WE WANT TO GET FANNIE-FREDDIE OUT OF CONSERVATORSHIP
*PHILLIPS: WE'VE HAD WORKING SESSIONS ON RECAPITALIZING GSES
*PHILLIPS: CALABRIA'S PLAN FOR GSES FOOTPRINT HAS BEEN DISCUSSED
*TREASURY'S CRAIG PHILLIPS SAYS COMPETITION WOULD BE GOOD
Good news.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12415 on: May 16, 2019, 07:10:20 AM »
Treasury beginning to line up w/ Calabria.

@KatyODonnell_
Craig Phillips, Treasury counselor, on GSEs this morning: “The current state is the worst possible state. We can preserve the system and reform it – we want to get Fannie and Freddie out of conservatorship, and we want to use private capital to do that.”

This has me thinking, how could FHFA and Treasury tap current shareholders for more money? There could be some sort of rights offering, perhaps with current shareholders being given priority either as an incentive to drop the lawsuits or as a reward for being first in (or both). And how would that work for the pref shares? Common shareholders could buy warrants or be forced to put up cash to maintain their position, I think.

I beliebe it was Tim Pagliara who said that the government won't screw existing shareholders because they will be providing some of the recap money. That's what started this train of thought.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12416 on: May 16, 2019, 08:38:25 AM »
Good news re Phillips quote. I’m not even fussed anymore by competition reference. Sen brown isn’t convinced it’s needed and mad Maxine will side with brown so no legislation creating competition during this Congress

Luke 5:32

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Invest for retirement?  Sure.  But investing in eternity is infinitely more important.  Don't get it twisted.  "...but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal."  Matthew 6:20

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12418 on: May 16, 2019, 10:33:21 AM »
Phillips is leaving next month: https://www.nytimes.com/2019/05/16/business/craig-phillips-treasury-fannie-mae-freddie-mac.html

On the surface, I don't like this. There are still too many moving parts, and Phillips has been one of the main people pushing things along. But perhaps his part of the heavy lifting is already done?

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12419 on: May 16, 2019, 10:46:37 AM »
Phillips is leaving next month: https://www.nytimes.com/2019/05/16/business/craig-phillips-treasury-fannie-mae-freddie-mac.html

On the surface, I don't like this. There are still too many moving parts, and Phillips has been one of the main people pushing things along. But perhaps his part of the heavy lifting is already done?

frankly, I love it

I never trusted the guy, thought he was a tbtf inside plant.  he was in charge of PLS at Morgan Stanley, no fan of the GSEs, he hated them when he was on street.  my best guess is that the treasury plan is baked and ready to go, he has no more value to add, and he is going to one of the banks that will get the mandate for the capital raise, claim all the credit and get a windfall bonus next year.  now would be the right time to cash in on two years in DC