Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2673114 times)

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9950 on: June 12, 2018, 08:57:40 AM »
Can this be anything other than a recap now these standards are out?

Any one got the cahones to go all in yet?
The proposed rules specifically state this is not an attempt to recap and that FHFA steps aside leaving exiting the conservatorship to Congress/Admin. Also, is it the sum of the risk-based and leverage ratio the total capital required? That would be north of $300 bill. I can't read the 200 + pages.

I believe the required capital is the greater of the risk-based capital number and the minimum capital number. So right now it would be the risk-based number ($180.9B), which is greater than the minimum number ($139.5B or $103.5B, depending on the Alternative chosen).

The point of the two numbers is that if the companies start de-risking themselves (holding less risky assets on the balance sheet), the $180.9B number could go down, but the other number (the minimum) wouldn't. FHFA (rightly) says that both are needed: the risk-based number is needed to actually calibrate the capital requirement to the actual state of the companies, and the minimum number is needed to prevent gaming of the system.

As for the statement about not wanting this to be construed as support for recap and release, well, Watt has been saying that all along. I just hope at some point he realizes (and is willing to take a stand on) the fact that nothing he does can restrain Congress's powers anyway, and they haven't shown any unified enough political will to do big reforms.


allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9951 on: June 12, 2018, 09:16:06 AM »
I am pretty much all in and adding in small increments every month. I think this is a material step towards any reform as it lays how much capital the GSEs will be required to raise / retain in a recapitalization / privatization scenario (and is one of the steps proposed by the shareholder friendly Moelis plan). He can say its not meant for recap/release all he wants but this will guide discussions on capital going forward.

Can this be anything other than a recap now these standards are out?

Any one got the cahones to go all in yet?

emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9952 on: June 12, 2018, 10:41:35 AM »
Market is not considering this a good news, at best, neutral.

Can this be anything other than a recap now these standards are out?

Any one got the cahones to go all in yet?

beaufort

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9953 on: June 12, 2018, 11:09:14 AM »
The capital framework, with numbers, suggested by FHFA is another good fact for plaintiffs and will likely be brought up in future NWS cases.  How can FnF ever have the capital levels the regulator says are appropriate if they can't retain capital?  Another good fact is when plaintiff lawyers are able to allege that the NWS has resulted in Treasury having fully recouped its investment in addition to the 10% dividend.  If Midas' numbers are largely correct, and this 10% moment has been discussed for some time, we are close. 

These two good facts will be very difficult to ignore in future judicial decisions.   

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9954 on: June 12, 2018, 11:26:13 AM »
:-)

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9955 on: June 12, 2018, 03:41:22 PM »
@midas

"I believe the required capital is the greater of the risk-based capital number and the minimum capital number. So right now it would be the risk-based number ($180.9B), which is greater than the minimum number ($139.5B or $103.5B, depending on the Alternative chosen)."

while I don't doubt you, I didn't see this explained on my quick first read

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9956 on: June 12, 2018, 04:13:43 PM »
@midas

"I believe the required capital is the greater of the risk-based capital number and the minimum capital number. So right now it would be the risk-based number ($180.9B), which is greater than the minimum number ($139.5B or $103.5B, depending on the Alternative chosen)."

while I don't doubt you, I didn't see this explained on my quick first read

I will take a closer look. I could very well be wrong.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9957 on: June 12, 2018, 04:16:25 PM »
@midas

"I believe the required capital is the greater of the risk-based capital number and the minimum capital number. So right now it would be the risk-based number ($180.9B), which is greater than the minimum number ($139.5B or $103.5B, depending on the Alternative chosen)."

while I don't doubt you, I didn't see this explained on my quick first read

I will take a closer look. I could very well be wrong.

the two smaller amounts are proposed rule alternatives.  i just don't understand where the first amount comes from.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9958 on: June 12, 2018, 04:41:37 PM »
the real Tim Howard...
Ive just now downloaded FHFAs notice of proposed rule making (NPR) on Fannie and Freddie capital. Im very glad theyve done this. Ill read it as soon as I can (its 368 pages), and definitely will submit a comment on it.
https://howardonmortgagefinance.com/2018/05/03/a-view-on-affordable-housing/#comments

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9959 on: June 12, 2018, 04:52:03 PM »
@midas

"I believe the required capital is the greater of the risk-based capital number and the minimum capital number. So right now it would be the risk-based number ($180.9B), which is greater than the minimum number ($139.5B or $103.5B, depending on the Alternative chosen)."

while I don't doubt you, I didn't see this explained on my quick first read

I will take a closer look. I could very well be wrong.
I don't doubt you either but if I remember correctly, Moelis stated there is the companies capital (between 150B and 200B) + Treasury's backstop for which the companies will pay a commitment fee for a total +/- of 400B of capital cushion. If Watt is implying more than 300B of capital is needed perhaps a chunk of that could be that taxpayer's backstop.