Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2426769 times)

Luke 5:32

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Doesn't beat around the bush, gets right down to the business of Christ laying down His life and conquering death for you, me, and everybody else that accepts Him. "Oh death, where is your sting? Oh Hell, where is your victory?" Listen: https://www.youtube.com/watch?v=7bJzhkWVANc


Luke 5:32

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Doesn't beat around the bush, gets right down to the business of Christ laying down His life and conquering death for you, me, and everybody else that accepts Him. "Oh death, where is your sting? Oh Hell, where is your victory?" Listen: https://www.youtube.com/watch?v=7bJzhkWVANc

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9972 on: June 12, 2018, 08:19:39 AM »
Next up: Moelis...

Note: attached image stolen from Twitter.


And page 14...once FHFA sets capital standards, Moelis can do the rest...

"Role of FHFA in setting minimum capital standards

The FHFA, which HERA endowed with broad discretion and authority to implement capital standards for the GSEs, will have the ultimate responsibility for designing and implementing final capital requirements.18 This authority, which has not been used or tested since the crisis, allows FHFA to impose a safe and sound regulatory regime tailored to the unique nature of the GSEs’ businesses and, designed to prevent the undercapitalization which led to their initial conservatorship. FHFA should be strongly encouraged to exercise this authority.

While we have sought to provide credible assumptions in designing and testing this Blueprint, the architecture of the Safety and Soundness Blueprint can be applied to lower or higher minimum capital requirements.iv

iv. There is an implicit trade-off between safety and soundness, on one hand, and the cost of guarantee fees and timeline to building capital, on the other. Imposition of more conservative capital requirements (e.g., 4% to 5% capital minimums) would require higher guarantee fees, in order to provide a sufficient market return to the larger amount of private capital that needs to be raised from third parties, and/or would necessitate a slower capital build. FHFA as safety and soundness regulator has the ultimate responsibility for assessing and evaluating this trade-off."
« Last Edit: June 12, 2018, 08:26:57 AM by Luke 5:32 »
Doesn't beat around the bush, gets right down to the business of Christ laying down His life and conquering death for you, me, and everybody else that accepts Him. "Oh death, where is your sting? Oh Hell, where is your victory?" Listen: https://www.youtube.com/watch?v=7bJzhkWVANc

DocSnowball

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9973 on: June 12, 2018, 08:26:45 AM »
Page 3 of executive summary:
" - Proposed risk-based capital requirements: FHFA estimates a combined risk-based capital requirement of $180.9
billion, 3.24 percent of the Enterprises’ total assets and off-balance sheet guarantees. See Table 1.
   - Proposedminimumleveragecapitalrequirements:SeeTable3
 Under the 2.5 percent alternative (Alternative 1): FHFA estimates a combined minimum leverage capital requirement for both Enterprises of $139.5 billion.
 Under the bifurcated alternative (Alternative 2): FHFA estimates a combined minimum leverage capital requirement for both Enterprises of $103.5 billion."

https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/Proposed-Rule-Enterprise-Capital-Fact-Sheet.pdf


Next up: Moelis...


And page 14...once FHFA sets capital standards, Moelis can do the rest...

"Role of FHFA in setting minimum capital standards

The FHFA, which HERA endowed with broad discretion and authority to implement capital standards for the GSEs, will have the ultimate responsibility for designing and implementing final capital requirements.18 This authority, which has not been used or tested since the crisis, allows FHFA to impose a safe and sound regulatory regime tailored to the unique nature of the GSEs’ businesses and, designed to prevent the undercapitalization which led to their initial conservatorship. FHFA should be strongly encouraged to exercise this authority.

While we have sought to provide credible assumptions in designing and testing this Blueprint, the architecture of the Safety and Soundness Blueprint can be applied to lower or higher minimum capital requirements.iv

iv. There is an implicit trade-off between safety and soundness, on one hand, and the cost of guarantee fees and timeline to building capital, on the other. Imposition of more conservative capital requirements (e.g., 4% to 5% capital minimums) would require higher guarantee fees, in order to provide a sufficient market return to the larger amount of private capital that needs to be raised from third parties, and/or would necessitate a slower capital build. FHFA as safety and soundness regulator has the ultimate responsibility for assessing and evaluating this trade-off."

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9974 on: June 12, 2018, 08:28:42 AM »
Can this be anything other than a recap now these standards are out?

Any one got the cahones to go all in yet?
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rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9975 on: June 12, 2018, 08:50:27 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.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9976 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 #9977 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 #9978 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 #9979 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.