FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[cherzeca]

Larry Kudlow - https://www.dropbox.com/s/soupvnqqu349wz3/20150718__Kudlow%20Show%20Fannie%20Mae.m4a?dl=0

Interesting.  Is nobody worried that only pre-NWS are compensated?

Pre-NWS shareholders shouldn't be worried at all.

How exactly have post-NWS holders been screwed? Or more to the point, what reason does Kudlow have to believe that post-NWS holders have been screwed?

the pre/post NWS debate is meaningless; pre-NWS holders sell their stock and claims to buyers who become post-NWS holders

[DRValue]

Larry Kudlow - https://www.dropbox.com/s/soupvnqqu349wz3/20150718__Kudlow%20Show%20Fannie%20Mae.m4a?dl=0

Interesting.  Is nobody worried that only pre-NWS are compensated?

Pre-NWS shareholders shouldn't be worried at all.

How exactly have post-NWS holders been screwed? Or more to the point, what reason does Kudlow have to believe that post-NWS holders have been screwed?

the pre/post NWS debate is meaningless; pre-NWS holders sell their stock and claims to buyers who become post-NWS holders

I've been thinking about how any compensation etc. payments would be made to past holders of stock.

For example, if Junior prefs are found to be entitled to past missed dividend payments, would shareholders who had owned the shares at the time a dividend would've been declared and paid, be due any dividend if they have since sold their stock?

I used to think they should be entitled to any award but now, thinking about how bankruptcy contract claims can be sold, I'm more inclined to think the reasoning would be that only current shareholders at the time of any court victory would receive any award.

Is that the way to think of it Cherzeca?

In other words, if I bought a junior pref today and the courts vacated the NWS and declared that junior prefs are owed all previous undeclared dividends, tomorrow, then they would all be paid to me because the previous holder sold their claim, in the form of a stock certificate, to me.

[cherzeca]

Larry Kudlow - https://www.dropbox.com/s/soupvnqqu349wz3/20150718__Kudlow%20Show%20Fannie%20Mae.m4a?dl=0

Interesting.  Is nobody worried that only pre-NWS are compensated?

Pre-NWS shareholders shouldn't be worried at all.

How exactly have post-NWS holders been screwed? Or more to the point, what reason does Kudlow have to believe that post-NWS holders have been screwed?

the pre/post NWS debate is meaningless; pre-NWS holders sell their stock and claims to buyers who become post-NWS holders

I've been thinking about how any compensation etc. payments would be made to past holders of stock.

For example, if Junior prefs are found to be entitled to past missed dividend payments, would shareholders who had owned the shares at the time a dividend would've been declared and paid, be due any dividend if they have since sold their stock?

I used to think they should be entitled to any award but now, thinking about how bankruptcy contract claims can be sold, I'm more inclined to think the reasoning would be that only current shareholders at the time of any court victory would receive any award.

Is that the way to think of it Cherzeca?

In other words, if I bought a junior pref today and the courts vacated the NWS and declared that junior prefs are owed all previous undeclared dividends, tomorrow, then they would all be paid to me because the previous holder sold their claim, in the form of a stock certificate, to me.

if some court voided the NWS, then there would be an additional remedy proceeding.  Ps would argue for applying all sweep payments in excess of 10% dividends as pay down of senior preferred resluting in a complete retirement of senior preferred (aka 10% moment).  since juniors only get divs as/when declared, there is no claim for Ps to get divs.

[DRValue]

@Cherzeca

I don't think whatever way this plays out will result in a dividend windfall, but I do recall plaintiffs arguing in a court hearing (Perry, I think) that junior pref and common should have been paid rateably alongside the senior pref, i guess getting at contractual rights.

I guess that this would only apply should the NWS stand.

I'm betting this plays out with the seniors being declared paid and retired, the GSE's pay a re-insurance fee to the Treasury while they rebuild capital and then go about raising capital in one way or another.

I'd be interested in what that would do to the warrants though as I have read (somewhere...) that the original intent was that they would only be exercised if the Treasury was not be able to recover its investment in the seniors. I don't know how the common warrants would be worth anything if the treasury lost its investment in the seniors but that's for another day.

I can't cite anything right now but if i can find the text regarding the intention of the warrants i'll link to it.

I wonder if the text shows the intention for the warrants was as above, and the seniors are paid down, a case could be made to invalidate the warrants?

[Midas79]

I'd be interested in what that would do to the warrants though as I have read (somewhere...) that the original intent was that they would only be exercised if the Treasury was not be able to recover its investment in the seniors. I don't know how the common warrants would be worth anything if the treasury lost its investment in the seniors but that's for another day.

I can't cite anything right now but if i can find the text regarding the intention of the warrants i'll link to it.

I wonder if the text shows the intention for the warrants was as above, and the seniors are paid down, a case could be made to invalidate the warrants?

The primary intent of the warrant was to drive the share price down and make it appear that the companies were in more trouble than they actually were. FHFA's extremely shady accounting practices were the final nail in the coffin. I believe this is in one of the released documents from the Fairholme discovery.

the pre/post NWS debate is meaningless; pre-NWS holders sell their stock and claims to buyers who become post-NWS holders

Legally yes. But I'm trying to get more into Kudlow's mindset. If Kudlow believes that only pre-NWS shareholders were screwed, and if enough shareholders bought after the NWS (making them easy to demonize as dirty speculators), then Kudlow might conclude that it's not worth "unfairly" compensating post-NWS holders to make pre-NWS holders whole. Of course that assumes that Kudlow has that much power over this process.

[Eye4Valu]

My bet would be on Mnuchin driving the train. Kudlow seems more concerned with private capital entering the secondary market than on whether you purchased common or preferred shares pre or post sweep. I think 9 out of 10 posters/observers of this thread would hazard that any purchase of common or preferred shares is speculative in nature. Bruce Berkowitz has discussed why he thinks purchasing preferred stock isn't an outright speculation due to its contractual nature. He also emphasized how the contractual rights are assigned to the new holder irrespective of when purchased. All of this got me thinking about the speculation versus investment dichotomy. While that line is never clear, to the extent holders here, including myself, are speculating, Buffettpedia.com offers the following on this link http://buffettpedia.com/2017/08/investment-versus-speculation-2/:

Benjamin Graham, widely known as the  father of value investing, said that “outright speculation  is neither illegal, immoral, nor (for most people) fattening to the pocketbook”. He acknowledged speculation is necessary and unavoidable, saying that in many common-stock situations there are substantial possibilities of both profit and loss, and the risks must be assumed by someone. But there is intelligent speculation as there is intelligent investing. He mentioned three ways in which speculation is unintelligent: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.

[Midas79]

My bet would be on Mnuchin driving the train. Kudlow seems more concerned with private capital entering the secondary market than on whether you purchased common or preferred shares pre or post sweep. I think 9 out of 10 posters/observers of this thread would hazard that any purchase of common or preferred shares is speculative in nature. Bruce Berkowitz has discussed why he thinks purchasing preferred stock isn't an outright speculation due to its contractual nature. He also emphasized how the contractual rights are assigned to the new holder irrespective of when purchased. All of this got me thinking about the speculation versus investment dichotomy. While that line is never clear, to the extent holders here, including myself, are speculating, Buffettpedia.com offers the following on this link http://buffettpedia.com/2017/08/investment-versus-speculation-2/:

Benjamin Graham, widely known as the  father of value investing, said that “outright speculation  is neither illegal, immoral, nor (for most people) fattening to the pocketbook”. He acknowledged speculation is necessary and unavoidable, saying that in many common-stock situations there are substantial possibilities of both profit and loss, and the risks must be assumed by someone. But there is intelligent speculation as there is intelligent investing. He mentioned three ways in which speculation is unintelligent: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.

My point about "investor" versus "speculator" is a matter of connotation: positive for the former and negative for the latter. Especially when used in the phrase "hedge fund speculators". The FnF saga is at least as much political as economic, just see how often David Stevens has used not letting hedge funds get a "windfall" as a reason not to recap and release the companies.

I only brought the point up to muse about whether Kudlow's proclamations about shareholders getting screwed is necessarily good news for post-NWS buyers in the event Kudlow does end up heading the NEC.

[Eye4Valu]

May be irrelevant to the situation, but didn't know this.

https://www.usnews.com/news/business/articles/2018-03-08/what-swamp-lobbyists-get-ethics-waivers-to-work-for-trump:

"Brian Callahan, the top lawyer at Treasury, was granted a waiver concerning issues involving his former position as general counsel at Cooper and Kirk PLLC. The law firm represents Fairholme Funds, which recently filed a lawsuit against the Treasury Department and the Fair Housing Finance Agency.

McGahn's waiver allows Callahan to participate in discussions about policy decisions pertaining to housing finance reform, even though "some of these discussions could at some point touch upon issues that might impact the litigation."

http://www.govexec.com/oversight/2017/06/newly-released-agency-ethics-waivers-leave-much-unanswered/138528/

"Brian Callahan, whom Trump named as deputy general counsel at the Treasury Department, won a letter from Treasury’s designated agency ethics official, Rochelle Granat, saying, “This memorandum documents that I have granted you a limited authorization pursuant to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards) to allow you to participate fully in policy matters related to housing finance reform even if an issue arises that might impact pending litigation in which your former employer, Cooper & Kirk PLLC, represents one of several plaintiffs. Notwithstanding this limited authorization, you have elected to refrain from any participation in the management of the litigation, including any communication with your former employer concerning this matter.”

[cherzeca]

May be irrelevant to the situation, but didn't know this.

https://www.usnews.com/news/business/articles/2018-03-08/what-swamp-lobbyists-get-ethics-waivers-to-work-for-trump:

"Brian Callahan, the top lawyer at Treasury, was granted a waiver concerning issues involving his former position as general counsel at Cooper and Kirk PLLC. The law firm represents Fairholme Funds, which recently filed a lawsuit against the Treasury Department and the Fair Housing Finance Agency.

McGahn's waiver allows Callahan to participate in discussions about policy decisions pertaining to housing finance reform, even though "some of these discussions could at some point touch upon issues that might impact the litigation."

http://www.govexec.com/oversight/2017/06/newly-released-agency-ethics-waivers-leave-much-unanswered/138528/

"Brian Callahan, whom Trump named as deputy general counsel at the Treasury Department, won a letter from Treasury’s designated agency ethics official, Rochelle Granat, saying, “This memorandum documents that I have granted you a limited authorization pursuant to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards) to allow you to participate fully in policy matters related to housing finance reform even if an issue arises that might impact pending litigation in which your former employer, Cooper & Kirk PLLC, represents one of several plaintiffs. Notwithstanding this limited authorization, you have elected to refrain from any participation in the management of the litigation, including any communication with your former employer concerning this matter.”

his linkedin resume shows he was at C&K only a few months, but as partner after a stint on senate staff.  former dc circuit clerk and...gibson dunn associate. 

[Eye4Valu]

May be irrelevant to the situation, but didn't know this.

https://www.usnews.com/news/business/articles/2018-03-08/what-swamp-lobbyists-get-ethics-waivers-to-work-for-trump:

"Brian Callahan, the top lawyer at Treasury, was granted a waiver concerning issues involving his former position as general counsel at Cooper and Kirk PLLC. The law firm represents Fairholme Funds, which recently filed a lawsuit against the Treasury Department and the Fair Housing Finance Agency.

McGahn's waiver allows Callahan to participate in discussions about policy decisions pertaining to housing finance reform, even though "some of these discussions could at some point touch upon issues that might impact the litigation."

http://www.govexec.com/oversight/2017/06/newly-released-agency-ethics-waivers-leave-much-unanswered/138528/

"Brian Callahan, whom Trump named as deputy general counsel at the Treasury Department, won a letter from Treasury’s designated agency ethics official, Rochelle Granat, saying, “This memorandum documents that I have granted you a limited authorization pursuant to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards) to allow you to participate fully in policy matters related to housing finance reform even if an issue arises that might impact pending litigation in which your former employer, Cooper & Kirk PLLC, represents one of several plaintiffs. Notwithstanding this limited authorization, you have elected to refrain from any participation in the management of the litigation, including any communication with your former employer concerning this matter.”

his linkedin resume shows he was at C&K only a few months, but as partner after a stint on senate staff.  former dc circuit clerk and...gibson dunn associate.

Conflicted and connected.