Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3866255 times)

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13760 on: September 12, 2019, 01:04:27 PM »
Calabria today: https://www.cnbc.com/video/2019/09/12/fannie-freddie-regulator-on-next-steps-in-mortgage-market-reform.html

mnuchin said 3 months for congress to act (previously 3-6). so retaining earnings for 2nd/3rdQs before considering public offering not upsetting...gives Calabria time to issue final capital rule, if he would stop granting stupid interviews

notice Calabria sidestepped the APA holding.  3 month period gives time to decide whether to file cert (would be interlocutory appeal, so SG may not do it and SCOTUS may not take it up)
« Last Edit: September 12, 2019, 02:30:59 PM by cherzeca »


orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13761 on: September 12, 2019, 02:25:39 PM »
FWIW lot of time in front of the camera for these two since the treasury plan release. No pushback outside of Brown just being a retard during the hearing, no pushback, no enriching hedge fund bullshit.
« Last Edit: September 12, 2019, 05:21:57 PM by orthopa »

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13762 on: September 12, 2019, 02:46:03 PM »
Calabria might allow release before all the capital is built? That is a huge game-changer if true.

https://twitter.com/KatyODonnell_/status/1172262431671881743
Calabria talked next steps in an all-staff mtg today -- raising capital buffer in a limited way and having GSEs operate under a consent agreement at point where they have enough $ to leave conservatorship but not enough to fully comply w/ new capital rules

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13763 on: September 12, 2019, 03:30:26 PM »
Calabria might allow release before all the capital is built? That is a huge game-changer if true.

https://twitter.com/KatyODonnell_/status/1172262431671881743
Calabria talked next steps in an all-staff mtg today -- raising capital buffer in a limited way and having GSEs operate under a consent agreement at point where they have enough $ to leave conservatorship but not enough to fully comply w/ new capital rules

if true, this makes a lot of sense. investor feedback may have been GSE cash flows, yes, run by a conservator with still undefined powers, no.  get out of conservatorship before raise money, and "consent agreement" lays out operational parameters until capital rule level is reached

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13764 on: September 12, 2019, 04:03:04 PM »
if true, this makes a lot of sense. investor feedback may have been GSE cash flows, yes, run by a conservator with still undefined powers, no.  get out of conservatorship before raise money, and "consent agreement" lays out operational parameters until capital rule level is reached

I took it the other way: instead of retaining earnings for a while and then doing an IPO to build the rest of the capital, it would be the reverse. Do a large IPO soon, though not large enough to get all the way to fully capitalized, and release FnF upon its completion. That's how you get the money to invest, by promising them voting rights immediately. Then FnF would build up enough capital via earnings to meet the requirements over time.

We did hear both Mnuchin and Calabria say that third-party capital was going to be needed. It can't be all retained earnings.

My assumption had been that there is enough investor appetite to do both at once, as in a $150B one-shot IPO that completely fulfills Calabria's capital requirements with release happening immediately after. It appears that assumption was incorrect for one reason or another.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13765 on: September 12, 2019, 06:28:22 PM »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13766 on: September 12, 2019, 07:16:18 PM »
What exactly is a consent decree?

https://twitter.com/HoldenWalker99/status/1172302913227522048

my suspicion is that Phillips heard from big investors that they wouldn't put up big bucks into GSEs until they were released from conservatorship. govt takes position that conservator has unfettered power and that is anathema to any new large investors. of course the collins APA opinion helps but I would think that investor position stands.  once the GSEs are released from conservatorship then all of these statutory powers go away.  of course this is a catch-22 if fhfa doesn't want to release the GSEs until they have raised capital sufficient to meet the capital rule.

so it would be smart to bifurcate the process, and have GSEs retain enough earnings to have a more substantial capital buffer, something investors wont vomit at if asked to invest in, and then end the conservatorship by segueing into an agreement (between fhfa and the GSEs, modeled on a consent decree except not something that needs to be blessed by a court) which governs the GSEs activity outside conservatorship.  some of the items binding the GSEs would presumably go away once the GSEs achieve their capital rule level.  but since there is no conservator lording over the GSEs with almighty conservator powers investors wont vomit at the prospect of investing in the GSEs.

this is the type of thinking that I suspect comes from Phillips two year study, including talking to investors.
« Last Edit: September 12, 2019, 07:18:49 PM by cherzeca »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13767 on: September 12, 2019, 07:29:31 PM »
Partly to help myself think this out but per HoldenWalker99 on twitter one way Treasury could get FnF to statutory capital levels then regulatory levels is to first let the GSEs start to retain capital via letter agreement before Sept 30. Start to retain capital. Then cancel Sr Preferred. Jr preferred then would contribute 33B to core capital. Retained earnings would build over time to get to DFAST level of 43B in capital. Then operate under consent decree until remainder of capital raised.

I would think preferred would immediately trade to par once the Senior preferred are cancelled in this scenario as they would be counting towards core capital.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13768 on: September 12, 2019, 07:36:35 PM »
Partly to help myself think this out but per HoldenWalker99 on twitter one way Treasury could get FnF to statutory capital levels then regulatory levels is to first let the GSEs start to retain capital via letter agreement before Sept 30. Start to retain capital. Then cancel Sr Preferred. Jr preferred then would contribute 33B to core capital. Retained earnings would build over time to get to DFAST level of 43B in capital. Then operate under consent decree until remainder of capital raised.

I would think preferred would immediately trade to par once the Senior preferred are cancelled in this scenario as they would be counting towards core capital.

I would add one important point.  the agreement would kick in and the conservatorship would end at the closing of the re-ipo.  the proceeds of the re-ipo would get the GSEs capital up to statutory level (this is based upon Rosner's tweeting which makes sense), but new investors would never have their money subject to conservatorship. the terms of the agreement would be what fhfa wants the GSEs to do until capital rule level is reached, at which point presumably many agreement items would terminate.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13769 on: September 13, 2019, 06:13:51 AM »
Partly to help myself think this out but per HoldenWalker99 on twitter one way Treasury could get FnF to statutory capital levels then regulatory levels is to first let the GSEs start to retain capital via letter agreement before Sept 30. Start to retain capital. Then cancel Sr Preferred. Jr preferred then would contribute 33B to core capital. Retained earnings would build over time to get to DFAST level of 43B in capital. Then operate under consent decree until remainder of capital raised.

I would think preferred would immediately trade to par once the Senior preferred are cancelled in this scenario as they would be counting towards core capital.
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