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

[Midas79]

@WB_fan82

The spirit of CET1 and tier 1 capital in Basel III is that they are loss-absorbing in case of a downturn or crisis. Receivables don't absorb losses. In the capital rule Calabria went on and on about capital quality (in addition to quantity). So while he might be able to choose to make receivables count towards the risk-based standard I don't think he will.

@cherzeca

Perhaps my creativity is exceeding my knowledge here. I hadn't considered appropriations, but all Treasury would be doing is redirecting money, not writing a check. Is that a distinction without a difference?

Treasury would still have to go to the capital markets, though. My route doesn't bypass the capital markets, it bypasses the companies.

[cherzeca]

I don't see how FHFA could pull off a 4thA/release into consent decree before a Biden inauguration given current pace of developments.  in order to do this, I would think FHFA would need the capital restoration plans from the GSEs, so that they could be reviewed by FHFA (and Treasury) as a reasonable basis for deciding to enter into the 4thA/release into consent decree. I don't see how JPM/MS and GSEs can produce capital restoration plans until the capital rule has been finalized.  I don't see Calabria finalizing the capital rule soon.  he has received substantial comments that will need to be digested and responded to (he may have already done this, but I doubt it) and is on a listening tour for next two weeks. Calabria has never worked in private enterprise where a deadline is a deadline and not an opportunity to kick the can down the road further (as it is in govt and at think tanks).  so I think the whole lame duck conservatorship release idea is lame, not because it is politically improper but because I don't see Calabria being efficient enough to do it.

[sholland]

I don't see how FHFA could pull off a 4thA/release into consent decree before a Biden inauguration given current pace of developments.  in order to do this, I would think FHFA would need the capital restoration plans from the GSEs, so that they could be reviewed by FHFA (and Treasury) as a reasonable basis for deciding to enter into the 4thA/release into consent decree. I don't see how JPM/MS and GSEs can produce capital restoration plans until the capital rule has been finalized.  I don't see Calabria finalizing the capital rule soon.  he has received substantial comments that will need to be digested and responded to (he may have already done this, but I doubt it) and is on a listening tour for next two weeks. Calabria has never worked in private enterprise where a deadline is a deadline and not an opportunity to kick the can down the road further (as it is in govt and at think tanks).  so I think the whole lame duck conservatorship release idea is lame, not because it is politically improper but because I don't see Calabria being efficient enough to do it.

I tend to agree with this.  Calabria has repeatedly stated that releasing the GSEs from conservatorship will be process dependent, not timeline dependent. Reading through the comments for the reproposed Capital Rule there is much discussion about CRTs being strongly disincentivized. According to the US Treasury’s September 2019 Housing Reform Plan, CRTs are to be encouraged. I expect this part of the rule to be rewritten. I also expect many other parts of the rule to be rewritten too.  This will all take time.  Government doesn’t do anything quickly.

[orthopa]

I don't see how FHFA could pull off a 4thA/release into consent decree before a Biden inauguration given current pace of developments.  in order to do this, I would think FHFA would need the capital restoration plans from the GSEs, so that they could be reviewed by FHFA (and Treasury) as a reasonable basis for deciding to enter into the 4thA/release into consent decree. I don't see how JPM/MS and GSEs can produce capital restoration plans until the capital rule has been finalized.  I don't see Calabria finalizing the capital rule soon.  he has received substantial comments that will need to be digested and responded to (he may have already done this, but I doubt it) and is on a listening tour for next two weeks. Calabria has never worked in private enterprise where a deadline is a deadline and not an opportunity to kick the can down the road further (as it is in govt and at think tanks).  so I think the whole lame duck conservatorship release idea is lame, not because it is politically improper but because I don't see Calabria being efficient enough to do it.

The entire duration of this investment would agree with you but a part of me disagrees. Mainly due to Calabrias recent letter to Brown not extending the comment period. He easily could have extended the comment period and I think the two upcoming webinars are a way for the public to have direct input and hopefully stomp out the notion that the rule was rushed/voices were not heard. FHFA seems to have already narrowed down the sticking points to the rule to two topics. Granted not simple topics but my feeling is other then ironing these out the rule is mostly done IMO.

FWIW the conspiracy theorist in me says the capital rule is mostly written, the 4th PSPA amendment has been decided already and JPM and MS have already submitted variations of CRP. Otherwise what have they been doing for the past 3-4 months? I dont think a capital rule finalized by end of October is out of the question. As Calabria has pointed out the rule is a variation of the previous proposal that has been a known entity for years.  After being public for 3-4 months, a webinar in the spring, and an additional listening session after the comment period closed is it out of the question to think 6 weeks is enough to get this finalized?

As I said before history would say your right and Im wrong but since this it seems this whole thing was shelved last year due to the election I have to believe the trade off of that was a compressed timeline at the end.

[cherzeca]

"FWIW the conspiracy theorist in me says the capital rule is mostly written, the 4th PSPA amendment has been decided already and JPM and MS have already submitted variations of CRP. Otherwise what have they been doing for the past 3-4 months?"

love it!  yes, I want to agree with you

[Luke 5:32]

The reasoning behind the section below troubles me greatly.  How can a judge write something of that nature?

[cherzeca]

The reasoning behind the section below troubles me greatly.  How can a judge write something of that nature?

where is this from?

[investorG]

The reasoning behind the section below troubles me greatly.  How can a judge write something of that nature?

imo the APA claim is the appropriate way to address the NWS misdeed rather than the technicality constitutional angle.  Should have been over 3 years ago with ginsburg's about face but it wasn't meant to be.  in addition mnuchin still fighting the APA claim in court post-collins en banc -- esp in light of the CBO report suggesting a 4th amendment sr pref adjustment passes the test -- is an embarrassment on the trump administration and a good indirect reason why they are favored to lose the election.

[Midas79]

The reasoning behind the section below troubles me greatly.  How can a judge write something of that nature?

Unfortunately, this is what we're up against here. The judge's opinion is completely nonsensical. The agreement which secured "unlimited funding" (though there's a clear limit in the contract and amendments), the original SPSPAs, is not the same agreement (the NWS) which gave Treasury all of FnF's future profits.

Do you have a link to the full opinion? It looks like this is the Rop case, which I thought challenged the constitutionality of HERA. Bhatti is still alive and kicking, and we all know how far Collins has advanced.

[cherzeca]

just scanned opinion.  sort of all over the place. simply disagrees with collins on direct v derivative claim, then says, gee, the sixth circuit hasn't addressed the conflict of interest argument re FHFA suing itself, so I can't rule that way...also a lot of weight placed on Demarco being an "acting" director, and distinguishing Seila in a rather forced way, which all seems like a judge who wanted really hard to get to an end result...again, collins is teed up and nothing this district court judge has said will affect how scotus analyzes collins. 

edit:  remember, at scotus, the justices look to circuit court cases (especially where there is a circuit court split...and having collins decided en banc is a bit more definitive than just a 3 judge merits panel).  this Rop district court case may be cited in govt reply briefs in collins, but it is JV material as far as what scotus will concern itself in the collins cert

second edit:  just took another look at opinion...p 34:  "In summary, Plaintiffs’ claims can proceed. The claims are derivative but Plaintiffs have prudential standing to bring them. Defendants have not shown that Plaintiffs’ claims are barred by the doctrine of claim preclusion or by HERA’s succession clause." 

so I am not sure what this judge did (looks like the const claim fails because DeMarco was acting director, and that even though HERA required an acting director to be chosen from then existing deputy directors it is not clear that the acting director was barred from removal by potus...a strained reading), quite frankly, and I am not that interested enough in the analysis I have read to try to figure this out