Fannie Mae (QB) (FNMAT) Cotización

I believe there is absolutely a connection: the DOJ has demonstrated a solid enough grasp of the relevant laws to win all the NWS cases it was a part of.

Yet, this STILL is not evidence that the DOJ advised Treasury that a write-down was illegal. Your logic here is terrible! And your basketball analogy is even worse! If you think the book quote is accurate, show us evidence outside of the book, such as the law that DOJ could had advised on! Your argument is like saying the Bible is the word of God because it's written in the Bible.

I said that Treasury told Calabria that it would be illegal (as evidenced by Calabria's book), and I inferred that Treasury's opinion was shared (or even originated) by the DOJ given their representation of Treasury in all of the NWS lawsuits.

That's a lot of inferring. Ok, let me try to apply your logic here then. One of these must then be true if your assumption of the book quote is accurate:
1.) There is no such law: DOJ was lying to Treasury by saying the write-down was illegal, and this lie was captured in Calabria's book
2.) There is a law: DOJ would be aware of the law that prevents the SPS write-down, but nobody including you, can find a reference to this law outside of Calabria's book

Of course its also possible that neither DOJ nor Treasury said anything and that Calabria is the person who recalled something imperfectly and put it in his book. Since this is not a recorded meeting record, or official memorandum, or meeting notes, accuracy is not guaranteed. You keep using the word "reporting." This is not news reporting. It's a recollection/memoir by a person. Memories are inherently not accurate and should not be taken as legal fact without further evidence.

Already done. My action is to place a high probability of a senior conversion in my common share price models.

Well that's odd. My action was to build my models and invest accordingly. But you didn't like it when I said my action was to buy shares, not file a lawsuit. So it's ok for you, but not for me? My models and investments can't be my action? Hypocrite.

In comparison NVDA lost $6B in market cap today

Is an AI company worth more than a company that takes care of over 59% of the nations mortgages?

There's also the matter of people like House Rep Bill Foster who once told Calabria in a hearing that he wanted (then-) current FnF shareholders to be wiped out. It is quite possible that a senior writedown would cause more political problems than a conversion. Calabria's book agrees

So your position is based on the desire by certain Congressmen and former folks at Treasury trying to wipe out the GSEs in years past. You don't think the needle has moved away from this as the desired outcome?

This adds even more scenarios, though the ones where FnF have to raise capital all the way up to the risk-based requirement all but wipe out the commons, even if Treasury stops at 70% ownership.

Why would they stop at 70%? The LP is greater than 100%. Why not keep going and then wipe out Preferred as well? Nobody would care except Preferred and Common shareholders, according to your logic, right? SMH. I don't think they want to wipe out Preferred or Common shareholders, so I don't think those scenarios are as likely as you apparently do. This is just my opinion, time will tell.

However, Treasury can shift its policy away from one of giving absolutely nothing to the shareholders while still converting the seniors and leaving behind just a few billion for the legacy common. A mission change will be needed for FnF to exit conservatorship anyway, but it doesn't necessarily have to involve the legacy common making money, especially from today's prices.

I don't get it. What's the difference between giving common shareholders $0.05, to now a few bucks (based on a "few billion" you stated above)? Charity? Fear of lawsuits? You kept saying those wouldn't happen. So what is the reason for the shift?

I don't think you quite understand what I mean by "mission change." The previous mission was to literally take everything from shareholders and dissolve the GSEs. You apparently think they are going to only change the second part of that sentence and the first part remains intact.

What is your evidence for this 8% return target? According to Treasury's own website, their overall return on the $182.3B AIG investment was $22.7B, which represents a return of 12.45%.

Look again. You are looking at totals, which includes Federal Reserve loans (there are no loans with the GSEs). The Treasury stock portion is listed separately. I thought it was 8% but apparently it's slightly lower than that at 7%. Can you imagine a $70B equity investment and what the perception would be if Treasury received a $70B return? Or a $100B return? You don't think that would have raised any eyebrows?

Treasury wanted to avoid lawsuits from the equity holders if they were to get wiped out. By giving them a token (8%) piece of the company, the Board could satisfy its duties and placate the shareholders.

Right, missing the forest for the trees again. Why not 50% or 60% to better placate shareholders? Because then, Treasury would not have yielded a positive return. They gave 8% to shareholders, because at that level, Treasury reached an acceptable positive return and wanted to avoid providing ammunition for litigation if they were to take more. Treasury's duty is to avoid taking a loss for taxpayers. They grabbed 92% to yield a positive return, albeit a lower return than the Federal Reserve was able to achieve.

Now, if you think Treasury would have gone to triple digit or "maximum" returns just because they could, that's pure speculation. If you have examples of Treasury yielding triple digit returns in other situations, I'd be interested to see them.

The way things have been going I sure hope they aren't tomorrow's HOD.

Thanks Rick.

Possibly February 9 for Pulte.

https://x.com/michaelhal54147/status/1883966465222811918?s=46&t=xLP2LlWgJrEMUZZ7Fum-nA

there is a Pro if i ever saw one.

Does the FHFA chief require a hearing , or is it appointed?

Senate has convened to consider nominating Scott Bessent

Vote should happen shortly

most markets today did a dip and rip. huh. Me gots to figure this one out....

Well GSE family, FMCC closes another day in the red. Let's be thankful today's slide was on 17 pennies. Along4zride has the inside information and posted many red days ahead. FMCC closing below $5 tomorrow, traded all the way down at $4.89 today.

6 billion market cap . lol. should be at least 3 trillion. multiply by 500x ie $3000/share. let’s first get to $250 and then to $2100 .

Nice

jan 2, 2025 release by fhfa . do you see congress listed anywhere in it? congress wasn't required for conservatorship to begin or for nws and not required to terminate either unless you want to change the charter for which there is zero need. they are working just fine (to use their own words). when fellow travelers can single handedly do nws overnight, why do you even need congress? i think the whole farce conservatorship should be reversed. cleaner way to do it. lamberth unanimous jury verdict and evidence presented in it , 10,000 docs under privilege can be used to invalidate fake conservatorship. reversal of c ship takes care of warrants, spsa and the whole enchilada.
https://www.fhfa.gov/document/letter-agreements-and-side-letter-executed-by-ust-and-fhfa.pdf

They are buying, duh.

Nicely done! I was going to buy more but ended up with some NVDA 2/21 $120 and $125 calls. We’ll see if those increase the number of shares I can buy later this week.

Just bought another 10K shares at-the-low-of-the day !

FNMA 5K
FMCC 5K

Looking good.

So the hacks at KBW downgrade it and yet at the same time raise the PPS expectation?

They downgraded the shares due to concerns that exit from conservatorship happens at all and also the price level of the shares, but they raised their estimate of the probability that Treasury writes off the seniors from 5% to 10%.

Bose George certainly isn't a hack. I still remember his $1 price target right after Mnuchin's comments on November 30 2016 that sent the commons over $4. It ended up being right.

Congress has no role in release of FnF. Congress created HERA and its role ends there.

Slimy lobbyists/journalists and /MBA (and likes of these) also have no role in this.

They have no legal authority, but unfortunately they do have a role.

When it comes to Congress, the President will need political capital to get his policy agenda done, and that requires some compromise with Congress. In fact, I believe the reason that the NWS didn't stop in late January 2017 is that there was pushback from Rs in Congress whose votes were needed on the tax bill.

Those in the idiot hater group (Zandi, Parrott, Carney, Bright, etc) are performing their own roles to the best of their ability. The first two of them had a lot of influence on housing policy in the last administration; hopefully that ended last week.

Since 2016, all government expenditures, including dividends payments from Fannie Mae and Freddie Mac can no longer be used for political projects without Congressional approval. A court ruled that all federal expenditures – including those from dividends – must be authorized by Congress.

What is your source for this?

Previously, billions of dollars were directed toward projects like Obamacare without such approval. As the ruling was not retroactive, those expenditures remained untouched.

Treasury took in billions from the NWS between 2016 and the end of the cash sweep in 2019. Where did that money go, and where was the Congressional approval for its expenditure?

Republicans tend for the release of Fannie and Freddie without "Senior Preferred Stock" using only warrants, as this would provide the greatest financial returns to the government.

The part about Treasury getting more money via warrant exercise than senior conversion is an opinion, not a fact. And what is your source for specifically tying Republicans to this?

The warrants, which give the government certain rights to future stock profits, expire on September 7, 2028. What is the alternative to the release?

An alternative is extending the expiration date, which FHFA and Treasury can do if they both agree, though I hope it doesn't come to that.

But my first thought was that, at this point in the GSE release story, writing your reps is the last thing we want to do - except for maybe expressing support for our nominees. And its too late for that.

This is one of the great dangers of owning FnF shares that far too many fail to acknowledge. Fannie and Freddie getting recapped and released DOES NOT MEAN that existing shareholders have to make a lot of money.

There are two ways that shareholders (even the juniors) can actually get totally wiped out: Congress and receivership. Receivership is in nobody's best interests, so keeping Congress as far away from recap/release as possible is of paramount importance.

At this point, we all need to hunker down and let Ackman, Paulson, the rest of the Wall Street crowd and the Administration take care of it.

Agreed.

What’s amazing about this whole situation is how the FHFA / Treasury apparently can get away with violating Congressional Law. Our friend Barron has been diligent about pointing out the Federal Statutes that govern Fannie and Freddie.

What is it that you expect? People at Treasury reading a message board and saying "golly gee, looks like they got us, we'd better write off the senior prefs and release FnF from conservatorship!"

Give me a break.

The DOJ defended Treasury to the hilt in all the NWS cases and successfully got them dismissed. Getting your allegations of illegality to stick would require not just filing a case but also winning it.

If it's so easy to prove illegality that it can be done in a few paragraphs on a message board, the case should practically write itself. The question is: when do you plan on filing it?

No capital deficit with a Liquidation Preference written down and Senior Preferred cancellation.

Wrong. Fannie's capital deficit to its core capital requirement as of September 30 2024 was $141B; the deficit for Tier 1 capital was $202B and deficit for CET1 capital was $201B. Writing down the seniors would only add $121B to all forms of regulatory capital (core, Tier 1, CET1) for Fannie.

Source: Fannie Mae 2024 Q3 10-Q report, page 53

For Freddie the numbers are $110B core capital deficit, $141B Tier 1, $139B CET1. Only $72B of that deficit would disappear if the seniors are written down.

Source: Freddie Mac 2024 Q3 10-Q report, page 40

Converting the seniors to common has the exact same effect on all forms of regulatory capital as a senior writedown, by the way.

Note: the regulatory capital levels are just the sum of certain balance sheet entries. The full liquidation preference of Treasury's Fannie seniors is $208B (page 54) but only $121B of it is on the balance sheet. That's why senior conversion or writedown only adds $121B to regulatory capital.

I worked at Justice for several years (until 9/11) and have a vague idea what I would be up against. Civil Division has over 1000 attorneys. Half of them are GS14s itching to get promoted to 15 or get some high paying job back home in Pig's Knuckle Arkansas. Once given a case they would never let go - like some kind of bulldog. Their whole human existence depends on crushing the opposition. And given the money and politics of a case involving the GSEs, they would put a lot of these folks on it.

Thanks for the background story. That certainly aligns with how the DOJ acted during the NWS cases.

If you don't mind weighing in on something as a former DOJ insider: Calabria's book Shelter From the Storm says that he was told by Treasury that a senior pref writedown would be illegal. I surmise that Treasury was advised by DOJ on this matter and thus that opinion likely originated with the DOJ. Given what you know about the DOJ, do you think this is a reasonable inference? And would it being correct have any bearing on the likelihood we should assign to a senior pref writedown?

But, yeah, I would say that, over the last 17 years a few things have been done to the GSEs that are, at least, what I call "legally sketchy."

Absolutely. I was as blindsided as anyone at the Supreme Court overturning the Fifth Circuit en banc panel's finding that the NWS was ultra vires. Unfortunately, it's not what you know, it's what you can prove in court. And the plaintiffs failed.

Sure - you can always find some lawyer, somewhere, willing to take your case. And I would certainly not discourage anyone in the pursuit of justice. But, as I have said (and the SC case confirmed) that this has never been about the law or facts only politics and money.

This is why I find constant accusations of illegality on the part of FHFA and Treasury to be at best useless and at worst counterproductive.

Politics will rule the day when it comes to resolving the conservatorships, and shareholders coming across as entitled can't possibly be a good thing.

It wasn't like he was saying it was a fact, literally expressed it as opinion.

Saying "IMO" doesn't automatically make something an opinion.

"IMO 2 + 2 = 5" is a factually wrong statement.

"IMO there is plenty of capital." is also factually wrong, for the reasons that I gave in my previous post.

Once again you are really trying hard to nitpick here. Keep digging, Watson.

For example, PE of 12, with warrants at 80% and the JPS converted at par gets common to just $22. This is without any SPO.

That's my point. Scenarios for the commons are very sensitive to tweaks in the assumptions. Ackman had to bend Treasury's common stake all the way down to 71% in order to get his $31 price target. It wouldn't take much more tweaking to get the commons into the single digits, and not much more beyond that to the low single digits. The amount of risk is extreme.

You think yours is more correct than anyone else.

Nope. I think mine is more reasonable than that of others. "Correct" applies to facts, not opinions.

I think mine is imperfect because I think everyone's is imperfect, including yours.

Of all the logical fallacies you are guilty of, the strawman is the one you commit the most often. I never said my projections were perfect.

Then I don't think you are paying enough attention to the numbers that reach those target resolutions. 80% is not actually needed in a lot of cases.

Quite the opposite: I don't think you are paying enough attention to the numbers Treasury has already released. Every year they release the Financial Report of the US Government, and they have placed a valuation on the senior prefs each year. In order for them to not take a huge haircut on the seniors (especially Freddie), they will have to convert the seniors.

I have seen no indication that Treasury would be okay with a certain rate of return, let alone the 8-10% you used. In fact, if Treasury was okay with only a 10% overall IRR then they would have written off the seniors back in 2018 when the total dividends they received provided just such a 10% IRR. (My argument against your supposed 8% ROR target with AIG is in another post)

Ummm. They are called examples.

Way to dodge the question. If you're going to just throw numbers out with the disclaimer that they're totally made up, you have no grounds on which to criticize anyone else's numbers.

Again... You are not considering the change in the mission.

This appears to be just another instance in a long list of you just listing possibilities with no regard for how probable or reasonable they are, which is utterly useless when creating future price scenarios.



Also, it's rather rich that you said "Treasury historically is fine with simply protecting taxpayer dollars and reaping a modest 8-10% return." when you have proclaimed many times that what Treasury did in the past with AIG and others is irrelevant because every situation is different and we shouldn't expect things to stay the same. Pick a lane.

The knowledge to get the NWS cases dismissed has absolutely nothing to do with whether there is a law against the SPS write-down.

Yet another opinion stated as a fact. I believe there is absolutely a connection: the DOJ has demonstrated a solid enough grasp of the relevant laws to win all the NWS cases it was a part of.

Your argument is akin to claiming that Anthony Edwards wouldn't be able to score 50 points in a Euroleague game because he has never played in that league before.

It is either illegal (meaning there is a law on the books preventing it) or it isn't. Nowhere has DOJ said that it was. It's only YOU saying this. Therefore, the burden of proof is on you.

Where did I personally claim that a senior pref writedown would be illegal? I said that Treasury told Calabria that it would be illegal (as evidenced by Calabria's book), and I inferred that Treasury's opinion was shared (or even originated) by the DOJ given their representation of Treasury in all of the NWS lawsuits.

How many times have you told other people that the burden of proof was on them, or the need to take action was on them, and then call them a hypocrite? That is EXACTLY what you are doing above.

Wrong. You are once again guilty of the strawman logical fallacy.

I used Calabria's reporting and logical inferences to inform my estimate of a senior pref conversion. No proof is needed for that, as evidenced by your refusal to place any credence in said reporting.

If it is your conviction that the "DOJ advised Treasury" that writedown is illegal, you should be willing to perform an action or provide proof of this claim.

Already done. My action is to place a high probability of a senior conversion in my common share price models.

LIVE NOW: Senate Vote on Scott BESSENT

Monday, Jan 27, 2025

12:00 p.m.: Convene and proceed to executive session to resume consideration

of the nomination of Scott Bessent, of South Carolina, to be Secretary of the Treasury.

LINK to proceedings :

https://www.senate.gov/legislative/floor_activity_pail.htm

So if Treasury wanted $300B and took the company entirely, nobody but shareholders will notice?

Less "notice" and more "care". It would make some headlines but I see no reason to think it would cause the overall P/E multiple to be much lower than if Treasury were to write off the seniors.

There's also the matter of people like House Rep Bill Foster who once told Calabria in a hearing that he wanted (then-) current FnF shareholders to be wiped out. It is quite possible that a senior writedown would cause more political problems than a conversion. Calabria's book agrees: one of Treasury's stated reasons for not wanting to do a senior writedown was political fallout.

I think you are discounting the visibility the GSEs are getting right now.

There is certainly a lot of visibility. What I discount is the idea that there will be some sort of outrage (by anyone who isn't a current common shareholder) if Treasury converts the seniors. In particular, I don't think any prospective buyers of Treasury's common shares will care at all how the legacy common was treated. They have already been subject to many mistreatments in the past (most notable the punitive SPSPAs and cash NWS); I don't see a senior conversion as moving the needle at all on that front.

There could also be outrage from a different set of people if the seniors are written down. Visibility cuts both ways.

You seem set on just one scenario - SPS conversion of 80%-95%, JPS conversion, SPO - not sure if you've specified an expected amount or range?

80-95% is a large range, and whether or not there is a junior conversion bifurcates the scenarios.

As for SPO sizing, it depends on whether FnF have to hit the risk-based capital requirement before exiting or only the minimum (2.5%). For the minimum, Fannie wouldn't have to raise any capital at all to exit by the end of 2025 and Freddie would need to raise ~$20B. For the risk-based, Fannie's capital raise would have to be around $60B and Freddie's $27B, using the numbers from their most recent 10-Q forms.

This adds even more scenarios, though the ones where FnF have to raise capital all the way up to the risk-based requirement all but wipe out the commons, even if Treasury stops at 70% ownership.

Ignore other models at your own peril.

There's a fundamental asymmetry between the juniors and commons when it comes to a senior conversion.

If a junior pref holder assumes there is a high chance of senior conversion and is wrong, that holder still makes a lot of money from here.
If a common holder assumes there is a low chance of senior conversion and is wrong, that holder can lose a lot of money from here.

The peril here isn't mine.

While we don't yet have an official statement, my opinion is that the mission has changed and that is no longer the objective. Is it your opinion, that the objectives have not changed since 2008, 2012, or 2019 vs today?

No. The LP ratchet itself represents just such a change in policy, albeit one that had a much bigger effect on the companies than the shareholders.

However, Treasury can shift its policy away from one of giving absolutely nothing to the shareholders while still converting the seniors and leaving behind just a few billion for the legacy common. A mission change will be needed for FnF to exit conservatorship anyway, but it doesn't necessarily have to involve the legacy common making money, especially from today's prices.

He did not say yes to the question.

I don't see why that matters. Him not saying "yes" does not imply that he is willing to write down the seniors.

So you think your forecast is more valid than anyone else? Nobody could possibly come up with a method better than yours?

Yes to the first, no to the second. If I thought someone else's forecast was more reasonable than mine, I would change my own to match it.

You have earned your reputation and the negative perception based on using the "shut up or file a lawsuit" response to artificially block the argument.

Nope. My reputation here is one of being (much) more bearish on the commons than the general consensus, which is such a threat to the status game here that all sorts of personal attacks ensued. Imagine how a round-earther is treated on a flat-earther message board.

I don't use my first signature line to "artificially block the argument", as evidenced by my back-and-forth with you on why I don't think an implied covenant lawsuit over the LP ratchet would succeed, for example. If I really was just going to hide behind that signature line I wouldn't have bothered.

You consistently fail to recognize that for AIG, Treasury had to take 92% to realize an 8% return on their investment. The 92% didn't come out of thin air because they wanted to screw investors over and take as much equity as they could. It was a calculated amount to ensure taxpayers were compensated.

What is your evidence for this 8% return target? According to Treasury's own website, their overall return on the $182.3B AIG investment was $22.7B, which represents a return of 12.45%.

Just to rehash: my main source for the reasoning behind the 92% number comes from this 2010 interview with a Treasury official regarding the AIG resolution. In particular, this quote: "So back to the topic of non-government equity holders getting any stake in the new company: he explained that this was a public company, with a new board instituted post-blowup that had duties under Delaware Corporate law. In short, Treasury wanted to avoid lawsuits from the equity holders if they were to get wiped out. By giving them a token (8%) piece of the company, the Board could satisfy its duties and placate the shareholders."

My read from that is that Treasury took as much of the equity as they possibly could while avoiding lawsuits against the board for breaching their duties to shareholders and that the 92% number had nothing to do with the status or amount of Treasury's investment.

In the case of FnF, those duties don't exist during conservatorship (which is when a senior conversion would have to happen), and also whatever token amount Treasury leaves behind for legacy shareholders will have to be shared between the juniors and commons.

mr. maloni, is there any country in the world that has 30 year explicit guarantee let alone 30 yr fixed mortgage? it is a joke by mba lobby to stick it to the people of united states. mba lobby must have gotten to hill to stall the release as explicit guarantee will indeed require congress. don't you think?

I think it's possible that they might engage with congress to get bill passed to release the GSE's but this didn't work last time so I don't see a lot of time wasted here.
The way I read this is, The GSE will be release and if they have to do that first then congress can work on passing a bill for capital holding requirements, mortgage utilities and warrants.
There will be a lawsuit over the warrants for sure.

https://www.bloomberg.com/graphics/2024-robin-hood-foundation-charity-investor-stock-contest/

Spot on.  Bessent is no fool.  I boldly predict double digits in the next six months.

Folks

Who was in charge - as it seems to go back and forth

Trump or Mnuchin

And now?

Yes
First week of January
Biden Plan

did not read the CATO material

but GOV would disagree that Treasury was a creditor

bessent is explicitly (literally!) saying congress is not needed for the release of GSE’s from conservatorship. can’t word it any better imo. he well knows if warranted or not, it’s been 16 yrs
“If any legislative changes are warranted, I commit to working collaboratively with Congress in this process.”
https://www.finance.senate.gov/imo/media/doc/responses_to_questions_for_the_record_to_scott_bessent.pdf

Good buying opportunity

News is coming stay tuned.

FMCC ,$5.00-$0.2300(-4.40%)
Market open: 3:11:20 PM ET, 01/27/2025
Bid
$5.00
Ask
$5.02
Bid/Ask Size
38/151
Previous close
$5.23
Today's open
$5.01
Today's volume
4.2M
Above Avg.

My understanding of the conservatorship was that discussions of that nature were prohibited UNTIL and ONLY when the conservatorship is ended.

$5.28-$0.4600(-8.01%)
Market open: 3:08:28 PM ET, 01/27/2025
Bid
$5.29
Ask
$5.29
Bid/Ask Size
7/4
Previous close
$5.74
Today's open
$5.38
Today's

Financial results going forward will be "Extremely Important"

These companies must show very strong earnings going forward or there will be no release. I'm not concerned the least bit because the numbers will come in strong and they will be released by the end of 2026.

Jeeze are the twins ever going green again?

In time #4 will explain itself

Got to get those first 3 out of the way first then number 4 will show itself almost right away.

Good to see you are still on the board.

LOL! You're right! Financials seem to be a bad omen.