Rodney5
24 minutes ago
You are a liar the author of a lie! No, the situation is not worse. The gov knows their actions are illegal and the conservatorship continues because they don’t know how to unwind this without looking like theft. No one wants to take the blame. I know it, you know it and everyone that has weighed the facts knows it. If as you say the shareholders will be wiped out would be the greatest theft in the history of finance.
The Senior Preferred Stock Purchase Agreement is a contract between two government agencies which Fannie and Freddie had no say so. The only legal contract is the one with the U.S. Congress, called the Charter Act. The Senior Preferred Stocks are illegal because the Stocks have an illegal commitment fee attached to it.
The Federal statutes are the Charter Act, the Safety and Soundness Act of 1992, as amended by HERA, Administrative Procedures Act, and potentially the Chief Financial Officers Act.
The Man With No Name
8 hours ago
So did Treasury own AIG stock, did they convert to common, avoid government balance sheet and raise capital. Yes! Good job Captain Obvious! You found the similarities! Now pay attention to the differences!
Yes, let's pay attention to the differences.
Treasury took 92% of AIG and AIG's shareholders had rights, FnF shareholders don't.
AIG owed a fiduciary duty to its shareholders, FnF don't owe a fiduciary duty to shareholders.
The situation here is much worse than was at AIG.
And fools keep thinking they're gonna get some big windfall. 😆
DaJester
14 hours ago
I use the term "Treasury" because it is the term Calabria used.
Yep - this is hearsay. You read it in a book and now you say it as if it means something that it doesn't. Calabria doesn't say it was Mnuchin or any source. We have no idea if whomever he spoke to knows anything about the illegality of the write-down. He's making the argument from authority fallacy, and you are just repeating it.
You misstated my premise, which is that since Calabria reported that Mnuchin believed a SPS writedown would be illegal, and since Mnuchin had already agreed to convert the SPS, it is unreasonable to put a higher probability on writedown than conversion.
Nope, the timeframe of the book was over a decade ago. Neither Calabria no Mnuchin have any impact at this time. So your point is only true in the context of the past and what was being considered then. You have NO IDEA if the same concepts are being currently considered. Or if you do, please provide your source.
probabilities and not possibilities. Could Treasury have been lying? Yes. Is there any reason to believe that it is probable that they did so? Absolutely not, as judged by their other actions
You and I must be judging Treasury's actions very differently. Would I doubt "Treasury" was being fully honest about the situation in that conversation. Almost certainly not. They will say anything to get what they want, and it's not necessarily illegal for them to be misleading in a conversation. Do I doubt Calabria's recollection of the conversation? Maybe just a little - it makes for good reading, it doesn't have to be accurate. It's NOT reporting, it's a book - he can literally write whatever he wants in it and embellish whatever he feels like. You equating it to "reporting" is a false equivalency.
Quoting Calabria, as a direct participant in the discussions and negotiations around a SPS conversion or writedown, clearly is not a false attribution. See above for Calabria's use of the term "Treasury".
Again, you cannot refute my claim. Treasury has NEVER said a write-down is illegal. There is no official statement, statute, or case law you can point to that says otherwise. If you could refute it you would have done it by now. Quote the source or shut up.
DaJester
15 hours ago
It's not what you know, it's what you can prove in court.
And this is the precise thinking that leads to the corruption. You seem to suggest it's not about what is legal or not legal, but what they can get away with. This is why you have people fighting on this board. There REALLY IS such a thing as right and wrong.
If a commitment fee is charged - it would be illegal per the Charter Act as currently written. Period, full stop. Your first signature line is irrelevant. We should not have to take the Government to court to get it to act legally and ethically. To suggest otherwise means you are part of the problem, not the solution.
If you expect the government to act illegally and want to invest accordingly, that's your prerogative. But you should not expect people to agree with you and bend over waiting for the government to ream them.
DaJester
15 hours ago
Holy schmolies are you being dense...
1a) When the LP ratchets were signed the jury verdict hadn't yet occurred and therefore could not have informed reasonable shareholder expectations.
- This makes ZERO logical sense. There is no discernable difference from shares purchased after the decision than those purchased before the decision. A shareholder's expectations are not limited to the information at the time of purchase, nor do different common shares come with different expectations. They all evolve together.
1b) The jury's verdict is not final. It can be appealed, and that appeal could be dragged out for several years depending on how far it goes. It could even be overturned.
- Again, technically true but wholly misses the point. The point is what the shareholder agreement means to investors. At no point does the agreement get modified to "shareholders have zero economic rights" because if it did, there's no point to have shares. Any "reasonable" shareholder would agree.
The idea that nothing can be reasonably expected because it could later be deemed a breach would render the entire premise of the implied covenant of good faith and fair dealing moot.
- There are plenty of things that can be expected or unexpected. Again, not the point. We aren't talking about every business decision, just those that violate the shareholder agreement. Any action that intentionally violates the shareholder's ability to reap in the rewards of their end of the contract, would be a breach of the implied covenant. It would be entirely reasonable to assume that if a company intentionally thwarts shareholders, that action would be a breach, now and in the future.
2) No. The removal of shareholders' economic rights by the NWS didn't have anything to do with FnF being in conservatorship
Say what? An investor should know that their shares have zero economic value because even after conservatorship, they can still expect a NWS to the Treasury? I don't have a clue what you are implying here.
DaJester
15 hours ago
"While we're on the topic of challenges to refute a statement, try refuting this one.
The only ways in which the situations of AIG common shareholders in 2009 and FnF common shareholders in 2024 differ are worse for FnF common shareholders."
Ahh, the old adage - there are none so blind as those who refuse to see. Ways in which AIG differs in situation? That's painfully obvious. Although "worse" is not as relevant as different. Different situations yield different results, for better or worse. Let me list a few differences and see if you can refute a single one of them:
- There is no Charter Act which creates by LAW, the existence of AIG as an entity, let alone as a privately owned entity. But obviously this exists for FnF. No Federal Agency can undo the Charter Act. For FnF to cease to exist, it will take Congress.
- The Federal Reserve initially LOANED $85B to AIG, meaning - it could be paid back with interest. As you and others keep touting here - there is no loan with FnF.
- AIG was hit with a commitment fee of $1.7B and then an ongoing commitment fee of 8.5% per year (later reduced) on the revolving credit amount. There was never a commitment fee on FnF. As mentioned in other posts, such a fee would be illegal per the Charter Act.
- There were several different rounds of AIG Preferred stock issued to Treasury. The Series C had voting rights. The 79.9% conversion rights switched to 77.9% to accommodate the creation of he Series D Preferred stock which had a cumulative dividend of 10% and additional warrants for 2% ownership. These were later exchanged for Series E Preferred stock that were NON-cumulative. The Series F started with zero LP but increased dollar-for-dollar with any amount drawn. All of this just illustrates that SPS agreements vary greatly AND CAN CHANGE. If they can change over time for AIG, they can for FnF also. I think it was you that asked "Why would Treasury agree to convert to a non-cumulative SPS" - well the same could be asked about AIG.
- The Federal Reserve reaped a $17.7B return on their $113B loan/credit commitments, roughly 15.7%. Again, there was no loan for FnF.
- Treasury made $5B return from the $69.8B AIG common & preferred stock investment, roughly 7%. So the cramdown was necessary just to achieve a single-digit return for Treasury's bailout of AIG. A cramdown for FnF is not necessary to achieve a 7% return, as Treasury has already received a greater return. A full LP cramdown would result in an absolutely unprecedented return from any government bailout in the history of the planet.
- After the cramdown, Treasury's 2012 AIG common stock offering was $20.7B, the largest US common stock offering at that time. This would pale in comparison to the amount of a FnF common stock offering if Treasury were to convert the entire LP (with or without warrants) into common shares.
So did Treasury own AIG stock, did they convert to common, avoid government balance sheet and raise capital. Yes! Good job Captain Obvious! You found the similarities! Now pay attention to the differences!
TightCoil
18 hours ago
Yeah, great forFannie and Freddie employees and Corrupt Directors, and Board Memebers, great for the Corrupt FHFA and Corrupt Treasury, great for Biden and Harris - But won't be great for Fannie and Freddie Shareholders, or should I say, SHEERHOLDERS - Fight, Fight, Fight 'Em - Fight to Right the Wrongs Done To Sheerholders
wingnutt01
19 hours ago
I recommend purchasing at least a $1,000,000.oo Umbrella insurance policy,, No-No, I'm Not in the insurance business, But I have two son's and it sure helped me sleep better at night. Canceled at the age of 21, never needed, Thank God for Good (Luck) Boys. They are 50 & 51 now, and guess what? They are/were on the same program, and they thank me often.
kthomp19
22 hours ago
I believe you do know that the commitment fee would be illegal per the Charter Act.
It's not what you know, it's what you can prove in court.
I suppose it's plausible that an argument could be brought that the commitment fee runs afoul of FnF's charters, but without any lawsuit alleging that there is little point in arguing about it. My first signature line strikes again.
And yet again it comes to arguing over possibilities, when probabilities are what matter. Could a future case be brought alleging that a commitment fee violates FnF's charters? Sure. What is the probability it will have any material effect on the SPS, and by extension the per-share price of the commons? I see no reason to assign more than a token number to this, maybe 1%, which isn't really enough to affect the EV much.
kthomp19
22 hours ago
TREASURY does not "think" anything - FFS. There are over 100K employees there. You can keep talking about "they" as if it's a single person. Unless you know about secret surgeries Mnuchin may have had, you are falsely attributing a stance to the entire US Treasury.
Somebody has to speak for them. Somebody has to sign Treasury's side of whatever agreements are made between Treasury and FHFA. I use the term "Treasury" because it is the term Calabria used. His quote:
There had been some calls over the course of the conservatorship for Treasury to just forgive all or part of its claim. That was a nonstarter, politically, for Treasury. Moreover, Treasury claimed that it could not legally do so.
At this point you're just buried in pure semantics with no regard for the bigger picture, which is whether or not FNMQ and FREQ are good investments at these prices (both in absolute terms and relative to the juniors). Keep arguing about the species of a particular tree in the forest while ignoring the wildfire risk if you like.
1.) Non-sequitur: an inference or a conclusion that does not follow from the premises. Your premise is that since Calabria quoted a conversation with Mnuchin, therefore the writedown is illegal. You can try to reframe it now, but in the past you have said if "Treasury thinks it's illegal" that is evidence that it is, and DOJ would be giving guidance to Treasury, therefore the position is more valid than my position, which is that it is NOT illegal. Go ahead and try to deny it or change your stance.
You misstated my premise, which is that since Calabria reported that Mnuchin believed a SPS writedown would be illegal, and since Mnuchin had already agreed to convert the SPS, it is unreasonable to put a higher probability on writedown than conversion.
It's about probabilities, not possibilities. Both writedown and conversion are possible, but the EV of the commons is far, far different if you assume a 99% chance of writedown and 1% of conversion, or 1% chance of writedown and 99% of conversion.
2.) False-attribution: Appealing to an irrelevant, unqualified, fabricated or unidentified source in support of an argument, or when a quote is attributed to the wrong person or group. You consistently attribute the quote as if it applies to "Treasury" when Treasury has said no such thing. If you are going to use the quote, be specific with who said it. Do not imply an official department stance nor infer the opinion of 100K employees. Go ahead and refute this: Treasury has NEVER said the SPS writedown is illegal.
Quoting Calabria, as a direct participant in the discussions and negotiations around a SPS conversion or writedown, clearly is not a false attribution. See above for Calabria's use of the term "Treasury".
3.) Argument from Authority: The argument is based on the idea that if an authority figure in a field makes a statement about that field, it's probably true. However, this can be a logical fallacy and lead to unreliable conclusions if the authority figure is not qualified or the claim is made in a way that's misleading. First, Calabria is not an authority on the legality of the SPS write-down, he is simply recalling a conversation. Second, whomever he spoke with at Treasury may or may not be an authority on the legality of the SPS write-down. Calabria being the former director of the FHFA does not provide any relevant authority for your argument. Go ahead and refute this: The quote in Calabria's book did not come with any legal references that would support the illegality claim.
I am not arguing that Calabria should be listened to because he is an authority figure in a field, but instead because he was a direct participant in the conversation (making his words reporting, not hearsay) and had no reason at all to lie or knowingly pass on bad information.
To refuse to believe his reporting you have to think that either he or Treasury (either Mnuchin or someone else with the power to enter agreements with FHFA) was lying. Again, probabilities and not possibilities. Could Treasury have been lying? Yes. Is there any reason to believe that it is probable that they did so? Absolutely not, as judged by their other actions, the most relevant of which is the terms of the January 2021 letter agreement.
Three more strikes for you. Two down and nobody on, you're well on the way to suffering yet another 1-2-3 inning.
kthomp19
22 hours ago
Something you have consistently ignored is the political fallout part of Calabria's reporting in his book, instead focusing solely on the legality aspect.
Page 147:
Second, I also believe that once the government had built up a substantial stake in the companies, Treasury did not want to bear the political criticism from reducing that stake to match its actual economic value.
Despite the political risk to Treasury, Secretary Steven Mnuchin expressed full support for the restructuring of Treasury’s preferred share holdings when I arrived at the FHFA.
Page 148:
A conversion would also allow a more accurate reflection of Treasury's claims without the political fallout of outright forgiveness. There had been some calls over the course of the conservatorship for Treasury to just forgive all or part of its claim. That was a nonstarter, politically, for Treasury. Moreover, Treasury claimed that it could not legally do so.
It is clear from these passages that in terms of political fallout, Mnuchin thought converting the SPS would be risky and writing the SPS off would be even worse.
If you're expecting a writedown in the future you are betting on that political risk being flipped on its head, that a writedown would have to somehow be less risky than (or perhaps equal to) conversion. Given Treasury's perfect track record in all FnF shareholder cases so far there is no way that the legal risk of conversion would outweigh the political risk of writedown. Senator Warner was already wary of Treasury taking a haircut via conversion; a 100% haircut in the form of full writedown would have to be worse.
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