No matter what congress decides to do with our countries mortgages, what matters is what the court will do with the warrants and the preferred stock of the govt. If they find it to be illegal, 80% chance, what will happen to common stock value?
Well if the govt is paid back 116.1 billion already with interest. So if you liquidate the company, they currently have ZERO debt.
If the govt receives 126 billion so far from the companies and the The junior preferred shares have a collective face value of about $35 billion, and the primary aim of the lawsuits is to get a full payout on the shares the commons would get negative 25 billion as of today, but within 2 years this number would become 3 billion positive to commons or about $3 a share in cash.
If the govt can be seen as charging interest on the DTA write down that should never of happened in the first place then the govt payout would have been less and therefore the payment back would have been less. more like 65 billion and not 116.1 remember the reason the 116.1 ever got that high was the company had to borrow money to pay the interest that was demanded on an amount that was higher than was needed to balance the book of fannie. using the 65 billion number you can add the 35 billion for junior to that and you are at 100b. if the govt has TAKEN 126b-100b then the over payment is 26 billion right now. forget if fannie is around in future. Does not matter to the court and these findings. 26/1.2 billion common shares and you get about $21 a share to common right now today in cash when the US govt shutters fannie as they say. This number is climbing by $3 a share every 3 months. close fannie and this does not change the fact that the money paid has exceeded the money borrowed and about $21 a share in liquidation should go to common.
new rules for fannie and freddie, the US govt wants to sell houses. The big banks would never put their money on the line for these types of changes to a 30 year loan. 20% down is going out the window and back to 5% is going to be common place again. Another interesting topic is the fact that subprime and alt-a mortgages were the real and only reason for the 2007 bubble, these no longer exist and will never return to the market. Banks loved to use these and Banks destroyed america in 2007 with their lending practices. It is also obvious that they fraudulently sold them to fannie and freddie. This is seen by the billions of dollars in settlement money the banks have paid to FANNIE AND FREDDIE.
Imagine how bad it will be if there is no 30 year mortgage and interest rates increase by 2-3% to 6.5% or above on 10 year or 15 year mortgages! This is the reality of getting rid of fannie and freddie.
It is interesting they talk about backroom deals to sell the warrants in fannie and freddie. I dont really think this is a possibility as we are talking about 100's of billions of dollars and really only countries or really large corporations together as a group could muster this kind of money
First, the government's authority to revise its investments in Fannie and Freddie expired more than three years ago. Its change in the payment structure was utterly lawless.
Second, the Housing and Economic Recovery Act expressly requires the government to consider how its actions affect private ownership of the companies. The government has evidently given no attention to that requirement.
Third, that same law requires the government, operating Fannie and Freddie as a conservator, to safeguard their assets, but the government's new dividend scheme conserves nothing. In fact, the government has acknowledged it intends to facilitate the companies' ultimate liquidation. That is the opposite of conservatorship and it violates virtually every limitation that Congress imposed on the government's authority to intervene in Fannie and Freddie.
Fannie Mae chops outlooks for housing in 2014, 2015
Imagine how if the US GOVT gets rid of Fannie and the 30 year mortgage is removed or the interest rates rise by as much as 3% without fannie around, how well will the delicate housing market be then? God help us all.
VOTE them out, Get real thinkers in that dont have their hands in the banks pockets. The court is more powerful than the executive or the legislative, rowe vs wade.
Rising mortgage rates, bad winter weather and consumer “conservatism” are all hitting the housing market,
said Doug Duncan, Fannie’s chief economist.
“With respect to housing’s contribution to growth this year, we have downgraded our outlook following the disappointing housing activity seen during the first half of the year,” Duncan said. “We currently estimate that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting.”
This is just a test of comment:
all comments are allowed by anyone.
click the topic in blue and the comment section will come up
on actual post page. Front page of blog is like news feed, you
have to open the topic by clicking its name to add comments.
if the warrants can't be exercised what would today's closing price have been????
Anthony says – Sometimes it helps to monitor the current price of a stock relative to the market in general. As of 9/5/14 the PE ratio of the S+P 500 was 19. The current price of FNMA can be compared to the market making some basic assumptions. The most recent quarter can be useful since it represents a “normalized quarter”. There are several things that can dramatically affect earnings, but, in order for common shareholders to be successful it is critical to end the sweep amendment and come out of conservatorship. The net earnings computed are the earnings after payment of preferred stock dividends. The following is the annualized earnings based on normalizing the 6/30/14 quarter:
1) Net earnings ($3.66 B x 4 quarters) ……. $14.6 B 2) Less Senior Preferred Stock dividend … …11.7 B 3) Less Junior Preferred Stock dividend … … .1.3 B
4) Equals common retained earnings ……….$1.6 B 5) Common retained earnings per share ($1.6 / 5.7 b shares) …... 28¢ per share
Anthony says – Dividing todays’ closing stock price of $3.62 by the earnings per share of $0.28 = a PE of 13. As of 9/5/14 the PE the S+P 500 was 19. At $3.92 the stock appears undervalued when compared to the S+P 500. The comparison can be made at any price level on the stock. For instance $4.50 on the stock would be a PE of 16 ($4.50/.28). The retained earnings per share can also be altered by other events such as the non-exercise of warrants or the elimination or reduction in the Senior Preferred stock dividend. If the warrants are not to be exercised the earnings per share go from 28¢ to $1.40 per share. The relative PE at a stock price of $3.62 would be a PE of 3. Incredibly undervalued when compared to the S+P 500. To value the stock price at a comparable market PE just multiply the earnings of $1.40 x a PE of 19 to get a comparable price of $26.60 per share. That’s where the stock would trade today without the prospect of a warrant exercise
Ill do the exercise too :
senior Preferred have been paid back, as it was a loan, I say this is the ruling the court will give. the warrants are only collateral on that loan, so are also washed out when paid back is seen by courts.
so same numbers 3.66 x 4 = 14.6 B less senior = 0 less junior preferred = 1.3 B commons earnings = 13.3 B
common retained earnings per share 13.3/ 1.2 = $11.08 a share
at a pe of 15, much lower than the s&p the value, and you have $166 a share.
Ill say it again, $166 a share. what kinda highway robbery is going on by our US TREASURY on us shareholders?
“Board of Governors Legal Division: “‘We understand that the Treasury lacks the legal authority to hold directly voting stock of AIG.’”
“September 17, 2008 report of Treasury’s external counsel at Wachtell: ‘Treasury legal is telling, as per doj, that they cannot hold voting shares.’”
“TARP Chief Investment Officer Jim Lambright: In ‘September when the Fed extended the credit facility, the government didn’t have an equity tool.’”
“Paulson: ‘Q. And prior to TARP’s approval, Treasury did not have the authority to purchase equity, either. Right? A. Correct.’”
They have NO authority to ever own voting rights or common equity!!!!!!!!!!! from their own mouths!!! They legally are unable to purchase the warrants at any price as this would give them voting shares and would also be equity in a company. they CAN NOT ever do this as it is not in their legal ability. They can have the warrants as collateral, that is all. NOTHING ELSE
My Response to a Comment Following the Market Watch Article in the Summary Section
Robert Laden, There are many people better at explaining this to you than me. But, frankly you do not understand what has been going on with FNMA for the last several years.
FNMA does not pay a 10% dividend to taxpayers. What has happened is that 100% of the profits from FNMA are going directly to the treasury, and where the money goes from there is not known. This has been called "The Sweep," and it is wrong on many levels. Treasury unilaterally, essentially, declared that the 10% dividend was cancelled and that all profits were to go to them. At this point, more than about $20 billion above the amount of money loaned to FNMA has gone to the Treasury. I believe that the current number exceeds $200 Billion. No other company that was loaned money by the Government has been stolen from like this. FNMA is STILL a public traded corporation.
Why is this wrong? If you care about the Rule of Law in this Country, this should disturb you on a Grand Scale. This violates the "Takings Clause" of the United States Constitution. As a citizen, I care more about the Constitution being upheld than getting a 10% dividend. If we allow the GOVT to do this to one corporation, this can happen to ANY corporation that the GOVT wants, or "needs," to take over. Secondly, FNMA (and Freddie Mac) are being held in Conservatorship even though they are doing well and profitable. The GOVT is not allowing the companies to recapitalize and this puts the U.S. taxpayer at a huge risk if a crisis comes to pass in the future, because there will not be any money to absorb the losses that are certain to occur. Where is that money? See Sweep above. Is it right for a conservator to not allow a company to be free once it is financially healthy? Is this the kind of power you want to cede to the GOVT, so that you can get 10% of what is, in the big picture, not a lot of benefit? There is a lot more at stake than just the future of FNMA and Freddie Mac when you extrapolate the potential tyrannical effects this could have on ANY United States corporation, or individual, for that matter.
Lastly, you comment about "Vulture Funds" owning all the stock. You are terribly wrong about that. A great deal of the stock is held by individual citizens like me who believe in the Rule of Law of the United States and we trust that the right thing will be done and that ultimately, FNMA will be set free. Without a doubt, this is a risky proposition. But, I, like many other Americans who believe in the importance of FNMA and Freddie Mac, believe that justice will prevail. Retirement Funds have traditionally held the stock, as well. Do you really believe that it is right for the GOVT to come in and steal the dividends that belong to shareholders and to devalue the stock by a continued state of Conservatorship and by sweeping all the profits?
In conclusion, whatever you feel about the GSE's and their right to exist, the corporations must be set free and then whatever happens to them in the market must be allowed to happen. To do otherwise is to support tyranny, and the right of the GOVT to take over or nationalize any corporation that they feel will benefit them. We, as citizens, cannot allow this or tolerate this.
Good luck to you and to all the Shareholders in FNMA!
Another example of Bernanke’s fevered understanding: “Of the 13 most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.” He said this at least once before, when he testified during the FCIC investigation. After the FCIC transcript was released, it was noted this was a ridiculous comment. Yet, he persists. If the government approached every financial institution’s potential insolvency as it did AIG, the government would have owned 6,000 banks in three days’ time.
One finding shows AIG’s nationalization – the government acquiring equity ownership from shareholders – was an ad lib operation by the trio. The finding states: “The Federal Reserve had no authority to purchase or hold equity,” the facts include (there are many more):
Geithner: “Under section 13(3) of the Federal Reserve Act, the Fed is prohibited from taking equity or unsecured debt positions in a firm”.
Bernanke: “The Federal Reserve is authorized under the Federal Reserve Act to extend credit in various forms, but is not authorized to purchase equity securities of financial institutions.”
Bernanke: “We had only one tool, and that tool was the ability of the Federal Reserve under 13(3) authority to lend money against collateral. Not to put capital into a company but only to lend against collateral.”
Paulson, referring to the Federal Reserve: “They legally couldn’t do preferred. They legally could only make a loan.”
“FRBNY General Counsel Thomas Baxter wrote to Federal Reserve General Counsel Scott Alvarez confirming “we agree that there is no power” for the Federal Reserve “to hold AIG shares.”
“FRBNY’s independent auditor Deloitte: “FRBNY cannot legally control a commercial company, and therefore it is not appropriate for them to consolidate an entity it cannot legally own.”
Another Finding eliminates the only other legal conduit for AIG’s nationalization. “In September 2008, Treasury had no authority to purchase or hold equity.” Some of the many facts that confirm Bernanke, Paulson, and Geithner broke the law. Nay, they trampled our protection from tyranny with jackboots. Facts follow:
“The “Treasury Department as of September of 2008 had no budgetary authority to invest in equities, securities of any financial institution.”
“FRBNY counsel to Federal Reserve Board officials on September 17, 2008, concerning ‘Issues with regard to the NY Fed/Treasury’s equity participation in AIG,’ Treasury ‘consider[s] themselves legally unable to assume ownership. This leaves the NYFed as Treasury’s place to house the equity position.'”
“September 17, 2008 report of Treasury’s external counsel at Wachtell: ‘Treasury legal is telling, as per doj, that they cannot hold voting shares.'”
“TARP Chief Investment Officer Jim Lambright: In ‘September when the Fed extended the credit facility, the government didn’t have an equity tool.'”
“Board of Governors Legal Division: “‘We understand that the Treasury lacks the legal authority to hold directly voting stock of AIG.'”
“Paulson: ‘Q. And prior to TARP’s approval, Treasury did not have the authority to purchase equity, either. Right?
Given the cleavage from reason by our policy makers (one last, irresistible Fact: no one from AIG was allowed in the room during its nationalization), consider: (1) interests you may hold in financial institutions and (2) Paul Singer’s description of the now legal means to redistribute those interests. Financial firms are more leveraged than is generally understood. Sell their securities.