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Federal National Mortgage Association Message Board

freefrommatrix 20 posts  |  Last Activity: Jun 13, 2016 1:25 PM Member since: Mar 6, 2000
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  • freefrommatrix by freefrommatrix Jun 13, 2016 1:25 PM Flag

    And why?

  • Reply to

    3 Day Settlement and The Risk of Trading

    by freefrommatrix Jun 1, 2016 11:09 AM
    freefrommatrix freefrommatrix Jun 1, 2016 1:51 PM Flag

    it's the reason I don't trade the stock that I own

  • Reply to

    3 Day Settlement and The Risk of Trading

    by freefrommatrix Jun 1, 2016 11:09 AM
    freefrommatrix freefrommatrix Jun 1, 2016 11:39 AM Flag

    Go read about fail-to-deliver and stock settlement. Trades can be canceled if counterparty fails to deliver the money or the stock.

  • I've been tempted to make some trades recently but haven't done it for one reason. If news hits with the three day settlement period I technically don't own the stock yet. I think it's possible that if the price of the shares were to increase 500 percent that it might cause people that sold to attempt to cancel the trade somehow. It would be tempting to screw people over this way and all the brokerages would have to say is that you didn't actually own the stock yet.

  • freefrommatrix freefrommatrix May 26, 2016 2:31 PM Flag

    Why would the complaint be sealed in the first place? Isn't the initial filing usually public?

  • freefrommatrix freefrommatrix May 26, 2016 12:54 PM Flag

    Government is eating our lunch though! Bunch of jerks.

  • freefrommatrix freefrommatrix May 26, 2016 12:40 PM Flag


  • freefrommatrix freefrommatrix May 26, 2016 12:30 PM Flag

    They partnered with Fannie Mae on the deal.

  • Then they wait a full five days into the order to ask for the extension. What were they doing those other four days? It's getting sort of comical.

  • freefrommatrix by freefrommatrix May 9, 2016 12:57 PM Flag

    Just the beginning of the big move. Battle fatigue for a lot of sellers probably.

  • I have been doing some research on how regulators, such as the federal reserve, set reserve and capital requirements for banks. One of the things I have noticed is that the FED and the media use the words reserves and capital interchangeably.

    Fannie Mae, for instance, has 3 trillion dollars in assets and approximately the same amount in liabilities. There is a misunderstanding that capital means an amount in excess of those assets and liabilities. What capital really means is a percentage of an institutions RISK WEIGHTED ASSETS, that the institution must hold in highly liquid financial instruments. Under Basel 2 this amount was 8 percent for banks.

    It does not mean that if Fannie Mae has 3.6 trillion dollars in liabilities and only 3.3 trillion dollars in assets that they are not necessarily insolvent. The composition of the liabilities and their various attributes determines the probability and risk of when and for how much the institution might have to depend on and deplete its liquidity to fund losses from its liabilities.

    The accounting treatment of their liabilities is of utmost importance for the determination of their true financial strength, and hence solvency for the purposes of HERA. I suspect that the risk of their liabilities has been reduced by at least half, and the value of their assets has increase by about the same amount due to G fee's doubling and the reduction in the retained portfolio at Fannie Mae from a peak of 900 billion in MBS, to less than 200 billion as it stands today.

    If Fannie Mae were to reserve 200 billion in highly liquid asset, like the 30 year Treasury bond, they would be able to survive any financial crisis that happened. This would be true even if their G fees went back to half of what they are now. The Enterprises should be much more vocal about this, because as of this moment Fannie Mae needs no more new capital to be let of conservatorship. That rhetoric is smoke and mirrors.

  • From her deposition:

    No, I didn't view it as nationalizing. It
    24 borders on that; I can see.
    25 But I had, shortly before that, had
    1 a meeting with Treasury whereby we reviewed our
    2 forecasts. I had expressed a view that I believed we
    3 were now in a sustainable profitability, that we would
    4 be able to deliver sustainable profits over time. I
    5 even mentioned the possibility that it could get to a
    6 point in the not-so-distant future where the factors
    7 might exist whereby the allowance on the
    8 deferred tax asset would be released. We were not there
    9 yet, but, you know, you could see positive things
    10 occurring.
    11 So when the amendment went into place,
    12 part of my reaction was they did that in response to my
    13 communication of our forecasts and the implication of
    14 those forecasts, that it was probably a desire not to
    15 allow capital to build up within the enterprises and not
    16 to allow the enterprises to recapitalize themselves

  • I can't post the link but if you go on there it is in the r/stocks section. If the post continues to get a lot of upvotes it helps us get visibility with the public. So if you have an extra minute, and like the post obviously, please upvote it.

  • 1. Government provided public assurances to preferred shareholder's before conservatorship was initiated. 22 billion dollars was invested in GSE preferred stock in 2007.

    2. Treasury then provides financing at 10 percent on the senior preferred stock. Reserves for losses are calculated at 4-5 times actual eventual losses.

    3. Based on this accounting the companies are forced to borrow money at 10 percent interest that cannot be paid back. All their other available sources of capital at lower rates are ignored by FHFA.

    4. Treasury then forces the GSEs to buy up to "50 billion dollars per month" of MBS from banks that they might not have otherwise been able to sell. These purchases very likely temporarily reduced the financial solvency of the enterprises, which resulted in them having to borrow more from Treasury at 10 percent interest.

    5. The housing market starts to recover. Actual losses to the GSEs are known by the FHFA to be much lower than the loan loss reserves that the enterprises are using in their accounting. This had to have been known before the 3rd amendment was initiated simply by making a comparison between actual losses and the amounts being reserved by the Enterprises.

    6. In order to avoid a "death spiral" the 3rd amendment is enacted. This makes the GSEs to pay a dividend to Treasury of their entire net worth (as determined by their already inaccurate previous accounting)

    7. The GSEs almost immediately reverse their loan loss reserves following enactment of the 3rd amendment. This results in a 60 billion dollar payment to the Treasury Department from Fannie Mae. This results in Fannie Mae paying over 3 years of payments under their previous arraignment in only 1 quarter (3 months).

    At this point it doesn't even matter if the result is intentionally being made to happen by the FHFA. The court should look at the probable result if it doesn't intercede. It should look at the agreement and who has the power now.

    The power of the Federal Deposit Insurance Corporation (FDIC) to repudiate contracts of a federally-insured depository institution (an Institution) for which the FDIC is appointed conservator or receiver),1 is among the most important and powerful statutory rights the FDIC exercises.
    Congress recognized this when it amended the Federal Deposit Insurance Act (the Act) in 1989 to codify the FDIC's rights as conservator or receiver to repudiate contracts and to make special provision for security interests.2 In effect, Congress intended to strike a reasonable balance between the rights of the FDIC, on the one hand, and the reasonable expectations of the marketplace, on the other.
    The FDIC Board of Directors also recognizes the importance of these provisions. Recent inquiries to the FDIC demonstrate concern regarding the enforceability of security interests for public deposits in insured depository institutions.3 In an effort to avoid misunderstanding or uncertainty by market participants involved in secured transactions with Institutions generally, the FDIC is adopting this "Statement of Policy Concerning Treatment of Secured Obligations After Appointment of the FDIC as Conservator or Receiver."4
    The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) was signed into law on August 9, 1989.5 FIRREA codified in section 11(e) of the Act the FDIC's repudiation right as conservator or receiver.6
    Section 11(e) also provides that the right is not to be construed as permitting the avoidance of any legally enforceable or perfected security interest in any of the assets of any depository institution except where such an interest is taken in contemplation of the institution's insolvency or with the intent to hinder, delay, or defraud the institution or the creditors of such institution.7 Therefore, if the FDIC repudiates a legally enforceable and perfected security agreement, it cannot avoid any legally enforceable and perfected security interest in the collateral to the extent of the statutory damages allowed by section 11(e) of the Act.
    In April 1992, the U.S. Court of Appeals for the Eighth Circuit addressed the meaning of "legally enforceable" as used in the statute.8 It held that the term required strict compliance with each of the affirmative requirements of section 13(e) of the Act, including the "contemporaneous" requirement,9 and the D'Oench doctrine.10 The court also held that all state law requirements applicable to the legal enforceability and perfection of security interests must be met.11
    That decision prompted some concern by those who have entered into or propose to enter into secured deposit or credit transactions with an Institution.
    Construing sections 11(e) and 13(e) of the Act together, it remains clear that security interests that are not perfected and legally enforceable may be avoided by the FDIC as conservator or receiver. For this purpose, the term "legally enforceable" requires compliance with sections 11(d)(9), 11(n)(4)(I), and 13(e) of the Act.
    Regardless of the date of the contract, the foregoing summary of existing law applies to all contracts to which an Institution is a party, if the FDIC is or was appointed conservator or receiver of such Institution on or after August 9, 1989.
    Historical Position of the FDIC
    The FDIC has maintained that it will not seek to avoid otherwise legally enforceable and perfected security interests solely because the security agreement does not meet the "contemporaneous" requirement of sections 11 and 13 of the Act.12
    Similarly, the FDIC has not sought to avoid an otherwise legally enforceable and perfected security interest solely because the secured obligation or the collateral subject to such security interest (a) was not acquired by the Institution contemporaneously with the approval and execution of the security agreement granting the security interest and/or (b) may change, increase, or be subject to substitution from time to time during the period that the security interest is enforceable and perfected.13
    The foregoing analysis assumes that (a) the agreement was undertaken in the ordinary course of business, not in contemplation of insolvency, and with no intent to hinder, delay or defraud the Institution or its creditors; (b) the secured obligation represents a bona fide and arm's length transaction; (c) the secured party or parties are not insiders or affiliates of the Institution; (d) the grant or creation of the security interest was for adequate consideration; and (e) the security agreement evidencing the security interest is in writing, was approved by the Institution's board of directors or loan committee (which approval is reflected in the minutes of a meeting of the board of directors or committee), and has been, continuously from the time of its execution, an official record of the Institution.14
    Factors Considered
    The FDIC considered several factors in the development of this statement of policy. Those factors include the legal rights and powers of the FDIC, assurances that may have been provided in the past by staff of the FDIC and the reliance placed upon those assurances by market participants, and the desirability for market certainty and stability. The FDIC also considered the potential long-term cost to the FDIC of adopting alternative positions or policies, and the potential for redemption or prepayment in the event of acceleration of the maturities of existing secured obligations of Institutions in the event of repudiation.
    Statement of Policy
    Contemporaneous Requirement. Provided all of the foregoing "Assumptions" are met, the FDIC, acting as conservator or receiver for an Institution, will not seek to avoid an otherwise legally enforceable and perfected security interest solely because the security agreement granting or creating such security interest does not meet the "contemporaneous" requirement of sections 11(d)(9), 11(n)(4)(I), and 13(e) of the Act.
    Specifically, the FDIC will not seek to avoid such a security interest solely because the secured obligation or collateral subject to the security interest (a) was not acquired by the Institution contemporaneously with the approval and execution of the security agreement granting the security interest and/or (b) may change, increase, or be subject to substitution from time to time during the period that the security interest is enforceable and perfected.
    Right to Redeem or Prepay. Notwithstanding the foregoing, the FDIC retains the right, as conservator or receiver, to redeem or prepay any secured obligation of an Institution by repudiation or otherwise.
    Upon repudiation, the secured party is entitled to any damages allowable pursuant to section 11(e) of the Act. The liability of the FDIC as conservator or receiver for exercising its repudiation rights is limited to "actual direct compensatory damages" as provided in section 11(e) of the Act. Such damages are to be determined as of the date of appointment of the conservator or receiver, as contrasted with certain "qualified financial contracts" where resulting damages are determined as of the date of repudiation.15
    The FDIC shall have a reasonable period of time, generally, no more than 180 days from the date of appointment of the FDIC as conservator or receiver for an institution, to elect whether to redeem or prepay, by repudiation or otherwise, secured obligations of the Institution.

  • I was really thinking about the net worth sweep and why it is definitely illegal. The Treasury has stated and continues to state and intention to wind up the operations of the companies and to make sure that shareholder's are never able to benefit from their investments. So even if FHFA did not know at the initiation of conservatorship that Treasury had such an intention that contradicted the goals of the conservator in the legislation, it definitely knows the intentions of Treasury now and has made no effort to reverse the consequences of its decision to enter into the net worth sweep.

    Let's say FHFA thought Treasury was going to eventually decide to be fair with all of the shareholder's by properly accounting for the unbalanced outcome of the net worth sweep if it were to occur. As soon as FHFA became aware that Treasury had no intention of ever allowing the Net Worth Sweep to end, it had an obligation as conservator to litigate on behalf of the companies against the Treasury Department so that it maintained the ability to execute the legislative intent of HERA. The problem with FHFA suing Treasury is that it itself entered into the Net Worth Sweep as conservator. So in a legal sense it would have to try to reverse its own decision and argue that it itself made a decision that violated its own goals for conservatorship. By entering into the Third Amendment it incapacitated itself to remedy any decision by itself that exceeded its statutory powers. So unless shareholder's have jurisdiction to challenge a decision by the conservator that it claims exceeds its powers as conservator, no one would have standing to reverse a decision by the conservator of FHFA. And that goes for any decision he decided to make. He could liquidate the companies and give all the money to himself. He could murder people. It would be as if congress made Mel Watt a dictator. He would be more powerful than the president, the courts, and congress combined.

  • The judges were asking the plaintiffs about the latitude that FHFA has to make decisions that are in the "best interests of the agency" as outlined in HERA. Since most of the legislative language put into HERA already applied to FDIC conservatorships and receivership, the reason for its inclusion pertaining to FDIC has to do with the fact that the FDIC ITSELF has the ability to lose money in its insurance fund by being careless in conservatorships and receivership and causing losses of insurance funds by BEING TOO GENEROUS in the terms it provides for banks it seeks to conserve.

    For instance, a bank in conservatorship might like to get free money from the insurance fund with no consideration, or it might like to have a 0 or even negative interest rate on the funds provided by the FDIC insurance fund, but that would be against the best interests of the agency. But in our situation, FHFA has no monetary interests, and hence no agency interest at all besides accomplishing the goals of the legislation as outlined in HERA. The language is therefore redundant, but has been sited by FHFA as a reason to allow them to have an agenda that goes beyond the legislative intent for the agency itself.

  • We are willing to compromise if Mel Watt is willing to compromise.

  • As Jerry Seinfeld would say, who are these people? The whole thing is contrived. No one cares enough about principle reduction to cause so much trouble that Mel Watt would have to cancel his lecture. But even if they were very rowdy I'm sure there is plenty of security at Harvard to remove people that cause trouble.

    The Harvard lecture seemed extremely suspect from the beginning. I can't imagine him having enough to say about the conservatorships that it would require an hour and half to say it. And since the conservatorships are being handled illegally how could he possibly dodge all of the obvious subjects and questions about them.

    I think the entire thing was a way to troll the shareholder's into thinking that something positive was about to happen.

  • Is that every proposal is going to give away rights that shareholder's had before conservatorship was initiated. The public is being brainwashed to assume that the model of the GSEs is somehow inherently defective and corrupted. Any GSE reform that passes will allow the government to have power and influence where it shouldn't have any power.

    1. The law says we are in conservatorship.

    2. Consistently profitable companies are by definition sound and solvent

    3. Financial contracts have strict terms and conditions. They are obligations in proportion to what they obligate someone to do to follow the terms of the contract.

    4. The government is not allowed to take over a privately owned company, loan it funds, and then entirely modify the cost of that capital so that the company cannot ever pay back the loan and resume operations.

    5. FHFA has unlimited power to improve operations and risk management at the companies. So GSE reform being required cannot be legitimately offered as the reason that FHFA has not accomplished the goals of conservatorship as outlined in HERA. Either they have enough capital or FHFA has to increase it. If they have too much risk, FHFA has to reduce that risk. But for FHFA to act as if it can't objectively call profitability a successful conservatorship, undermines the very definitions of soundness and solvency.

    6. GSE reform passing Congress without input from the GSEs is inherently unfair. The companies have a right to choose whether or not the new terms of what it will mean to be a GSE are worth it. If they want to become fully private companies they should be allowed to make that decision on their own.

    7. Bottom line is that capital reduces risk, consistent profitability is the very definition of soundness and solvency, contracts have rules that each side must honor(including the government), and Treasury/FHFA have legal limits on what they can do to the GSEs in conservatorship.

    That is why the GSE reform debate is nonsense. If the government truly wants to create companies similiar to the GSEs it should just do that themselves. If a far better model than Fannie and Freddie can be created then that model should get all the business right? So why the need to take the assets of Fannie and Freddie and put them into a new company?

    Well because the real goal of conservatorship is to make sure that shareholder's in Fannie or Freddie, or their management, can never have say in or fight whatever the government finally gets around to doing to them. Politicians, and everyone that wants to see the GSEs go away, want to make it seem like we are getting something we shouldn't be getting. That the profitability of the company has always been some gift from the taxpayer's that we were lucky to have in the first place. But shareholder's didn't create the GSE's, Congress did!! Shareholder's didn't make the government turn the GSE's into publicly traded companies, Congress did!!

    And why is everyone fighting us so much when they have the opportunity to get a piece of the profits by buying shares in the GSE's for themselves? They can get the dividend's and market value of the GSEs profits without ever having to lobby congress to change the GSEs. But this present battle by the banks is just stupid because it has such a low probability of succeeding. Why wouldn't they want to make billions of dollars of profit by investing in the GSEs themselves? Why not use their political muscle to get these companies out of conservatorship asap?

2.02+0.02(+1.00%)11:20 AMEDT