$189 billion truly is a huge number. However you might consider that Wells Fargo had issued long term debt of $260 billion at end of 2008 down to $120 billion at end of 2011, plus paid off $50 billion in preferred shares and additional LTD in CD'
So considering Wells is less than half the size of the GSE' and did it in a shorter period of time of 3 years, I believe Wells Fargo' was more spectacular.
Here is the problem, when you have someone running the GSE' that was appointed by the white house with the directive of running them in the most profitable way in which to get the taxpayers back their money.
Now are we to believe a political appointee did not act politically? Hard to believe.
Instead what is more believable is that the this GSE Czar was eager to purchase the mbs from the ailing banks in order to help out the financial system.
Almost as rediculous is that FNMA turned around and sued the banks who sold the mbs to them! If anyone can determine what a mbs valuation truly is, it should clearly be the GSE!
If the GSE' were harmed for making poor purchases they should sue the govt to be made whole, not JPM.
It was not JPM that forced them to buy it nor mislead them as to what was inside it.
stevens1958, at the time I made my post, in my mind I thought it was actually a radical thought that the market had a 50/50 chance to go up if they announced the tapering would begin. That was the purpose of posting it, because I thought it was fun to say something out of the ordinary. Apparently you had a strong conviction that it would go down once tapering was announced.
However now that the market has gone up, I thought it fair to state what I am looking to sell in January.
Going short by shorting the April $48 - $55 call spread which would give me a net of $.56
Although such a wide spread will use up a lot of capital, I feel very comfortable with the risk I am taking. My thinking is that I believe WFC will be fully valued at $48 and if the stock does gain 10$ over the next quarter then I will just roll my spread up and out to the next strike every month..... sooner or later wells is bound to stop going up and at that time I will collect my $.56 or hopefully something near to that amount. Its possible the stock could shoot up into the fifties, then I would be screwed, however that's the risk I take.
Good luck to the longs, at least for the next week or two. LOL
This is very exciting to read. I would add the fact that the Treasury went in to wipe out FNMA' tax credits (for nefarious reasons) with a stated rationale FNMA would never earn enough money to realize their benefit.
I never know what to make of Bernanke statements that the govt fiscal policy is creating a headwind to the GDP of approximately 1.5%
I used to think he meant the tax increases, but suddenly today it occurred to me he might be referring to reduction in spending we have had over the past 2 years.
He is a Republican, does anyone else have any opinion on what he means by blaming the govt fiscal policy for the underperformance in the GDP?
I agree some people are rude and negative nannies. Anyone slandering the company or claiming its share price deserves to be lower are simply bashing the company.
I would not want to short the market during a Santa clause rally, however I am considering selling some calls around the $48 level if and when the stock takes another leg higher.
Why $48?, because if you strip out the loan losses reserves I think the approximate multiple would be around 14 at the $48 strike. (dont quote me on that, I havent read the financials for quite a while)
As I read on the board I see many posters who may not realize something that is continually in the news but may not be quite clicking with some of a couple of you.
The GSE' are being forced to raise their G-fees not simply to allow private sector to compete with them, but so that when the time comes that the g-fee is paid to the govt from the private sector that it will not cause a huge upheaval to rates at the very time the congressional bill is passed.
In other words, FNME is making additonal profits now, and the mortgage borrowers are getting used to paying higher interest rates gradually, so that in 2015 FNMA will be set loose at which time FNMA will be forced to pay a fee to the treasury to compensate it for its backstop of its debt and liabilities. Other competitors will also be able to pay for this same backing from the govt as well.
Fannie and Freddie' margins will be squeezed which is all well and good. I am not trying to say that I know something that most of you dont already understand, however you have to admit there are many among you that dont quite grasp that FNMA is going to have to pay most of their g-fee to the govt going forward. And this will be after they are set free from the conservatorship.
I realise most of you already know the above, however there are many of you out there that under the mistaken impression that there are no viable alternatives out there, or even understand that it is coming in 2015. The private sector is coming and this is how we are to view the methodical and gradual increase in the g-fee that you have been reading about recently in the news once again.
nissanje, you said: " no one has come up with a viable option, why? FNF have been around for decades the model works, private capital can come in but they don't, why, they can get almost the same return buying MBS from FNF with limited risk and a lot less work"
I agree that the GSE ;model worked since 1968, it has truly contributed to home ownership over those 40 years. However those argueing for a freer market state that it is unfair that the private market is not able to compete against the GSE. In other words the private sector and their lobbyist want a share of FNMA profits.
You mistakenly think private capital can come in and compete with FNMA' guarantee business. You say no one has come up with a viable option..... yes they have, it is to take away FNMA' charter. This option has been touted since the very begining. Instead a system where the GSE would be forced to pay for the backstop they receive from the Fed govt, in this way the private sector could also pay the same fee as well thus being on a level playing field.
Now weather this is better for the American economy would be argued by the realtors and mtg brokers association. Homeowners definately would be paying higher mortgage rates. However economic theory that capitalism is the best coarse of action would be the counter arguement, many free market advocates simply believe it is not fair to have a monopoly by the GSE where wallstreet privatises the gains but socialises the losses.
This is very interesting share price moving, we are now busting through all time highs.
I wonder if there are any other people reading this mulling over shorting the market.
however one thing you might reconsider is your belief that the treasury will remain backing certain types of loans that meet the politicians criteria..... presently what is in the bill being prepared is that the treasury will be compensated for any future guarantee. This same type of guarantee up for sale will also be available to its competitors. This is going to increase mortgage rates however little known most taxpayers is that present mortgage rates have already been inflated via increased g-fees by the treasury.
you seem to be right that wind down doesnt mean wiped out.
you are far off base if you think a free market has been established.
Unless you havent read the news, you are forgetting FNMA is under conservatorship. This is not a free market, but rather FNMA is enjoying the explicit backing of the govt toward its guarantee' and other debts.
Once released from the govt and its charter taken away, FNMA executives through the years have always been unwavering in stating they could not exist in their present form.
FNMA guarantee on their mbs is only as good as their ability to pay on any losses. At this present time no one would want to own a fnma mbs without a guarantee, it would need to yield as much as a normal commercial bond.
Think of it this way, banks can hold fnma guaranteed mbs on their balance sheet with the same amount of collateral backing it as us treasuries. This is decided by their regulators. However if you remove the backing of the us govt, for fnma mbs, then to hold it on commercial bank balance sheets their regulators will force companies suich as WFC to raise capital as they would for other commercial backed bonds.
I just found the FNMA Warrant to purchase Common Stock.
It definately states that the exercise period ends on the twentieth anniversary , or 9/28/28.
There is no way to mis interpret it, it is pretty clear the warrants are still outstanding unless it got amended.
during these comment periods everyone that actually feels passionate about this needs to be emailing and writing the key congressional players. Why does anyone post on a mb? Its fun to discuss and interesting to learn.
I read through the warrants late last night and I missed that fact, instead I thought it said some outrageous amount of time such as 30 years or something. I will go back and read through it again, thanks for agreeing.
Seemingly odd to see the word fairness and Fannie Mae in the same sentence, but here it goes.
Here is what I feel would be a fair to present Fannie Mae shareholders:
1) after markets close today announce FNMA will enabled to buy back the outstanding warrants from the govt at what ever the shareprice was at the close of the markets that day, to be paid back by spring of 2014.
2) they can keep whatever amount of mortgages on their balance sheet they choose, however if they choose to pay for the govt to backstop their guarantees must be able to pass a stress test. For example their capital must be able to withstand credit losses of 60 bps or so.
3) any financial institution in the industry producing mbs must have some type of guarantee behind them and pay a premium to the govt for a secondary backstop. And be held to the same stress test as FNMA.
4) this guarantee fee paid to the govt may initally start out quite large , but as several years pass and the govt has built up quite a huge war chest then of coarse the g-fee ccan shrink can shrink much like how the FDIC handles charging its members for deposit insurance.
Fannie should be given several years in order to raise the capital needed, perhaps. My wild guess is that they could raise it organically in 7 to 15 years depending upon how much competition they have.
Mind you, once given the same govt backing, it is easy to see that the top 10 mortgage servicers would all be formidable competition for the GSE'. Plus as long as they had the capital I see no reason why the mortgage insurance companies or several other reits would not get involved. The competition could be great, who knows. Plus this could be the increase of subprime lending again as well as the end of FHA as we know iit.
Why not try it? Seems far to me.
Huh?? Are you kidding, if profits mattered more than politics, then investors would give this share price a reasonable look. The how reason the pps is so irrational is because of politics not fundamentals.