Berkowitz pitches GSE plan


Fannie Mae (FNMA +6.1%) and Freddie Mac (FMCC +6.1%) preferred shares are up sharply as Bruce Berkowitz takes to CNBC to talk up his recapitalization plans for the GSEs. The Fannie Mae Preferred S series (the most popular vehicle) is ahead 9.7% to $9.70 - in a recap, these would get paid at par, or $25, and Berkowitz is talking about a time frame of June 2014.

"We helped before with AIG, it can work with Fannie and Freddie."

Other preferred shareholders with whom Berkowitz is trying to garner support include Blackstone, Perry Capital and GSO Capital. His plan is to purchase and recapitalize the mortgage-guarantee business of the GSEs and turn them into state-regulated bond insurers with no federal perks. The nearly $5T in assets and liabilities currently managed by Fannie and Freddie would remain with the government.

Treasury and FHFA officials have previously said such ideas are DOA. "Some people are forgetting a little history," chides FHFA chief Ed DeMarco to those who assume recent nice results from Frannie mean their problems are solved.

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Comments (7)
  • DeepValueLover
    , contributor
    Comments (11220) | Send Message
     
    Any congressperson seen partnering with Berkowitz and the "evil" hedge fund industry is out of a job.

     

    All you will hear from this proposal is crickets chirping.

     

    Will never happen...
    14 Nov 2013, 10:10 AM Reply Like
  • GSELover
    , contributor
    Comments (13) | Send Message
     
    Demarco is a lifelong government employee.

     

    Berkowitz and company are financial geniuses that understand the markets. Who knows better?
    14 Nov 2013, 11:45 AM Reply Like
  • Yorick
    , contributor
    Comments (775) | Send Message
     
    Berkowitz is in this for the preferred being "made whole", even if he has to do it at the expense of the common stock.
    14 Nov 2013, 11:47 AM Reply Like
  • Admiral Relative Value
    , contributor
    Comments (33) | Send Message
     
    The problem being what exactly? Pfd holders have full claims before any common distributions... It is a self serving plan, not for neglecting the common holders, but rather in asking for the government to make the preferred shares money good. I haven't looked at the exact structure of the proposal, but is he asking for the preferred plus additional outside capital to buy the insurance arm at book value from the gov't? This doesn't sound that bad, except where do the borrowing costs (for Fannie/Freddie and ultimately the mortgage borrowers) go without the federal backing?
    14 Nov 2013, 04:26 PM Reply Like
  • Jonathan Bluhm
    , contributor
    Comments (407) | Send Message
     
    Looks like its time to jump on this ship, at least for a few weeks. I don't want to be standing on the sidelines with all the news driving the prices of common stock up!

     

    (my rational investor mind knows that these shares are worthless, but I'll play along...)
    14 Nov 2013, 12:28 PM Reply Like
  • Trader's Profit Compass
    , contributor
    Comments (2072) | Send Message
     
    bought yesterday at 2.52....2.90 today. mega volume....in it for a trade , that's all
    14 Nov 2013, 02:24 PM Reply Like
  • fxfx
    , contributor
    Comments (1402) | Send Message
     
    Berkowitz is a financial genius - and when he owns a - relatively moderate - stake in the preferreds but totally avoided the common, I certainly would not bet on the common. The guy knows a bit about capital structures and WHERE to get involved therein. the common may be goodfor daytrading and pure speculation. The preferreds seem to be a reasonable investment though. wish I had bought more of them when they were at $5...
    16 Nov 2013, 03:45 PM Reply Like
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