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Carney: Legal victory of little use to GSE owners

  • Assume, says John Carney, Bill Ackman and other investment managers win their legal battle against the government over Fannie Mae (OTCQB:FNMA -1%) and Freddie Mac (OTCQB:FMCC -0.8%). At that point, we go back to the bailout agreements under which both would still be obligated to pay a 10% dividend. Also, both would need to pay a commitment fee of, say, one-half to one percent, an amount they would struggle to be able  to afford.
  • The result is the two would have an even tougher time building a capital buffer, meaning a time frame of years before their earnings power could accrue to holders of either the preferred or common stock.
  • Previously: Carney: Fannie and Freddie investors should surrender
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Comments (21)
  • salvatort
    , contributor
    Comments (353) | Send Message
     
    Any chance that a legal victory would force the Treasury to return the money it received in excess of the 10% dividend back to the companies?
    18 Aug 2014, 01:26 PM Reply Like
  • factsnotopinions
    , contributor
    Comments (13) | Send Message
     
    Yes- that is a remedy that would be calculated into a damage model.
    18 Aug 2014, 03:59 PM Reply Like
  • cdameworth
    , contributor
    Comments (38) | Send Message
     
    This article is false. The difference in payment between what has been paid and what would have been paid at 10% is in excess of 130 BILLION dollars. See pages 26 and 27 of the Ackman complaint below.

     

    http://bit.ly/1oUKzlq

     

    If John Carney thinks that 130 Billion dollars is not enough to cover the fee and recapitalize the two companies then I'd love to see how much that would cost exactly.
    18 Aug 2014, 01:43 PM Reply Like
  • dgfurr
    , contributor
    Comments (66) | Send Message
     
    The problem with this analysis is that this commentator is providing only one possible outcome from the suits. There are many. here are a few plausible ones

     

    1. Yes the government lied and took the companies without compensation and are forced to pay damages. Make whole would be customary and force the government to pay fair market for the common, and par value to the preferreds plus dividends for the securities they stole and return them to status quo.
    2. The government can keep their stake and pay for the securities at fair market plus dividends for the common and preferreds.
    3. The government is proven to have committed securities fraud and forced to relinquish all monies in excess of the funds lent. That would force all funds, including the preferred stock dividends to be returned to the shareholders.
    4. The entire process is deemed to be a fraudlent transfer and they have to make restitution.
    5. Collusion and coercion is proven between the Treasury and the Government appointed Board of directors and the 10% dividend declared null and void because the government changed accounting regulations in order to accomplish the theft. This results in all funds being returned for distribution.
    6. Enough embarrassing info is uncovered that the government moves to end the conservatorship to save face.

     

    These are just some possibilities.

     

    No one can be sure of the outcome, but the fact that the U S Government
    is trying very hard to avoid document production means that they are afraid of something much larger than losing. These suits could change the entire role of the government in the regulation of financial industry.
    Whoever is providing Carney with a paycheck should probably rethink his worth and cut his rate.

     

    In my view, and I am not compensated for it, is that Carney is like many other commentators, all mouth and little thought. Just a second opinion
    18 Aug 2014, 01:45 PM Reply Like
  • Caludio
    , contributor
    Comments (279) | Send Message
     
    To Dgfurr
    I agree 100% with your comment. Very well said indeed!
    18 Aug 2014, 01:59 PM Reply Like
  • mag1205
    , contributor
    Comments (1869) | Send Message
     
    I am a firm believer in private property in the U.S. Fannie and Freddie were and are private companies, listed on the wall street. The treasury and the Gov't were the real culprits confiscating these two mortgage companies and put them into conservatorship with one sole objective ie to wipe out these two companies FF. John Carney is one person opining and we should not forget that court process has started the discovery process under Hon. Judge Sweeney. Obama gov't is guilty along with treasury in making a mess of FF. Once all the emails and letters starts to come out, we are going to find out exactly what this Gov't. and Treasury are hiding and Obama Gov't will do everything in their power not to produce or share those letters/email they deem negative to take over all profits from FF. This case will be in the courts for a very long time. Long Fannie.
    18 Aug 2014, 02:07 PM Reply Like
  • Caludio
    , contributor
    Comments (279) | Send Message
     
    I will stick with Ackman, Bercowicz, Ichan, Richard"Dick"Bove, Perry, Paulson and other successful business men like them and their lawyers rather than with the opinion of John Carney.
    18 Aug 2014, 02:20 PM Reply Like
  • InTheTube
    , contributor
    Comments (108) | Send Message
     
    Indeed, something tells me that these guys know something about investing.... now what would that be?
    18 Aug 2014, 05:03 PM Reply Like
  • rejeandubois
    , contributor
    Comments (38) | Send Message
     
    Very nice comments on FNMA
    I think you are trying to scare people away and sell out then someone could buy it back really cheap, like pennies.
    Either this or you don't have any idea what you are talking about.
    Nobody could be that stupid as believing what you are saying, are you in the clouds or somewhere similar?
    Twice now you have been trying in scaring people into selling. I think that the Bill Ackman & companies will not believe one word you are saying. Good luck with your short.
    I want to ditto the words of Caludio. I have better faith in Ackman, Bercowicz, Ichan and all those successful men and companies. Do you for a moment think that these guys have decided one day to invest billions without doing their homework and what about the lawyers like Charles Cooper, Cooper sure is not a looser. So I am sticking with them.
    If you are successful in bringing the prices down I will simply buy some more.
    Thanks for your help
    18 Aug 2014, 04:12 PM Reply Like
  • Brad Foxx
    , contributor
    Comments (2) | Send Message
     
    So clearly Carney knows more than Bruce Berkowitz, I find it strange that he was not voted fund manager of the decade by Morning Star.

     

    He is obviously overlooking the fact that damages are attached to many of the lawsuits being filed.
    18 Aug 2014, 04:31 PM Reply Like
  • telestickman
    , contributor
    Comment (1) | Send Message
     
    Carney could be trying to scare the price down.

     

    But, if you look into his background, he could be viewed as a stooge for the banking industry.

     

    The Senate bill to dismantle F&F also plays into the hands of the big banks.
    Perhaps he's trying to deter opposition to the Senate bill.

     

    Stickman
    18 Aug 2014, 04:44 PM Reply Like
  • Bradgrp61172
    , contributor
    Comments (41) | Send Message
     
    What the treasury and FHFA are trying to do is totally repugnant and goes against our democratic principles and constitutional protections, our securities and tort statutes, and our market economy. Its like you're lying in bed asleep and the government comes in, jars you awake, kick you out the house and sells it. I'm sure this nation hasn't fallen to the depths of a 3rd world nation yet. But that practice is 3rd world tactics. What did these people think, that nobody was looking or nobody held securities in the GSEs. What was it?
    18 Aug 2014, 07:23 PM Reply Like
  • jimmywumsn
    , contributor
    Comments (14) | Send Message
     
    If this guy live in England during World War II, It is very likely he will surrender to Nazi Germany.
    18 Aug 2014, 08:32 PM Reply Like
  • kingb1980
    , contributor
    Comments (23) | Send Message
     
    Good comment dgfurr I agree wholeheartedly
    18 Aug 2014, 10:25 PM Reply Like
  • rejeandubois
    , contributor
    Comments (38) | Send Message
     
    Time will tell if you are right or wrong John Carney.
    I hope it won't hurt your ego too much when the Ackman, Berkowitz and the other serious investors win their case
    18 Aug 2014, 11:18 PM Reply Like
  • Travis Brown
    , contributor
    Comments (402) | Send Message
     
    Even if it does take years to make earnings, it's the open markets right to experience this not an illegal conservator's.
    19 Aug 2014, 02:01 AM Reply Like
  • Craig Joyce
    , contributor
    Comments (46) | Send Message
     
    Based on his other articles, Carney is an obvious hatchet man with a pre-formed agenda. His writing on this subject is in no way "journalism."
    19 Aug 2014, 12:07 PM Reply Like
  • Bradgrp61172
    , contributor
    Comments (41) | Send Message
     
    Another thing, lets not forget that Treasury forced at least 1TS of bad subprime and low rated loans from the TBRF banks onto the books of the GSEs, which the GSEs still hold.
    19 Aug 2014, 12:07 PM Reply Like
  • tradingalpha
    , contributor
    Comments (215) | Send Message
     
    Does anyone know why F & F are down so much over the past few days?
    4 Sep 2014, 05:20 PM Reply Like
  • InTheTube
    , contributor
    Comments (108) | Send Message
     
    Only thing I can think of is Day Traders clearing out their books in anticipation of the Berkowitz Trial which ends Discovery Phase on Friday. I would expect this to be another easy victory for F&F shareholders, but I guess these guys do not want to run the risk.
    5 Sep 2014, 02:37 AM Reply Like
  • tradingalpha
    , contributor
    Comments (215) | Send Message
     
    Thanks!
    5 Sep 2014, 11:16 AM Reply Like
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