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Fannie Mae and Freddie Mac junior preferred shares could increase by at least 100% if one analyst is correct. Dick Bove of Odeon Capital said Josh Rosner of Graham Fisher & Co., who has testified multiple times in front of Congress about the government-sponsored enterprises, discussed them with the Odeon team.
Rosner said it is in the government’s best interest to settle with the plaintiffs before the Supreme Court in the Collins case. If the government loses, it could own Fannie Mae and Freddie Mac $130 billion. Additionally, the Federal Housing Finance Agency could be declared unconstitutional, and the next president could fire FHFA Director Mark Calabria. However, these last two points have already effectively happened due to the impact of the Seila case on the government-sponsored enterprises.
Three major GSE developments over the last 10 days will greatly impact the future of Fannie Mae and Freddie Mac. Dick Bove of Odeon Capital outlined the three GSE developments in a recent note.
The biggest GSE development is the Seila Law case, although the ruling was directly aimed at the Consumer Finance Protection Bureau. The Supreme Court ruled that although the CFPB might be legal, the position of its director is not.
Bove explained that the Supreme Court justices believe the Constitution should be interpreted as it is written and amended and that the laws of Congress should be followed as written. He also said that they fear bureaucrats aren’t following the Constitution and the laws passed by Congress.
The Small Business Association’s (SBA)’s Payroll Protection Program (PPP) handed out loans to small businesses, but it isn’t just small businesses getting the loans. Criticism of the program continues as officials released details on hundreds of thousands of businesses that received PPP loans from the SBA, many of which will be forgivable. The Payroll Protection Program was designed to bail out small businesses impacted by the pandemic, but many firms that took the bailout money weren’t impacted by the pandemic.
The SBA’s PPP loans were supposed to be for small businesses that had to shut down during the pandemic. However, many large businesses, including asset management firms that didn’t actually shut down, are taking the loans.
Note from Tim: as a reminder, I put together a spreadsheet of Palo Alto firms that got over $150,000 in PPP loans. Check it out here. If you don’t have an AirTable account, it’ll ask you to sign up for free.
I had noted a few months ago that many of these firms getting the PPP loans were not ‘in the spirit’ of the program.
Without any real ‘oversight’ the compliance part of these loans seems – – – questionable — on some. I am not sure how it all really works, but the American public likely believes these funds should have gone to the ‘small business’, with waiters, waitresses, or bartenders who obviously couldn’t work. This was the spirit of the PPP program.
And, there are others – the people at the gyms and yoga studios. At the nail salon and corner barber shops. There are many, many businesses, and it seems everyone has a hardship story.