• the DC Circuit Court of Appeals affirmed the lower court’s judgment that FHFA had breached the GSEs’ duty of good faith and fair dealing in connection with the Obama administration Net Worth Sweep (NWS) (notwithstanding the broad statutory powers granted to FHFA, as confirmed by SCOTUS in the Collins case); and

• it was my view that Treasury must cancel its outstanding senior preferred stock (SPS) balance in connection with any GSE recap/release, insofar as

  • that SPS balance is outstanding only as the fruit of the good faith and fair dealing covenant breach,

  • so that deriving profit from the SPS after having received distributions in full payment of the SPS under the NWS would constitute another good faith and fair dealing covenant breach,

  • which would give rise to additional meritorious litigation against FHFA and impair the Trump’s administration ability to release the GSEs from conservatorship.1

Now inverting, what is the contra to my argument?

One tell that the fix is in would be if the DC Circuit Court of Appeals (acting en banc, or before the entire Circuit Court) granted FHFA’s petition for rehearing of the case en banc.

Why is that?

Simply because the Fairholme case was a unanimous opinion, written by Judge Ginsberg, the judge possessing the greatest amount of judicial respect on the DC Circuit Court.

It is extremely unusual for a Circuit Court to grant a petition for rehearing en banc in connection with a unanimous opinion, where there is no dissenting opinion.

Claude2 sums this up nicely, referring to Federal Rule of Appellate Procedure 35(a), which governs FHFA’s petition:

• “en banc rehearing is not favored and ordinarily will not be ordered except to secure or maintain uniformity of decisions among the panels of the court, or to decide questions of exceptional importance. A dissent is often the clearest internal signal to the rest of the court that a panel decision might conflict with circuit precedent or raise a genuinely close, important question — three judges agreeing unanimously is evidence that neither trigger is present.

• Commentary on the D.C. Circuit rule regarding en banc rehearing specifically notes that unanimous opinions are the norm, and that the court's reluctance to go en banc even in cases with fiery dissents reflects an institutional norm against "politicking" to overturn colleagues — which would apply with even more force where there's no dissent flagging a problem at all.

It’s infra dig except in the situations where it is apparent that the original judicial panel in the case went off on a lark in the unanimous decision.

So, FHFA’s petition for rehearing will be filed by September 8, 2026 and if it is granted, I suggest you won’t have to wait for the rehearing to know that the fix is in.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

Two things are of note:

• the GSEs passed the tests with flying colors; and

• FHFA finally stopped presenting the results on the GSE-antagonist alternative basis, the Deferred Tax Allowance case (DTA case) which was used by the Obama administration to support its preference that the GSEs go into receivership.

The Dodd Frank severely adverse scenario sets forth financial conditions that are worse than that experienced during the Great Financial Crisis (GFC).

The GFC financial conditions provided the federal government the pretext to impose outrageously large, non-cash balance sheet charges on the GSEs balance sheets, that the federal government used as further pretext to put the GSEs into conservatorship.

So for all those GSE antagonists who proclaim in their best Chicken Little voice that a repeat of the GFC may recur, the GSEs can simply reply, “No problem!”

The Severely Adverse Scenario:

Fannie Mae was found to incur a cumulative net loss of $4.9 billion over the 10 quarter stress test period, coming out of the stress test period with over $104 billion in net worth.

Fannie Mae:

Freddie Mac was found to incur a cumulative net income of $4.8 billion over the 10 quarter stress test period, coming out of the stress test period with over $75 billion in net worth.

Freddie Mac:

One more thing of note: FHFA finally stopped presenting the DTA case in reporting the GSEs Dodd Frank Severely Adverse Stress Test results.

The DTA case assumes that all federal income tax deductions that carry forward on the GSEs’ balance sheets arising from the stress test period credit losses must not be credited as deferred assets.

The DTA case stress test results are therefore substantially inferior to the base case results. One would want to present the DCA case if one were a GSE antagonist.

Why does the DTA case back out these deferred assets?

Because FHFA assumed, in presenting the DCA case, that the GSEs would never become profitable after the conclusion of the stress test period, and therefore wouldn’t benefit from the carried-forward tax deductions represented by the DTAs.

In other words, that the GSEs would descend into receivership after the conclusion of the stress test period.

This is an absurd assumption for FHFA to make given the consistent profits recorded by the GSEs and their accumulation of retained earnings to create fortress balance sheets over the past 10 years.

But this has been the consistent assumption that FHFA has adopted ever since the Obama administration.

Finally, FHFA has woken up and smelled the coffee.

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

With respect to GSE financial results, there is not much to talk about other than it’s smooth sailing. The GSEs are a consistent cash machine, showing no loan quality degradation during a time of challenging “housing affordability”.

Below, two snippets from the Fannie 2026 Q2 results:

• As to consistent earnings, see some relative metrics from Fannie’s quarter:

Consistency personified. The only (slight) negative is the increase in the provision for credit losses in 26 Q2 of ($485) from Q2 26 Q2 of ($277) (yet both well down from the ($946) credit loss provision of 25 Q2.)

So about credit quality?

• Credit quality is stable, though multi-family charge-offs are higher than desirable:

Fannie now meets its regulatory total risk-based capital requirement, other than the conservative add-on buffers of the ERCF (assuming the senior preferred stock is either cancelled or converted into common stock in a GSE recap/release), and has grown its net worth from $14 billion at the start of 2020 to $117 billion now.

And yet, the GSEs seem to continue to labor under a perception of financial precarity, or what I refer to as the “Specter of GSEs Past”.

Treasury Secretary Bessent appears to be unduly concerned about the effect a GSE recap/release might have on the mortgage spread to Treasuries, fearing a shock to the GSE MBS market if the GSEs are no longer controlled in conservatorship by a FHFA Director with (almost) unlimited power as conservator.

This, while the GSEs routinely pass their Dodd Frank Severe Adverse Scenario stress tests (test conditions worse than the Great Financial Crisis) with flying colors.

Michael Burry is another example of the persistence of the “Specter of GSEs Past”.

In his writing on Substack and X, he invariably refers to the GSEs today as the “toxic twins”.

In shorting the data center “neo-clouds” such as Nebius and Coreweave, Burry refers to their current financial position as pattern matches to the GSEs’ financial results during the 2009 Great Financial Crisis.

I don’t want to litigate at length whether Burry is correct when he argues that the financial roll-out of AI data centers is a pattern match for the GSEs of 2009, and therefore selling neo-clouds short is a wise investment.

I would point out, however, that the credit quality of mortgages in 2009 was essentially crap, adversely impacted by vast numbers of “liar loans” and no-doc loans with unverified debtor income numbers.

The prevailing due diligence theory in the lead up to the Great Financial Crisis was that since housing prices had uniformly risen each year since 1990, there was no credit risk…even in the event of default, the rising tide of housing prices would be sufficient to pay off the mortgage in any foreclosure.

No credit risk but plenty of fees blindly pumping out crap mortgages, and then even more fees packaging these crap mortgages into crap Private Label Securitizations that the rating agencies saw fit to rate investment grade!

I would contrast the credit quality of the 2009 mortgage collateral to the credit quality of GPUs and data centers today, where the latest evidence is that legacy GPUs that have already exceeded their depreciation lives are still yielding significant financial returns1, and that data center lease rates have increased over time as data center performance has improved.

Indeed, the SpaceX CFO stated during its recent conference call that the payback period for data center capex is about one year. This is an unprecedented return on capital.

But my point is that the “Specter of GSEs past” is very strong in the financial zeitgeist, so much so that I would claim an investor such as Michael Burry, who claims pattern recognition as his superpower, is letting the “Specter of GSEs Past” cloud his judgment.

Just as Treasury Secretary Bessent is letting the “Specter of GSEs Past” cloud his judgment as to the likely effect a GSE recap/release would have on the GSE MBS market and mortgage rates generally.

You would think the consistency of GSE earnings in an age when mortgage underwriting is actually being taken seriously would retire the “Specter of GSEs Past”.

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

1

Per Claude:

• “Every child born in the U.S. between January 1, 2025 and December 31, 2028 who has a Social Security number qualifies for a one-time $1,000 seed deposit from the U.S. Treasury into their “Trump Account.” That’s the full window of the program — it applies only to births in those four years, not an ongoing annual thing.

• Estimated total number of deposits: roughly 14.3 million, based on projected U.S. births over that 2025–2028 span — which at $1,000 each works out to about $14.3 billion in total federal seed funding over the period.”

This approximate $14 billion price tag is going to be paid for by US taxpayers….unless Treasury considers defeasing this obligation from the sales proceeds of GSE common stock.

Given FHFA Director Pulte’s past pioneering of “Twitter Philanthropy”1 on (what is currently) X, I imagine Pulte would be in favor of hanging up his conservator hat and being a part of a process that takes philanthropy to the next level.

Of course, Trump 47 first needs to complete a GSE recap/release to do that. Sometimes, you just need a reason to do the right thing.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

Then nothing for the past year.

Why?

Many have pointed to bigger Trump 47 priorities filling in the administration’s bandwidth, such as tariffs, various other legislative programs and, now, the Iranian conflict.

All true.

But never mentioned is the likelihood that when Treasury closely examined what contingent liabilities the GSEs may be exposed to which might frustrate a public offering in any GSE recap/release, Treasury focused upon the possible damages arising from the Obama administration’s Net Worth Sweep (NWS), if the DC Circuit Court of Appeals in Fairholme reversed the district court and held that rescission and reliance damages were available to the plaintiff shareholder class for FHFA’s breach of the implied covenant of good faith and fair dealing.

Just think about the GSEs’ damage exposure in the case of rescission, which essentially involves the issuer taking back outstanding junior preferred stock in exchange for paying out cash (presumably at par).

In the case of Fannie Mae alone, this would amount to a $19 billion payment. It would also involve a remand of the case back to the district court for a trial to set damages (which itself could involve an appeal), all of which could very well extend to the end of the Trump 47 term.

That would put a crimp in any plans for a GSE recap/release.

In Any GSE Recap/Release Can No Longer Occur in a "Wild Wild West, Anything Goes" Landscape Implied by the SCOTUS Collins Decision and BREAKING: DC Circuit Court Affirms Net Worth Sweep Breached the GSEs' Duty of Good Faith and Fair Dealing. MY READ THROUGH: In any GSE Recap/Release, Treasury Must Cancel its Senior Preferred Stock, I focused upon the effect on common stockholders of the DC Circuit Court’s affirmation that

• the NWS breached the duty owed to shareholders under the implied covenant of good faith and fair dealing, and

• this state law shareholder covenant survives in conservatorship notwithstanding the broad grant of statutory authority granted FHFA as conservator.

In these posts, I argue that for GSE common shareholders, it should be less likely that Treasury will convert rather than cancel its senior preferred stock (SPS) in any GSE recap/release, given the DC Circuit Court’s holding.

Now, one can consider the possible effect of the decision on junior preferred shareholders (JPS), who because of their place in the capital structure, are indifferent to the SPS cancel/convert question.

In my view, by eliminating the specter of rescission and reliance damages (leaving the current approximately $1 billion damage award intact, small peanuts compared to the alternative), the DC Circuit Court’s holding makes a GSE recap/release more feasible and therefore more likely, assuming one can take the Trump 47 administration at its word that a GSE recap/release is something it would like to accomplish before the end of the Trump 47 term.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

• the GSEs’ duty of good faith and fair dealing (implemented by FHFA as conservator on behalf of the GSEs during conservatorship) owed to GSE shareholders continues during conservatorship, notwithstanding the broad SCOTUS opinion in Collins that FHFA as conservator has the statutory authority to act in the best interests of the federal government;

• FHFA breached that duty by implementing the Obama administration Net Worth Sweep (NWS); and

• money damages (but not reliance damages or rescission) was available to the GSE plaintiff shareholder class.

The implications of this holding to any GSE recap/release is twofold:

• the GSEs’ duty of good faith and fair dealing will govern the structuring of any GSE recap/release during conservatorship, and

• the accounting GSE balance sheet items for Treasury’s GSE senior preferred stock (SPS) ($193 billion in the aggregate for both GSEs) currently exists only because FHFA breached this duty of good faith and fair dealing (given that Treasury actually received over $300 billion in distributions that were more than sufficient to pay off the SPS in full).

What is the scope of this duty of good faith and fair dealing as it applies to

• the structuring of any GSE recap/release generally, and

• whether Treasury cancels the SPS, or derives value from it by converting it into common stock, in particular?

The NWS was unprecedented in the history of American financial practice and legal jurisprudence, as the DC Circuit Court correctly noted that the plaintiffs argued during the jury trial.

The fruit of the NWS is the outstanding SPS.

Dealing with the SPS in any GSE recap/release will proceed without precedential guidance1, but not without guidance offered by logic and common sense.

If the scope of the duty of good faith and fair dealing was breached by

• creating a SPS dividend payment structure that resulted in over $300 billion of distributions made by the GSEs in respect of the SPS without reducing the SPS principal balance, and

• the current SPS balance is outstanding only because this dividend payment structure breached this duty of good faith and fair dealing, then

• any GSE recap/release transaction that permits Treasury to derive value from the outstanding SPS must likewise be found to be a breach of the duty of good faith and fair dealing owed by FHFA to GSE shareholders.

Is there a court decision on point that mandates this?

Not directly.

Remember, the NWS was unprecedented, so there is no caselaw that deals with the unwind of something as unprecedented (and so pernicious and abhorrent to US financial practice norms) as the NWS.

So we are left to logic and common sense, which one hopes (dare I say expects) Treasury as led by Treasury Secretary Bessent possesses.

Logic and common sense clearly instruct us that deriving value from the fruits of a duty breach is also a duty breach.

Why would someone as smart as Treasury Secretary Bessent proceed with a consequential GSE recap/release transaction that so obviously compounds an Obama administration duty breach with a Trump 47 duty breach, which will only serve to frustrate the achievement of any GSE recap/release?

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

Soon is now, and I was right as to (i) and (ii).

You can read the opinion here.

For our investment purposes, the holding’s read through to the terms of any GSE recap/release is what is important.

The possible read throughs are that this DC Circuit Court decision may

• incentivize Trump 47 to recommence the process to conduct a GSE recap/release1; and

• convince Treasury that its GSE Senior Preferred Stock (SPS) holding must be cancelled in any GSE recap/release.

In connection with a GSE recap/release, Treasury Secretary Bessent needed clarity as to whether Treasury could derive value from its SPS holding ($193 billion in the aggregate for both GSEs).

The DC Circuit Court holding should provide Treasury that clarity, because:

• as a simple matter of math, the SPS would have been paid off in full if the NWS was not enacted;

• as Judge Ginsburg makes clear in the DC Circuit Court’s opinion, the NWS amendment of the SPS original dividend terms breached the duty of good faith and fair dealing owed by FHFA, acting as conservator for the GSEs, to GSE shareholders;

• the clear implication of the Court’s holding to Treasury is that but for that duty breach, there would be no SPS outstanding today; and

• Treasury/FHFA risk engaging in another breach of the duty of good faith and fair dealing by deriving value from the SPS in any GSE recap/release, since the SPS is outstanding only as a consequence of the NWS breach of the duty of good faith and fair dealing.

Now, why did the NWS breach the duty of good faith and fair dealing?

The Court states that the “the issue is whether FHFA violated the reasonable expectations of the parties by adopting the Third Amendment.” (emphasis in original) (p. 16)

In other words, was it a reasonable expectation of GSE shareholders that Treasury/FHFA would amend the SPS to require the GSEs to distribute $300 billion in respect of the SPS, well in excess of the total amount payable in interest on and principal of the SPS, only to have the entire SPS liquidation balance remain outstanding?

The DC Circuit Court affirmed the District Court’s holding that nothing in HERA, the statute governing the GSE conservatorship, precludes FHFA from having to honor its duty of good faith and fair dealing to GSE shareholders, and the trial jury was not in error to conclude that the NWS violated this duty.

Now, turning to the treatment of the SPS in a GSE recap/release, would it violate the expectations of the parties for Treasury to derive value from the SPS when the only reason any SPS is outstanding is because FHFA breached the good faith and fair dealing duty?

Let’s consider the Senior Preferred Stock Agreement (SPSA) under which the SPS was issued.

The SPSA states at Sections 3 and 4 if the GSEs “pay down the Liquidation Preference of each outstanding share of Senior Preferred Stock in full, such shares shall be deemed to have been redeemed…Following such deemed redemption, the shares of the Senior Preferred Stock shall no longer be deemed to be outstanding, and all rights of the holders thereof [ie Treasury] as holders of the Senior Preferred shall cease.”

Does it violate the expectations of the parties, given that the SPSA contemplates that the SPS is deemed to be redeemed when the amount of the full liquidation preference of the SPS has been paid, for Treasury to be able to both

• obtain this full liquidation preference payment, and also

• keep the SPS liquidation balance outstanding, and

• do so by means of an act, the NWS, that has been judicially determined to be a breach of the duty of good faith and fair dealing owed by FHFA to GSE shareholders?

The question answers itself.

So I would suggest that the key takeaway for Treasury Secretary Bessent is:

• any act by Treasury and FHFA in connection with a GSE recap/release that provides value to Treasury in respect to the outstanding SPS (for example, by converting the SPS into GSE common stock) would constitute an independent breach of the GSEs’ duty of good faith and fair dealing, inasmuch as

• the SPS is only outstanding on the GSE balance sheets because of the NWS, which has just been judicially affirmed to have been a breach of the GSEs’ duty of good faith and fair dealing to shareholders.

Inverting, Treasury would be well within its rights to convert the SPS into common stock in any GSE recap/release had the DC Circuit Court held that the NWS did not constitute a breach of the duty of good faith and fair dealing owed by FHFA to GSE shareholders.

But that is an alternative universe. This DC Circuit Court decision should remove any question Treasury Secretary Bessent may have as to whether he was living in that alternative universe.2

EDIT: I have received feedback that it is not correct to say Treasury “must” do anything; Treasury can do what it wants, and FHFA has wide latitude to act under HERA, as explained by the Collins SCOTUS case.

Indeed, this is true.

I assume two things in connection with this post: (i) Trump 47 would like to do a GSE recap/release before the expiration of its term, and (ii) Treasury/FHFA would not structure a recap/release in a fashion that raises avoidable roadblocks and unforced errors.

I reiterate that this DC Circuit Court opinion makes clear that if Treasury structures a GSE recap/release in which it derives value from its outstanding SPS, GSE shareholders will have a meritorious litigation claim that this breaches the duty of good faith and fair dealing owed to them by the GSEs (and which this opinion makes clear survives the Collins SCOTUS holding).

This duty breach claim would only serve to frustrate Trump 47’s objective of accomplishing a GSE recap/release during its term.

This would be an extremely ill-advised course of action. I give Trump 47 more credit than that.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

• outclassed FHFA in the oral argument before Judges Ginsberg, Walker and Childs, as I discussed in Oral Argument in the GSE Net Worth Sweep Damages Case Before the DC Circuit Court of Appeals and Oral Argument in the GSE Net Worth Sweep Damages Case Before the DC Circuit Court of Appeals, Part II. Who Wins?, and

• benefitted from the Delaware Supreme Court’s favorable decision, rendered post-Fairholme oral argument, in a case that answers in the affirmative the question that was still open at the time of oral argument, whether under Delaware law shareholder claims arising from the Obama administration’s infamous net worth sweep (NWS) travel with the shares, which

  • serves to defeat FHFA’s strongest argument it had at oral argument (that GSE common shareholders acquiring shares post-NWS had no standing) in its effort to reverse the jury decision at trial.

For those who wish to characterize the DC Circuit judges’ on a liberal/conservative scorecard, Walker leans conservative while Childs leans liberal. As for Ginsburg, one may recall that he was the appellate judge who led the reversal of Judge Lamberth’s initial ruling in the Fairholme case that there was no good faith/fair dealing duty owed by the GSEs to shareholders.

So while Ginsburg can be hard to pin down on a liberal/conservative metric (which is a feature, not a bug, for a judge), he is a strong voice in favor of application of the good faith/fair dealing duty to the facts presented by the NWS. The most salient aspect of oral argument was when class plaintiffs counsel carefully walked through the various bad faith acts by FHFA/Treasury in connection with the NWS in the record below, in reply to a question by Judge Ginsburg.

I expect Ginsburg will find that the NWS breached the good faith/fair dealing duty and write the opinion; Walker will agree with Judge Ginsburg; and Childs, who might be disposed to find in favor of the NWS as an act by a Democrat POTUS, doesn’t have the intellectual chops nor the facts in the record to stand up to Ginsburg (or convince Walker to join her if she tries).

The oral argument was held April 21, 2026, and so one might expect a decision in another month or two. I don’t expect SCOTUS will take up any cert. petition by FHFA.

So, I believe the DC Circuit Court of Appeals will affirm the jury decision that the GSEs (read FHFA and Treasury) breached their duty of fair dealing and good faith under Delaware law when they implemented the NWS and

• Treasury siphoned off the GSEs’ net worth in an aggregate amount more than sufficient to retire Treasury’s senior preferred stock (SPS), but

• characterized these distributions as dividends so as to leave the SPS outstanding in full.

Now, here is the question that I suggest Treasury Secretary Bessent has been focused on that has delayed progress on GSE recap/release:

• whether Treasury has freedom to convert the SPS into common stock in any GSE recap/release; and

• here is the intellectual waterfall that will follow from the Fairholme appellate decision that will answer this question for Treasury Secretary Bessent:

  • since the NWS amendment breached the GSEs’ good faith/fair dealing duty to common shareholders, NWS distributions were improperly characterized as dividends;

  • since the NWS distributions characterized as dividends breached a legal duty owed by the GSEs to their common shareholders, these distributions should be re-characterized as distributions which were more than sufficient to retire Treasury’s SPS;

  • any attempt by Treasury to derive value from the SPS, such as by converting the SPS into common stock, is another duty breach, simply an attempt to profit from an act, the NWS, that has been already been judicially determined to be a breach of the good faith/fair dealing duty; and

  • any act by Treasury, other than to cancel the SPS as more than fully repaid, will itself constitute an independent good faith/fair dealing duty breach, which if done would

    • generate new GSE shareholder litigation that will frustrate Trump 47’s attempt to consummate a GSE recap/release in what remains of his term.

Do I think Scott Bessent, as a past adjunct professor of financial history, disfavors the NWS, as a misbegotten aberration in the annals of US corporate financial practice?

Yes.

Do I think Scott Bessent, as Treasury Secretary, needed an answer to the question, whether Treasury could validly proceed with a conversion of its GSE SPS into common stock, before proceeding with any GSE recap/release?

Yes.

Within another month or two, Treasury Secretary Bessent will have his answer.

NB: My initial post characterized the NWS dividends as “invalid”. I have edited this since since the NWS dividends have been found in previous litigation to be “valid” as a matter of Delaware General Corporation Law; however, because the post-NWS distributions characterized as “dividends” constitute a breach of the GSEs’ fair dealing/good faith duty, any SPS conversion would simply constitute a further duty breach insofar as it seeks to profit from the original NWS duty breach.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

By Email and First-Class Mail

Treasury Secretary Scott Bessent

U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Re: Proposing a Non-Conventional GSE Rights Offering

Dear Mr. Secretary Bessent

The GSEs are in a structural “twilight zone”.

There is an acknowledged Trump 47 administration desire to monetize Treasury’s economic stake in the GSEs (certainly worth hundreds of billions of dollars).

However, federal conservatorship oversight of the GSEs is thought to stabilize the institutional credit markets and keep the mortgage spread to Treasuries under control in order to promote housing affordability, especially going into midterm elections at a time of risen interest rates.

The GSEs’ continued conservatorship prevents a conventional capital raise (typically referred to as an IPO) as a practical matter for so long as the GSEs remain in conservatorship, ruling out any “mark to market” of Treasury’s investment.

By thinking in conventional terms, the Trump 47 administration will not be able to reconcile the mutually contradictory GSE objectives to (i) monetize Treasury’s stake in the GSEs and (ii) raise regulatory capital for the GSEs, all while (iii) signaling to the MBS market tight supervisory control over the GSEs in conservatorship.

Meanwhile, the GSEs have earned and retained almost $200 billion of regulatory capital since the Obama administration’s net worth sweep has been suspended, priming the GSEs for a near-term conservatorship release.

Bill Ackman, whose Pershing Square is a major common shareholder of the GSEs, has proposed a two-step solution while keeping the GSEs in conservatorship, although it raises no GSE capital.

Treasury would cancel its GSE senior preferred stock (SPS) as more than fully repaid, and the GSE common stock would be listed on the NYSE, all while keeping the GSEs in conservatorship pending a future IPO, at which time the GSEs would exit conservatorship.

Ackman believes that the GSEs cannot access sufficient equity capital until the GSEs improve their existing management (making them “IPO roadshow-ready”) and additional investment banking research has been published.

I believe the GSEs can raise sufficient regulatory capital today while remaining in conservatorship, by doing a (non-conventional) common stock rights offering to GSE common and junior preferred shareholders.

There is an existing base of GSE common and preferred stockholders which have purchased and hold shares during conservatorship, notwithstanding that (i) they have no assurance that a GSE recap/release will be executed or even pursued, (ii) there is little investment banking research to rely on, and (iii) the existing GSE executive teams remain in place.

These investors will increase their investment through a rights offering in an amount sufficient to buttress conservatorship release, provided the existing investors know that Treasury’s SPS is being cancelled as more than fully repaid and their shares will be listed on the NYSE in connection with the rights offering.

Why would current GSE investors subscribe to the rights offering I propose?

Because the terms of the rights offering will be advantageous to existing GSE common and preferred stockholders.

The rights’ common stock subscription price would be: (i) substantially in excess of the current GSE common stock price, resulting in no shareholder dilution^, (ii) but substantially less than the anticipated GSE common stock price upon conservatorship release, providing an incentive to subscribe to the rights offering. The rights would be transferable, providing current holders an economic benefit upon receipt. Given the anti-dilution terms of Treasury’s warrants, the rights offering would not be dilutive to Treasury’s interest.

With a successful rights offering, a future GSE public offering (IPO) to new institutional investors would become an option rather than a requirement for conservatorship release.

As I am sure you are aware, a conventional common stock rights offering involves the distribution to existing common stockholders of rights to subscribe to purchase common stock at a discount to the existing trading price, as an incentive for common stockholders to exercise their subscription rights. The rights are transferable but may be subscribed only during a short period of time, such as 30 days.

The issuer arranges for a standby purchaser to purchase shares directly from the issuer in the amount of any rights that go unsubscribed by paying a standby commitment fee, assuring that the intended offering proceeds are raised.

Because of the discounted subscription price, the conventional rights offering depresses the trading price of the issuer’s common stock, resulting in dilution for existing common stockholders.

Common stock rights offerings are commonly used in distress situation, where common stockholders are incentivized to preserve their existing equity interest by subscribing for more shares in order to retire debt that cannot be refinanced in the credit market or by new investors in the equity market.

The GSE common stock rights offering I propose is quite different because the context of the GSE conservatorship and its path to release affords a unique financing opportunity.

Because of this unique context and quite contrary to the conventional rights offering, the GSE common stock rights offering can be structured with terms that will result in no dilution for common stockholders by adopting a subscription price that is both attractive to existing holders and a premium to the current common share price.

Why do a common stock rights offering during conservatorship rather than wait and do an underwritten primary common stock issuance (IPO) upon conservatorship release?

The rights offering to existing shareholders is inherently simpler, easier and quicker to execute than a full-blown underwritten offering to new institutional investors, thereby involving less execution risk. It will also increase the GSEs regulatory capital during conservatorship, which permits Treasury to release the GSEs from conservatorship on its own schedule, based upon its view of credit market conditions, rather than schedule conservatorship release only after consummation of a lengthy IPO underwriting process.

Because underwriters are not involved in a rights offering and therefore derive no underwriting fees, you will not see any investment bank recommend to Treasury that the GSEs do a rights offering.

Why would existing GSE common and junior preferred stockholders provide new capital in a rights offering, given SCOTUS sanction of the FHFA Director’s statutory powers under HERA, permitting the FHFA to prefer its own interest over common shareholders’ interests?

Because they do that today, and every day they buy and hold GSE common and preferred stock (at a price). It’s a part of the deal they have come to accept, and they will be even more inclined to invest in the rights offering (at a higher price) given Treasury’s decision to cancel its SPS and NYSE uplist the common stock.

While current GSE junior preferred stockholders seek capital structure protection from a possible conversion of Treasury SPS into common stock, this protection would no longer be needed once Treasury agrees to cancel its SPS.

The prototypical GSE junior preferred stockholder is a GSE common stockholder in investment disposition, albeit with the stylistic adoption of suspenders in addition to a belt. With a rights offering premised upon SPS cancellation and NYSE listing, junior preferred stockholders can ditch the suspenders and participate in the rights offering.

Take the case of Fannie Mae, with its common stock closing June 6, 2026 at $6.68 per share. There are approximately 1.158 billion common shares outstanding, and 5.876 billion common shares outstanding on a fully diluted basis, giving effect to the exercise of Treasury’s 79.9% warrants.

How might the terms of a rights offering scenario work for Fannie?

Let’s look to the Deutsche Bank GSE research report I previously reviewed in a Substack post, GSE Recap/Release: Summarizing Deutsche Bank’s GSE Valuation Report, to construct a scenario for structuring the subscription price for the Fannie Mae rights offering.

Deutsche Bank (DB) presents the following as its forecast (dated September 9, 2025) for Fannie Mae common stock in connection with a GSE recap/release:

Note that Deutsche Bank’s Scenario 3 assumes that Treasury’s SPS will be cancelled and that the ERCF will be waived, leaving the HERA statutory 2.5% capital standard in place. Deutsche Bank estimates that this will result in an implied market value for FNMA of $31.57 per share.

Here is a possible rights offering scenario:

• Treasury/FHFA would agree to cancel the Fannie Mae SPS, waive application of the ERCF (which is currently waived during conservatorship) on a going forward basis (provided the 2.5% statutory standard is satisfied), and NYSE list the common stock on the expiration of the subscription right 30-day term.

• Fannie Mae would distribute to Fannie Mae common and junior preferred stockholders, as of the subscription distribution record date, rights to 1.158 billion shares of FNMA at a subscription price of $14 per share during the 30-day subscription period.

• The rights offering, assuming full subscribed, would double the number of FNMA shares outstanding and raise $16.2 billion.

• The rights would be freely transferable for 30 days, and a market would be created during this period for

  • Fannie Mae common stockholders to sell their rights if they do not want to subscribe in the offering, and

  • any investor to buy the rights, at then market prices.

• Fannie Mae’s statutory equity capital as of March 31, 2026, pro forma for the rights offering (including SPS cancellation) would be approximately $130 billion (satisfying the 2.5% statutory capital standard), and its CET1 capital would be approximately $100 billion, (satisfying the ERCF minimum capital requirement and the capital stress buffer, were they applicable),

• The rights offering entails no shareholder dilution since the FNMA subscription price, $14 per share, is well in excess of the current FNMA trading price.

• The rights offering should be fully subscribed because the $14 per share subscription price is well below an implied post-conservatorship release FNMA share price of over $31 per share (following Deutsche Bank), assuming SPS cancellation, ERCF waiver and NYSE listing and conservatorship release.

• By conducting the rights offering, Treasury will have signaled to both the equity and credit markets that GSE recap/release is back on track and will be accomplished absent unforeseen problems with the credit market.

In connection with the rights offering, Treasury/FHFA should consider permitting dividends to be paid while in conservatorship on the outstanding Fannie Mae junior preferred stock, permitting dividends to be declared and paid on the common stock at a dividend rate Treasury/FHFA considers prudent.

This will support the FNMA share price after consummation of the rights offering, which serves to support the offering incentive dynamics of the rights offering itself.

The rights offering:

• will raise additional regulatory capital making a future GSE IPO a luxury rather than a necessity,

• will prepare the GSEs for conservatorship release at a time of Treasury’s choosing and without further condition, rather than conditioned upon the consummation of an IPO underwritten offering, which provides Treasury flexibility and optionality,

• uses the vast disparity between current and prospective post-conservatorship release GSE common stock values as an arbitrage to accomplish the twin goals of raising necessary equity capital as well as incentivizing current GSE stockholders,

• signals to the institutional credit markets that mortgage spreads should remain at the status quo or even be reduced (assuming the “implied” too-big-to-fail federal guarantee of the GSEs is not disavowed and an explicit, paid-for federal backstop line of credit is implemented), and

• restart and energize the GSE recap/release process, in order to achieve conservatorship release at the time of Treasury’s choosing and without disturbing the mortgage spread to Treasuries.

It is time for the GSE recap/release process to resume a sensible path to fruition.

Very truly yours,

Christian Herzeca

PS. This letter summarizes two posts that I have published under my nom de plume (Rule of Law Guy) on my Rule of Law Guy’s Newsletter Substack, GSE Recap/Release: Taking Ackman’s Two-Step Proposal One Step Further and GSE Recap/Release: Taking Ackman’s Two-Step Proposal TWO Steps Further

So if Team Trump 47 can have a “fight in the locker room” before going to win out on the field, I can post a clickbait post.

But let’s review the bidding:

• It is apparent (to at least my eyes) that FHFA Director Pulte was pushing Treasury Secretary Bessent to kick off GSE recap/release last summer; and

• Bessent opposed, likely referencing that he was not ready to sell GSE recap/release to the GSE MBS credit market yet, before engaging in pugilistic rhetoric.

Seriously folks, this would have been a fight worth watching.

Perhaps Pulte, now acting Director of National Intelligence, will come up with some “intelligence” on Bessent, as payback.

Then we GSE investors can rightly conclude that GSE recap/release under Trump 47 has morphed into Keystone Cops farce.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

• the right to subscribe for GSE common stock at a premium to current trading values, but also

• at a discount to the expected trading value after conclusion of the rights offering, and

• at a deep discount to the expected trading value after conservatorship release.

This rights offering would restart (some might say start) the GSE recap/release process with a capital raise to add equity regulatory capital, while allowing Treasury to release the GSEs from conservatorship on its own schedule, when Treasury believes that the GSE MBS credit market will not be adversely affected.

Upon reflection, I would now propose expanding this rights offering to existing GSE junior preferred (JPS) stockholders, entitling GSE JPS holders the right to subscribe to purchase GSE common stock on the same terms and conditions as GSE common stockholders.

This would substantially broaden the rights offering and enhance the probability of a successful capital raise.

Why would a GSE common stock rights offering concurrently made to GSE JPS holders as well increase the likelihood of successful execution?

Because the prototypical GSE JPS holder is a GSE common stockholder in investment disposition, albeit with the stylistic adoption of suspenders in addition to a belt.

The GSE JPS holder seeks capital structure protection from

• any Treasury conversion of its (already repaid) senior preferred stock (SPS) into common stock in any GSE recap/release;

  • by holding JPS, the holder would be insulated from dilution arising from any SPS conversion; and

• any FHFA/Treasury decision to retain the overly-conservative ERCF, which would serve to depress the trading price of the GSE common stock post-conservatorship release.

However, the GSE rights offering as I propose it would be conditioned upon

• Treasury’s cancellation of its (already repaid) SPS;

• FHFA waiver of the ERCF; and

• listing of the GSE common stock on the NYSE.

With these three conditions satisfied, the GSE JPS holder can ditch the suspenders and be inclined to subscribe to the common stock rights offering1.

This would substantially increase the likelihood of a successful rights offering and, hence, a successful GSE recap/release.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

Suppose Trump 47 (really, Treasury Secretary Bessent) wants to eat his cake and have it too, regarding the GSEs.

Suppose Treasury Secretary Bessent wants to:

• do right by GSE shareholders by proceeding upon a path to conservatorship release (which includes, among other things, Treasury’s cancellation of its GSE senior preferred stock (SPS) as already more than paid off, and listing of the GSE common stock on the NYSE), but

• still keep the GSEs in conservatorship to maintain government control over the GSEs (which effectively rules out a primary public offering of common stock to institutional investors (IPO) for so long as the GSEs remain in conservatorship), in order to

• reassure the institutional credit markets and keep the mortgage spread to Treasuries under control in order to promote housing affordability, especially going into midterm elections at a time of rising interest rates.

This eat cake/have cake Trump 47 mindset is plausible, inasmuch as FHFA Director Pulte has intimated in past media interviews that the Trump 47 administration may want conservatorship to continue even during a GSE capital raise.

Pulte was criticized for such a suggestion, inasmuch as a large stock offering to savvy institutional investors during GSE conservatorship is a nonstarter.

SCOTUS found that the FHFA Director as conservator has the statutory power to promote the federal government’s interest without needing to observe any fiduciary duty to the GSE common shareholder. SCOTUS upheld the Obama administration’s Net Worth Sweep (as egregious a violation of first-world financial norms inspired by third-world thievery as there ever was).

If this is the Trump 47 mindset, it is also apparent that this GSE process has stalled, likely because the Trump 47 administration hasn’t figured out how to accomplish its mutually contradictory GSE objectives in the near term.

In this post, I explain a way to thread the needle so Trump 47 can get GSE recap/release back on track, raise equity capital without shareholder dilution while the GSEs remain in conservatorship, and avoid any disruption in the mortgage credit market:

• adopt the Ackman “Two Step”, but add onto his proposal a third step, that includes a

• non-dilutive rights offering to existing GSE common shareholders that

  • can be executed while the GSEs remain in conservatorship,

  • will avoid the need for the GSEs to do a primary public offering (IPO) in connection with an eventual conservatorship release, and

  • stabilize the mortgage credit market until such time as Treasury is confident that conservatorship release may be done without credit market disruption.

Adding a Rights Offering to Ackman’s Two Step Proposal

I have discussed Ackman’s “Two Step” GSE proposal at length at Ackman Proposes a Two-Step Approach to GSE Recap/Release and GSE Recap/Release: Assessing the Ackman Two-Step Proposal.

Briefly, Ackman proposed a two step process whereby (i) Treasury cancels its SPS as more than fully repaid, and (ii) the GSE common stock is listed on the NYSE, all while keeping the GSEs in conservatorship pending (iii) a final resolution of the FHFA’s regulatory capital standard applicable to the GSEs, (iv) broad investment bank coverage of the GSEs and publication of GSE equity research reports that would support an IPO, and (v) an Ackman-recommended upgrade to the quality of the GSEs’ executive teams.

This is Ackman’s first step.

During the interregnum period prior to conservatorship release, Ackman argues more investment banks need to initiate GSE coverage and the GSEs’ management teams need to become “IPO-roadshow-ready” in order for institutional investors to become comfortable with making an equity investment in a prospective GSE IPO. Seventeen years is a long time for the GSEs to operate in the absence of any institutional equity following. If this interregnum time period is rushed, in Ackman’s view, the GSEs’ IPO stock offering will suffer which will depress the resulting GSEs common share prices.

Of course, Ackman is also talking his sizable GSE common stock book, as effectuating this first step of his proposal would pop the GSE common stock price substantially.

The Ackman second step would be an IPO upon conservatorship release, perhaps as late as by the end of Trump 47’s term, when the institutional equity market is sufficiently familiar and comfortable with GSE equity, so that an IPO can proceed at a satisfactorily high price.

Ackman’s operating premise is that the GSEs need an influx of new institutional equity investors to recapitalize the GSEs sufficiently to permit conservatorship release without disturbing the institutional credit market.

I think this premise is mistaken.

There is an existing base of GSE common stockholders which have purchased shares during conservatorship with

• no assurance that a GSE recap/release will be executed or even pursued,

• little investment banking research to rely on, and

• the existing GSE executive teams in place.

These investors will increase their investment through a rights offering in an amount sufficient to buttress conservatorship release, provided the existing investors know that Treasury’s SPS is being cancelled as more than fully repaid and their shares will be listed on the NYSE in connection with the rights offering.

Why would current investors subscribe to this rights offering, and the rights offering be successful?

Because the terms of the rights offering will be advantageous to existing GSE common stockholders.

The rights’ subscription price would be

• in excess of the current GSE common stock price, resulting in no shareholder dilution1, but

• less than the anticipated GSE common stock price upon conservatorship release, providing an incentive to subscribe to the rights offering, and

• the rights are issued only to current GSE common shareholders and would be transferable, providing current holders an economic benefit upon receipt.

With a successful rights offering, a future public offering (IPO) to new institutional investors would become an option rather than a requirement for conservatorship release.

Below I discuss the potential terms of such a GSE common stock rights offering, and address why it will not result in shareholder dilution.

The GSE Rights Offering During Conservatorship

A typical common stock rights offering involves the distribution to existing common stockholders of rights to subscribe to purchase common stock at a discount to the existing trading price, as an incentive for common stockholders to exercise their subscription rights. The rights are transferable, but may be subscribed only during a short period of time, such as 30 days.

The issuer may arrange for a standby purchaser to purchase shares directly from the issuer in the amount of any rights that go unsubscribed by paying a standby commitment fee, assuring that the intended offering proceeds are raised.

Ackman’s new investment fund, Pershing Square USA, Ltd., would be one of many potential standby purchasers.

Because of the discounted subscription price, the rights offering typically depresses the trading price of the issuer’s common stock, resulting in dilution for existing common stockholders.

Common stock rights offerings are commonly used in distress situation, where common stockholders are incentivized to preserve their existing equity interest by subscribing for more shares in order to retire debt that cannot be refinanced in the credit market or by new investors in the equity market.

The GSE common stock rights offering I envision is quite different because the context of the GSE conservatorship and its path to release affords a unique financing opportunity.

Because of this unique context, the GSE common stock rights offering can be structured with terms that will result in no dilution for common stockholders by adopting a subscription price that is both attractive to existing holders and a premium to the current common share price.

Why do a common stock rights offering during conservatorship rather than wait and do an underwritten primary common stock issuance (IPO) upon conservatorship release?

The rights offering to existing shareholders

• is inherently simpler, easier and quicker to execute than a full blown underwritten offering to new institutional investors, thereby involving less execution risk,

• will increase the GSEs regulatory capital during conservatorship, permitting Treasury to release the GSEs from conservatorship on its own schedule, based upon its view of credit market conditions, rather than schedule conservatorship release only after consummation of a lengthy IPO underwriting process,

• rewards existing GSE common stockholders with a discounted opportunity to increase their shareholdings in connection with Treasury’s decision to cancel the SPS and list the common stock on the NYSE, and

• by increasing GSE regulatory equity capital, makes an underwritten IPO to new institutional investors an option rather than a condition to conservatorship release, thereby derisking the GSE recap/release process.

Why would existing GSE common stockholders provide new capital in a rights offering given the FHFA Director’s dictatorial statutory powers under HERA?

Because they do that today, and every day they buy and hold GSE common stock. It’s a part of the deal they have come to accept, and they will be even more inclined to invest in the rights offering given Treasury’s decision to cancel its SPS and NYSE uplist the common stock.

Take the case of Fannie Mae2, with its common stock closing May 22, 2026 at $7.18/share. There are approximately 1.158 billion common shares outstanding, and 5.876 billion common shares outstanding on a fully diluted basis, giving effect to the exercise of Treasury’s 79.9% warrants.

How would the terms of a rights offering scenario work for Fannie?

Let’s look to the Deutsche Bank GSE research report I previously reviewed in a post, GSE Recap/Release: Summarizing Deutsche Bank's GSE Valuation Report to construct a scenario for structuring the subscription price for the Fannie Mae rights offering.

Deutsche Bank (DB) presents the following as its forecast (dated September 9, 2025) for Fannie Mae common stock in connection with a GSE recap/release:

Note that DB’s Scenario 3 assumes that Treasury’s SPS will be cancelled and that the ERCF will be waived, leaving the HERA statutory 2.5% capital standard in place. DB estimates that this will result in an implied market value for FNMA of $31.57/share.

Here is a possible rights offering scenario:

• Treasury/FHFA would agree to cancel the Fannie Mae SPS, waive application of the ERCF (which is currently waived during conservatorship) on a going forward basis and NYSE list the common stock on the expiration of the subscription right 30 day term.

• Fannie Mae would distribute to Fannie Mae common stockholders as of the subscription distribution record date rights to 1.158 billion shares of FNMA at a subscription price of $14/share during the 30 day subscription period.

• This rights offering, assuming full subscribed, would double the number of FNMA shares outstanding and raise $16.2 billion.

• The rights would be freely transferable for 30 days, and a market would be created during this period for

  • Fannie Mae common stockholders to sell their rights if they do not want to subscribe in the offering, and

  • any investor to buy the rights, at then market prices.

• Fannie Mae’s statutory equity capital as of March 31, 2026, pro forma for the rights offering (including SPS cancellation) would be approximately $130 billion (satisfying the 2.5% statutory capital standard),3 and its CET1 capital would be approximately $100 billion,4 (satisfying the minimum capital requirement and the capital stress buffer of the ERCF, were it to apply),5

• The rights offering entails no shareholder dilution since the FNMA subscription price, $14/share, is well in excess of the current FNMA trading price, $7.18/share.

• The rights offering should be fully subscribed because the $14/share subscription price is well below an implied FNMA share price, assuming SPS cancellation, ERCF waiver and NYSE listing and conservatorship release.

• By conducting the rights offering, Treasury will have signaled to both the equity and credit markets that GSE recap/release is back on track and will be accomplished absent unforeseen problems with the credit market.

In connection with the rights offering, Treasury/FHFA should consider permitting dividends to be paid while in conservatorship on the outstanding Fannie Mae preferred stock6, permitting dividends to be declared and paid on the common stock at a dividend rate Treasury/FHFA considers prudent.

This will support the FNMA share price after consummation of the rights offering, which serves to support the offering incentive dynamics of the rights offering itself.

Benefits of the Rights Offering

The rights offering

• will raise additional regulatory capital making a future IPO a luxury rather than a necessity,

• will prepare the GSEs for conservatorship release at a time of Treasury’s choosing, rather than upon the consummation of an IPO underwritten offering, providing Treasury flexibility and optionality,

• uses the vast disparity between current and prospective post-conservatorship release GSE common stock values as an arbitrage to accomplish the twin goals of raising necessary equity capital as well as incentivizing current GSE common stockholders,

• signals to the institutional credit markets that mortgage spreads should remain at the status quo or even be reduced (assuming the “implied” too-big-to-fail federal guarantee of the GSEs is not disavowed and an explicit, paid-for federal backstop line of credit is implemented), and

• restart and energize the GSE recap/release process, in order to achieve conservatorship release at the time of Treasury’s choosing and without disturbing the mortgage spread to Treasuries.

It is time for the GSE recap/release process to resume a sensible path to fruition.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

5

That from today’s Wall Street Journal, in an article (paywall disabled) laying out Trump 47’s plan to rectify abuses by the Obama and Biden administrations.

More from the article:

“The Trump administration created an unusual settlement fund valued at nearly $1.8 billion to compensate people who claim the federal government weaponized the legal system against them, a move announced in tandem with President Trump’s decision to withdraw a lawsuit seeking billions of dollars from the Internal Revenue Service.”

Hey Trump 47, wake up! $1.8 billion is a pittance compared to the theft conducted by the Obama administration’s Net Worth Sweep. Your own Treasury is the beneficiary of a similar weaponization attack against GSE shareholders, by carrying GSE senior preferred stock at a balance sheet amount that is over 70X the damages your new fangled Anti-Weaponization Fund seeks to address.

[Of course, since Trump himself was a plaintiff in an action against prior administrations’ “weaponized DOJs” but never was a GSE shareholder, one can see where his initial loyalties lie]

The time is well past doing GSE recap/release. Mortgage interest rate spread to Treasuries remains at a four-year low (having only recently ticked up slightly because of that thing in Iran).

LFG!

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

This is a blended probability valuation arising from two case scenarios: a “fast exit” case and a “slow exit” case.

Mizuho assigns a probability of 30% to the fast exit case, resulting in a FNMA share valuation of $32.

Mizuho assigns a probability of 70% to the slow exit case, resulting in a FNMA share valuation of $0.

The fast exit is described by Mizuho as

• FHFA lowers minimum capital requirements and Treasury deems the SPS repaid.

• Under that scenario, FNMA is already capitalized to relist, unlocking post-privatization ROEs of ~11–13% and intrinsic value of ~$32 (FNMA).

The slow exit is

• the existing capital regime remains intact, earnings are fully absorbed into capital buildup, and

• common shareholders earn zero return through roughly 2033.

Mizuho teases out bear/base/bull cases from the fast/slow exit scenario methodology it has developed by adjusting the probability weightings, as set forth in the graphic below.

This creates bear/base/bull case FNMA share price outcomes of $3/$10/$18.

One criticism of this Mizuho approach is that it is too simplistic. Within the many variables involved in any GSE recap/release, there can be a range of outcomes. For example, Treasury’s senior preferred stock may be cancelled but the restrictive regulatory capital standard of the ERCF may be retained, a scenario not entertained in the Mizuho analysis.

If you disagree with the 70% probability weighting assigned to the slow exit (no recap/release in next seven years) scenario, Mizuho notes that under its valuation methodology, each 10 percentage point increase in the probability of the fast exit adds approximately $3 to the resulting price target.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

The video (posted on X by FHFA Director Pulte) is set forth below.

Paraphrasing Warren Buffett, if you set yourself down at a poker table and you don’t know who the schmuck is, you are the schmuck.

Trump 45 spent much of the first term talking about taking the GSEs public.

Didn’t happen.

Then Trump 45 explained that the clock on his first term ran out, because POTUS wasn’t able to fire the Democrat incumbent FHFA Director until SCOTUS confirmed that POTUS could do so without cause.

So, by way of mea culpa, Trump posted “the letter”, set forth below, almost five years after Trump 45 took office.

Now, a year and a half into the Trump 47 second term, POTUS is still “thinking” about taking the GSEs public.

Who are the schmucks in the saga? Could it be the GSE shareholders?

For what it’s worth, I do believe that Trump 47 wants to consummate a GSE recap/release before the Trump 47 term ends in two and a half years. It certainly is more feasible this term than his last term, given the growth in the GSEs’ capital.

But time is money, and the passage of time eats away at the GSE shareholders’ return on investment.

One doesn’t have to suffer from TDS to call BS on Trump 47 and the slow march to GSE recap/release.

It is well past time for Trump to stop taking GSE shareholders for the schmucks at the poker table.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

For paying subscribers, I provide below the paywall my prediction as to the outcome of these cases. Predicting the outcome of these Net Worth Sweep cases is fraught. The Net Worth Sweep saga before the courts has been an exemplary example of the old saw, “you can’t fight City Hall”.

I believe the courts have been consistently wrong in holding that HERA authorized FHFA, as conservator with the primary duty to place the GSEs in a safe and sound financial position, to divert the entire net worth of the GSEs to Treasury, resulting in dividends to Treasury of some $150 billion in excess of what Treasury was entitled to.

But another saw: “bad facts make bad law”, and the courts have consistently made bad law because the judiciary has had no institutional courage to call out the Obama administration for the abject theft of GSE shareholder money.

So will the DC Circuit Court of Appeals provide at least one coda of judicial self-respect as this Net Worth Sweep saga winds down in the courts?

Read more

• award $612 million of damages, plus interest, to the class action GSE plaintiffs on the theory that the Net Worth Sweep (NWS) breached the GSEs covenant of good faith and fair dealing to shareholders, but

• deny GSE junior preferred stockholders (Berkeley) the opportunity to argue the NWS entitles shareholders additional damages under contractual theories of restitution and reliance.

You can listen to the oral argument at the Court’s website.

FHFA argued that because SCOTUS in the Collins case found that HERA authorized FHFA to act in its own best interest1, FHFA

• not only had the statutory authority to implement the NWS and dividend to Treasury some $150 billion additional GSE funds than Treasury was entitled to under the preexisting 10% dividend terms,

• but also that the GSEs owed no implied covenant of good faith and fair dealing.

  • This argument posits that because FHFA had authority to divert all of the GSEs net worth to Treasury, GSE shareholders had no reasonable expectation that FHFA would deal fairly and in good faith with them.

The class action plaintiffs countered that

• the Collins case was purely one that construed FHFA’s statutory authority, and said nothing about the effect of that statutory authority on the GSEs contractual rights owed to its shareholders,

• it is clearly the case that an action, such as the NWS, can be authorized by federal statute but be conducted in a manner that violates underlying contractual state law duties owed to shareholders, and

• GSE shareholders had no reasonable expectation that the NWS would be authorized, such that its adoption violated the shareholders reasonable expectations that underlie FHFA’s covenant of good faith and fair dealing, because the NWS (referring to case law indicating a breach of the covenant)

  • was unprecedented

  • was of extreme gravity to shareholders, and

  • was adopted precipitously and not with the usual care and deliberation one expects in an action with such momentous financial consequences.

As an aside, it was especially worth listening to the oral argument of Hamish Hume, class counsel, at approximately minutes 37-44. It is unusual to have some seven minutes of uninterrupted argument, before an active questioning bench, and Hume was extraordinarily effective in marshaling his arguments…so effective, that the Judges simply sat and listened for those seven minutes.

Hume’s presentation was especially praiseworthy because of his displayed sang froid. Hume betrayed no sign of the significant financial consequences of the case to him personally. As class action counsel, he stands to make a life-changing fee if Judge Lamberth’s decision is upheld by the DC Circuit Court of Appeals, or nothing at all if the decision is reversed. My voice would have been breaking and knees audibly knocking.

The argument ended with the Berkeley plaintiffs arguing that Judge Lamberth’s decision preventing them from arguing that they were entitled to damages on restitution and reliance theories was in error. If this decision is reversed, the case would go back down to Judge Lamberth not to reexamine the validity of the NWS, but estimate what damages on a restitution or reliance contractual theory is available to plaintiffs. These damages would likely far exceed the amount of damages awarded by the jury before Judge Lamberth.

What is the import if the DC Circuit Court of Appeals upholds the jury decision below, apart from obligating the GSEs (not FHFA or Treasury, the parties at fault in promulgating the NWS) to pay to the class something approximating $800 million (including post-judgment interest)?

I have speculated on this question, arguing in a prior post, GSE Recap/Release: About That Litigation Risk Posed by GSE Common Stockholders In Event of Treasury's SPS Conversion, that if the NWS breached the GSEs duty of good faith and fair dealing to shareholders, then any conversion of Treasury’s GSE Senior Preferred Stock (SPS) for value into GSE common stock should likewise be another independent breach of the covenant of good faith and fair dealing.

So if the DC Court of Appeals affirms, in my view this should constitute good reason by Treasury to cancel the SPS as (more than) fully repaid, which is the economic reality.

* * * * *

As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

This may sound like an untimely question now, as the Iran conflict rages, interest rates have risen and oil prices pose an inflation threat.

But this is the perfect time to prepare for a Trump 47 GSE pivot, to move beyond what I call Trump 47’s “infatuation phase” of GSE recap/release, to get serious and initiate the “implementation phase”.

What is the “infatuation phase?”

This was the phase during the first year of the Trump 47 administration when there was more talk than walk.

FHFA Director Pulte is well meaning and wants to achieve a GSE recap/release. He knows it is the right thing to do.

But during this infatuation phase, the FHFA Director seemed more preoccupied with granting media interviews, cheerleading rather than actually preparing the GSEs for the recap/release process. For example, why hasn’t Fannie Mae filled its CEO position by now if Fannie’s executive team needs to embark on a public securities offering roadshow? (A cardboard Fannie CEO won’t work on a roadshow, the new Supreme Leader of Iran notwithstanding)

What will the “implementation phase” look like?

I set forth my view of the GSE recap/release implementation phase below, by working backwards from a defined successful endpoint, and by asking what steps must be taken to arrive at that successful end…for as T. S. Eliot wrote in The Four Quartets, "In my end is my beginning".

But let’s acknowledge an immediate exogenous constraint. Interest rates have recently risen sharply because of the Iran conflict.

See the below mortgage interest rate chart and the mortgage spread chart (from streetstats.finance):

(It may be of comfort to Treasury Secretary Bessent to note that while the MOVE rate of interest rate volatility has exploded higher recently, the mortgage spread has increased far less.)

As a prerequisite to entering into the “implementation phase” of GSE recap/release, the Iran conflict must be concluded, oil prices retreat and interest rates re-stabilize. These are necessary conditions for the return of market conditions conducive to a GSE recap/release.

Let’s assume this occurs over the ensuing few months. Then what?

The Implementation Phase of GSE Recap/Release

Charlie Munger would always say that to understand how to accomplish something, one should “invert”, by asking oneself how one would prevent that something from being accomplished, and then one should proceed by removing those obstacles.

I offer something analogous, insofar as I envision a defined endpoint of success, but I “work backwards” by constructing the necessary events that must be present in order to work your way forward. To my mind, I offer the Janus-faced twin to Charlie’s process.

To define a successful endpoint, one must first identify the purpose of a GSE recap/release.

This purpose can be stated clearly:

• The GSEs have been locked into a “temporary” 17 year conservatorship because of federal government malfeasance. This malfeasance must stop.

• The GSEs capital was stolen by the Obama administration by means of the Net Worth Sweep, even while the conservatorship statute mandates that the GSEs capital should be restored into a safe and sound condition. This malfeasance must be reversed.

• The GSEs operating efficiency and technological advancement have been hampered by bureaucratic ignorance and inefficiency, frustrating the ability of the GSEs to lower the cost and improve the speed of mortgage financing that is in part responsible for the housing affordability crisis the US is now experiencing.

The purpose of a GSE recap/release is to reverse 17 years of GSE abuse at the hands of the federal government, and to renew the GSEs as private corporations that are fully capitalized, and operationally and technologically proficient in order to revitalize the US housing market.

So let’s work backwards from a successful GSE recap/release that accomplishes these goals:

• Imagine what a successful GSE recap/release looks like.

  • Spoiler alert: A primary common stock offering raising sufficient proceeds to permit conservatorship release at the closing of the offering.

• Implement the necessary conditions that must be achieved in order for that successful endpoint to be reached.

  • Spoiler alert: Cancel Treasury’s senior preferred stock (SPS) as fully repaid, and have the FHFA Director waive application of the overly-restrictive ERCF.

• Revitalize the GSEs, two of the most important US financial institutions, so that they are market leaders rather than laggards in the implementation of cutting-edge financial technology.

  • Spoiler alert: Begin the transition from TradFi to DeFi by adopting agentic efficiencies and moving the GSEs secondary mortgage finance ecosystem onto blockchain.

Let’s now proceed to tease out the terms of our successful end point, now that we have identified the reason why we must pursue that successful end point, and the conditions that must be met to achieve it.

A successful GSE recap/release requires a primary stock offering that raises sufficient equity capital for the GSEs to meet their applicable statutory regulatory capital standard, and permits the GSEs to be released from conservatorship at the closing of the stock offering.

• A successful equity offering (raising something on the order of $20 billion for Fannie1) requires the GSEs to:

  • convince institutional equity investors they will pay a reliable dividend and have substantial opportunities for growth;

    • a satisfactory common stock dividend is necessary but not sufficient. There must be some “sizzle” arising from achievable prospective earnings growth to accompany the “steak” of a reliable dividend, in order to consummate a large common stock public offering.

  • be able to exit conservatorship coincident upon the closing of the primary stock offering;

    • no rational institutional equity investor will invest in the GSEs while they remain in conservatorship, and thus remain subject to the power of a FHFA Director to withdraw all of the net worth of the GSEs and hand it over to Treasury (as unlikely as it might seem for the Trump 47 administration to mimic the Obama administration’s confiscatory treatment of the GSEs with another net worth sweep).

      • Thought experiment:

      • Do you expect Trump 47 to sweep all of the GSEs’ current net worth to Treasury?

      • No.

      • Then why would anyone think that Trump 47 would enshrine and make permanent the results of the Obama administration net worth sweep by converting the more than repaid SPS into common stock?

  • convince institutional investors that historic governmental remnants of antagonism to GSE shareholders have been eliminated.

    • the best signal to the market of this elimination of governmental GSE animus is the cancellation of the SPS. Additional moves that can help convince institutional investors that they are not investing in a corporation that the federal government considers to be a financial “problem child” is to raise the existing GSE conforming loan limits and rationalize the regulatory capital requirement, both discussed below.

  • since the GSEs need to raise equity capital and Treasury does not need cash (in the sense that a private selling shareholder might), the offering should be a primary offering with no selling by Treasury to compete with the primary shares being issued.

Working backward, in order to meet these conditions of a successful offering that results in conservatorship release, the GSEs must:

• have Treasury’s SPS cancelled as more than paid in full;

  • this will provide a dollar for dollar increase in the GSEs regulatory equity capital, and

  • by acknowledging past repayment of the SPS in the fraudulent guise of dividends, this will eliminate the vestige of federal antagonism to GSE stockholders represented by the SPS;

    • it is foolhardy to try to raise some $20 billion in the form of common stock if Treasury as majority stockholder has just diluted common stockholders by converting an already paid-off SPS into common stock, thereby diluting GSE common stockholders.

      • within investment banking circles, this SPS conversion would be a prime example of “crapping in your bed”. It is a matter of first principles that Treasury should not crap in its own bed by converting the SPS into dilutive common stock while trying to guide Fannie Mae through a $20 billion common stock offering.

• have the FHFA Director waive the provisions of the overly-conservative ERCF, and proceed with the HERA statutory minimum of 2.5% equity capital2, because the GSEs have been satisfying the severe adverse scenario Dodd Frank stress test (worse economic conditions than the Great Financial Crisis) without any equity capital needed.

  • read my post The Dodd Frank 2025 Severely Adverse Scenario Stress Test Results Show Fannie Mae is in a Safe and Sound Financial Condition, and the Enterprise Regulatory Capital Framework Should Be Abandoned as to why the GSEs stress test results prove that the ERCF should be waived;

    • for further recent analysis on the need to eliminate the ERCF written by Donald Layton, former CEO of Freddie Mac, see President Trump Paves the Way for the FHFA to Reform and Reduce GSE Capital Requirements.

    • Mr Layton looks to the Trump Executive Order mandating the GSEs to repurchase MBS in order to lower interest rates as evidence that Trump wants to use the GSEs constructively to help solve housing affordability.

    • It also bears noting that the Fed just recently released a notice regarding bank capital requirements that is intended to lower regulatory bank capital requirements and mortgage risk weights.

  • The FHFA Director has plenary statutory authority under HERA to waive regulatory provisions applicable to the GSEs, as I discussed in my prior post, FHFA Director Pulte Uses a Little Known Regulatory Waiver Rule, and the ERCF Shudders.

    • FHFA Director has the statutory authority to waive the application of the ERCF, to permit the GSE recap/release to proceed under the statutory 2.5% HERA equity capital statutory provision. FHFA would be able to consider possible alternatives to the ERCF (as Mr. Layton identifies in his article) in the luxury of time post conservatorship release.

      • A new regulatory capital standard does not need to be promulgated prior to a GSE recap/release conducted under a statutory regulatory standard.

• A $20 billion primary equity offering by Fannie taken together with the cancellation of Treasury’s SPS would increase Fannie’s pro forma statutory regulatory capital to $138 billion as of year end 2025 (-$3 billion at year end, +$121 billion through SPS cancellation, +$20 billion offering proceeds). This pro forma capital amount would (more than) satisfy the HERA statutory regulatory capital requirement (without unnecessary ERCF add-ons and buffers). Satisfaction of this capital standard provides the basis for conservatorship release upon the closing of the offering.

• Develop a credible plan to increase revenues and cut costs.

  • Increase revenues.

    • The GSEs are profitable entities, but they are also encumbered by 17 years of conservatorship encrusted inertia.

      • Institutional equity investors who might be attracted to a GSE common stock investment don’t buy inertia stories, they buy stable growth stories.

    • GSEs must present plans to increase revenues

      • One possible growth plan would be to significantly increase the dollar amount of the conforming loan limits (CLL) on mortgages that can be purchased by the GSEs.

        • There is no reason why the current conforming mortgage limits shouldn’t be increased (unless one wants to depress the GSEs’ footprint, which is a counterproductive strategy for a successful public offering).

        • For 2026, the baseline CLL for one-unit properties is $832,750 in most of the U.S., up $26,250 from 2025. The high-cost area ceiling is $1,249,125 (150% of the baseline).

        • The CLL was frozen during conservatorship at $417,000 for nine straight years.

        • The CLL is intended to be a brake on the growth of GSE revenues, and a limit to the GSEs’ total addressable market (TAM).

        • This limit on the GSEs’ TAM is counter-productive for US national housing policy, since the GSEs’ purchase of originated mortgages serves to lessen prevailing mortgage rates by providing a liquid secondary mortgage industry to support home mortgage lending.

          • Since the GFC, it has become abundantly clear that private label securitization sponsors and mortgage REITS do not provide sufficiently liquidity for the US national mortgage finance industry.

    • The biggest positive increase to GSE revenues would result from an increase in mortgage refinancing, if long term mortgage rates decline.

      • While a refinanced mortgage only replaces the existing guaranteed mortgage, so that the recurring guarantee fee charged may not differ, there is an “Upfront Loan-Level Price Adjustment or LLPA” which is charged on refinancing, which is an increment to the guarantee fee stream Fannie derives from guaranteeing the mortgage. Increased refinancing leads to increased Fannie Mae profits.

    • It has been reported that Fannie will license the GSEs Uniform Mortgage Backed Securities platform, now named US Fintech, to private parties to use as their securitization platform. The projected revenues from this licensing initiative have not been identified. This license program should be fleshed out in connection with a GSE public offering.

  • Reduce costs. A cost reduction plan that focuses on increased technological adoption should be formulated in connection with a GSE public offering.

    • It should be recognized at the outset that FHFA Director Pulte has successfully reduced operating costs at the GSEs.

      • Based on Fannie Mae’s full-year 2025 financial results released on February 11, 2026, under the direction of the Federal Housing Finance Agency (FHFA), the company reduced its total non-interest expenses by $141 million compared to 2024.

        • so kudos to FHFA Director for accomplishing that during the “infatuation phase”.

      • But there are available to the GSE significant “ecosystem” cost reduction benefits that should be planned for and developed in connection with a GSE recap/release, to provide that requisite public offering “sizzle”.

      • The GSEs must adopt an approved platform of AI agents that can implement the GSEs’ mortgage underwriting standards and purchase conditions more quickly and at less cost than is currently done.

      • The NYSE announced that it has entered into an agreement with Securitize to tokenize stock listings on the exchange. See NYSE Partners With Securitize to Develop 24/7 Tokenized Securities Platform (paywall unlocked). This will tokenize real world assets (RWAs), the NYSE-listed stocks, for the tokens to trade with immediate settlement on blockchain.

      • Going further than tokenization of RWAs, Figure has developed a complete “native” blockchain ecosystem for the origination, servicing, trading and securitization of the loan assets all on blockchain.

        • The Figure platform is a step beyond the NYSE/Securitize platform insofar as the Figure platform, as a native platform, offers greater potential for cost savings, should the GSEs adopt a blockchain platform to transition its current ecosystem.

          • See my post Trump 47 Housing Finance Executive Order: Promote Digital Mortgage Standards. FHFA Director Pulte: I'm On It. for further discussion of how the GSEs could forecast to institutional investors the potential vast savings that could be achieved by transitioning the GSE ecosystem to a fully on blockchain ecosystem.

      • The GSEs have the opportunity to significantly reduce home ownership costs and increase home affordability, while increasing their profitability, by moving their mortgage origination/recording—>mortgage servicing—>mortgage securitization ecosystem onto DeFi blockchain platforms.

If Trump 47 is serious about improving housing affordability, Trump 47 should begin the implementation phase of a GSE recap/release.

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

This thesis purports to find support by pointing to the Trump 47 mandate to the GSEs to purchase some $200 billion of their MBS in an effort to lower interest rates.

This thesis is an absurd canard.

As I discussed in GSEs to Buy $200 Billion of MBS in Bid to Reduce Mortgage Interest Rates. This is Constructive for GSE Recap/Release, the GSEs will increase their operating earnings through interest rate arbitrage, by using short term borrowing (costing the GSEs less than 4%) to repurchase outstanding MBS (earning over 5%).

So this MBS repurchase transaction benefits both the GSEs (by increasing profits) and the secondary mortgage finance industry (by lowering interest rates).

Win/win. The GSEs don’t have to be in conservatorship for them to do a win/win.

As I discussed in that post, excessive MBS repurchasing may expose the GSEs to a liquidity risk. But given the authorized repurchase amount was limited to a total of $200 billion, based on the GSEs’ financial position, no real liquidity risk is presented.

But the larger reason why this conservatorship/control thesis is gibberish is that majority shareholders are always permitted to propose transactions that redound to the pro-rata benefit of all shareholders, even if the majority shareholder may also benefit from the transaction in some separate way that is specific to the majority shareholder.

Majority shareholders get into potential trouble when they propose transactions that benefit themselves or their affiliates while offering no tangible net benefit to the issuer or the minority shareholders.

The prototypical example where this issue is raised is when the majority shareholder proposes a transaction to take the issuer private, by “squeezing out” the minority shareholders. The majority shareholder gets the remaining stock in the issuer, and the minority shareholders get cash.

Even here, courts bless such transactions when the minority shareholders are represented by a special committee of independent directors and advisors, and the transaction proceeds paid to the minority shareholders passes a “fundamental fairness test”.

Assume the GSEs are released from conservatorship, Treasury owns 79.9% of the common stock and Treasury proposes an MBS repurchase transaction that it causes the GSEs to implement as majority shareholder.

Good for all GSE shareholders if done prudently, and also separately good for Treasury to lower national single family mortgage rates.

Will Treasury not be able to cause the GSEs to consummate this transaction post-conservatorship release?

Of course Treasury will have the authority to propose this same MBS repurchase transaction outside of GSE conservatorship as it does during conservatorship.

Then why is Trump 47 taking so long to release the GSEs from conservatorship?

Perhaps tariffs, the Iran war, and dealing with those nasty Democrats. For starters.

Also perhaps because the FHFA Director seems more interested in rooting out Democrat politician mortgage fraud than preparing the GSEs for conservatorship exit, such as by finding a permanent Fannie Mae CEO.

I don’t have the answer. I only know that Wall Street’s thesis ain’t it.1

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.

What does the Trump 47 EO mean by “promoting digital mortgage standards”.

Is it simply referring to establishing standards for existing GSE and GNMA TradFi mortgage practice conducted on a digital cloud-centric database? Such standards already exist in practice.

Or it is seeking to promote the DeFi “tokenization” of the TradFi mortgage “real world asset” (RWA). This means that the data regarding the existence and terms of the RWA mortgage would migrate from cloud-centric databases onto a public blockchain.1

This is a $10 trillion question. This could revolutionize the US housing finance industry with over $17 billion annual cost savings2 available to mortgaged homeowners. Leave it to the federal government to be so inexact with respect to something having so much at stake.

Not to fret, as FHFA Director is “on it”:

The Secretaries of Federal Housing Administration, Agriculture and Veterans Affairs administer housing insurance programs whose insured loans are sold to GNMA, to be pooled into GNMA guaranteed MBS (bearing the explicit full faith and credit of the US). There are approximately $2.6 trillion of outstanding GNMA guaranteed MBS.

The GSEs purchase conforming mortgages (mostly uninsured except low-income loans insured by private insurers) that are pooled into GSE guaranteed MBS. There are approximately $7 trillion of outstanding GSE guaranteed MBS (backstopped by an explicit federal line of credit and bearing an implicit federal guarantee).

If these “digital mortgage standards” are to be standards regarding the prospective DeFi transformation of the origination, servicing and pooling of mortgages into GSE and GNMA MBS (some $1.5 trillion principal amount issued annually by GNMA and the GSEs), then there is a smart way to do this.

The smart way is to have GNMA and the GSEs transition over time to a comprehensive DeFi business model where “digital mortgage” loans are originated on a blockchain, loan data is recorded on chain, loan servicing is largely automated on chain, securitization of mortgage loans into MBS is conducted on chain, interests in MBS are fractionalized on the chain to promote investment by retail investors (who are fleeing from Wall Street private credit investments currently, and would be well served by an investment opportunity in guaranteed MBS at an appropriate retail principal amount) and GNMA and the GSE MBS are traded (with immediate settlement) on chain?

By doing so, GNMA and the GSEs would have done to the $10 trillion US housing finance market what the Department of War is doing to the US military war-making capability: defy the usual expectation of technological incompetence by bureaucratic federal agencies and actually adopt cutting-edge private market technologies that create huge national benefits.

Figure estimates that by using its blockchain platform to provide complete life-cycle, end-to-end mortgage loan origination, servicing, trading and securitization, Figure can save 117 basis points (bps) compared to the conventional TradFi methods, such as are used by the GSEs and GNMA.

The 117 bps is a per-loan, one-time lifecycle cost reduction — meaning on a $300,000 HELOC, for example, you save approximately $3,510 over the life of that loan’s origination-through-securitization journey.

It would be a brave new mortgage finance world if GNMA and the GSEs achieve this measure of DeFi cost savings given their scales of their operation. If they don’t do it, DeFi companies like Figure will increasingly grow into this space, proving once again Bezos’ Law, that “your margin is my opportunity”.

While you are “on it”, Director Pulte, perhaps you might read my prior posts on the subject:

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As always, this substack provides investment analysis, not investment advice. Do your own due diligence.