Berkowitz zu Bank of America und Fannie & Freddie

Die Fairholme Funds mit Manager Bruce Berkowitz haben ihren Geschäftsbericht 2014 veröffentlicht. Berkowitz bespricht darin kurz seine Investments. Da ich sowohl auf Bank of America als auch auf Fannie Mae und Freddie Mac durch genau diesen Fonds aufmerksam geworden bin, möchte ich Berkowitz‘ Statements hier posten. Die Investmentthesen sind, erwartungsgemäß, immer noch dieselben wie anfangs.

Bank of America 

„Bank of America (22.3%) has executed its business plan admirably to date. By refocusing on core customer relationships across multiple platforms (i.e., checking, credit card, mortgage, and small business), the company is positioning itself for long-term profitability. Effective cross-fertilization of these services will make parallels with best-in-class Wells Fargo more pronounced, and help Bank of America’s still depressed market price to at least reach book value, reflecting the higher values of existing business. The company recently surpassed its 2011 cost-cutting goal of $8 billion per annum, ahead of schedule. Litigation expenses – a major weight on the company in recent years – have largely dissipated. Heeding lessons learned from the financial crisis, the company prudently disposed of a profitable (at the time) wholesale mortgage business. Intermediaries might seem like ideal clients, but history shows that they are more adversary than friend. Investors should not be surprised to see Bank of America continue to shrink no-longer-core activities. However, the company’s balance sheet is poised for a growing business economy and a rising interest rate environment, with every increase of 100 basis points potentially boosting revenue by $3.7 billion. Sometimes you must take two steps back in order to go ten steps forward.“

Fairholme Funds 2014

Ich bin derselben Meinung.

Fannie Mae und Freddie Mac 

2013 habe ich mich schon einmal mit Fannie Mae und Freddie Mac beschäftigt (hier und hier), die Aktien aber nie gekauft, bzw. erst jetzt. Kurzzusammenfassung: 

Fannie und Freddie haben im Zuge der Krise Staatshilfe erhalten – und zwar in Form von Senior Preferred Capital, das mit 10% verzinst werden sollte. Gleichzeitig wurden die beiden unter Conservatorship gestellt und die FHFA hat die Kontrolle über die beiden Institute übernommen. 2012 hat die Obama-Administration (einseitig, da sie durch die Conservatorship ja die Kontrolle hat) beschlossen die beiden Institute abzuwickeln/aufzulösen, und für die Erledigung ihrer Aufgabe (den Hypothekenmarkt liquide zu halten) neue Institute zu gründen, die mit privatem Kapital finanziert werden sollen. Außerdem wurde ein ‚Net Worth Sweep‚ in Kraft gesetzt, wodurch sämtliche Gewinne von Fannie und Freddie in Form einer Dividende an die Senior Preferreds gehen - also an den Staat. D.h. es ist den beiden nicht möglich, Kapital aufzubauen, oder die Senior Preferreds zurückzuzahlen. Da für diesen Sweep kein Ende vorgesehen ist, kommt dies einer Enteignung gleich. 

Ein paar Punkte, warum das so nicht durchgehen wird:

• Die Enteignung verstößt gegen Gesetze (gar Verfassung?). An diese muss sich auch die US-Regierung halten. Gerichtsverfahren laufen
• Die neuen Institute können nicht viel anderes machen, als das, was Fannie und Freddie gemacht haben. Sie sollen das nur ohne Staatsgarantie machen
• Die Staatsgarantie kann man auch Fannie und Freddie entziehen, diese zu ersetzen macht also keinen Sinn
• Warum sollte privates Kapital diese neuen Institute finanzieren wenn man Angst haben muss, wie Fannie und Freddie Aktionäre, enteignet zu werden?
• Wenn es nur um das Brechen des Duopols geht: Private in den Markt zu lassen, sollte kein großes Problem sein - zumindest wenn man keine Angst vor Enteignungen haben muss
• Einige andere Gründe, wie die (unten) von Fairholme erläuterten

Der Punkt, warum es doch durchgehen wird: Der Präsident will es so. Ökonomisch fundierte Begründungen habe ich noch keine gehört, aber das hat Politiker ja noch nie gestört…

Fannie bleibt eine Alles-oder-Nichts-Wette, weswegen ich auch nicht nachkaufen werde. Bleibt es bei der Abwicklung, sind die Aktien wertlos. Ansonsten ist auch eine Verzehnfachung oder mehr nicht unwahrscheinlich.

“When we initiated the Fund’s investments in Fannie Mae (4.5%) and Freddie Mac (3.5%), conventional wisdom was that the companies would be liquidated. We disagreed. Our investment was predicated on a simple thesis: there are no substitutes. Fannie and Freddie provide services that are absolutely essential to the American way of life. They help make the popular 30-year fixed-rate mortgage available and affordable. They provide liquidity and stability to the nation’s housing finance system – during good and, especially, in bad times. No one does it better.

Time is proving our thesis true. Fannie and Freddie have already benefited from post-crisis reform and are returning to simpler, safer business models. Under a range of scenarios, the companies are collectively expected to earn at least $21 billion per year. The United States Treasury has already recouped $36 billion more than it disbursed to Fannie and Freddie during the crisis, rendering this our nation’s most successful equity investment ever. In fact, Treasury’s current profit from Fannie and Freddie is almost three times more than it made from all of its other financial rescue programs combined. These figures do not even account for Treasury’s warrants to acquire 79.9% of each company’s common stock.

Today, Washington bureaucrats are unlawfully holding these profitable companies captive in a perpetual conservatorship. Congress never authorized Treasury to become Fannie and Freddie’s “overlord” – forcing the companies to spend all their capital on executive branch prerogatives and circumventing the legislature’s appropriations process. Indeed, the power of the purse remains vested in Congress under the Constitution. The Housing and Economic Recovery Act of 2008 does not authorize any federal agency to use these two publicly traded, shareholder-owned companies as a piggy bank. Yet, in an unprecedented abuse of executive power, the bureaucrats have illegally expropriated and de facto nationalized two of the most valuable companies in the world with apparent impunity. Worse still, their actions are now endangering our housing market, making it more difficult for lower- and middle-income Americans to access mortgage credit.

By preventing Fannie and Freddie from accumulating any cushion against potential future losses, Treasury is obstructing the ability of the Federal Housing Finance Agency (“FHFA”) to perform its duties as safety and soundness regulator of both companies. Treasury’s actions are also directly impeding the statutory obligations of the FHFA, as conservator, to “preserve and conserve [their] assets and property.” Even Fannie and Freddie’s political foes admit that this situation is untenable.

Given the dim prospects for comprehensive housing finance reform legislation in the foreseeable future, we believe that FHFA will ultimately heed the pragmatic advice offered by Senate Banking Chairman Tim Johnson on November 19 at a congressional hearing and “engage the Treasury Department in talks to end the conservatorship.” Johnson is not alone in his call for such action.

The Leadership Conference on Civil and Human Rights recently voiced concerns about the housing market’s growing inequities: “Any successful policy to promote affordable homeownership must involve strong leadership by Fannie Mae and Freddie Mac… eliminat[ing] the GSEs would be counterproductive; it would negatively impact communities of color and young people, and it would impede our ability to grow our nation’s middle class… in order to ensure the best path forward to increasing homeownership in the communities we represent, we believe it is vital to initiate serious discussions about unwinding the conservatorship and allowing Fannie and Freddie to begin rebuilding their capital… Fannie and Freddie can be fixed; discarding them in entirety would be a colossal mistake.”

In the interim, the Fund continues to pursue litigation against FHFA and Treasury to defend its rights as an owner of the companies. To date, the Fund’s lawyers have received approximately 387,000 pages of documents – most of which have come from Fannie Mae, Freddie Mac, and their respective auditors. Not only has the government insisted on shrouding all documents in a veil of secrecy known as a “protective order,” but FHFA and Treasury have further shielded responsive documents from disclosure by broadly asserting executive privilege. One example from the recently released Privilege Log is indicative: 

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The document cited above is a news summary containing public information prepared by a third-party aggregator after the Net Worth Sweep was announced in August 2012 that is being withheld from discovery due to “Presidential Privilege.” Why are FHFA and, particularly, Treasury resisting discovery so fiercely? Is it because the document trail directly implicates some of the President’s most senior advisors in the White House (as cited below)?

Anklicken zum Vergrößern

Anklicken zum Vergrößern

FHFA and Treasury have argued that courts have no jurisdiction to review their administrative actions in this matter. However, recent comments by several Supreme Court justices in Mach Mining v. EEOC challenge the government’s similar attempt to evade judicial scrutiny in a separate case. The government’s claim – “We think this is a matter that is entrusted to the agency that is not for court review” – was met with skepticism by the highest court in the land. Chief Justice Roberts swiftly responded: “Trust you? Just trust you? I am very troubled by the idea that the government can do something and we can’t even look at whether they’ve complied with the law.” Justice Scalia echoed those concerns, noting how he found it “extraordinary” that the government wanted to be exempted from litigation. Justice Breyer weighed in: “In my mind, of course, there should be judicial review.” Sunlight is indeed the best disinfectant.

More than just patience, this investment requires persistence. Every major financial institution relied upon federal government assistance during the 2008 crisis. Each institution repaid the Treasury in full, plus interest. The same is true of Fannie and Freddie, yet only they remain under the day-to-day control of a federal agency. Government cannot pick private market winners and losers. We forge ahead with the facts squarely on our side, and the assurance that no one is above the law.”

Fairholme Funds 2014