rros

Two super interesting quotes (to me at least), "Moelis is an independent investment bank, and is currently engaged as a financial advisor to certain non-litigating preferred shareholders in the GSEs" (page 6) Seems to me to be more confirmation that non-litigating and litigating shareholders are in the same boat. "This also follows the same general approach laid out in the Moelis Blueprint and is consistent with GSE reform proposals put forward by other major market participants (e.g., the Mortgage Bankers Association)" (page 7) If MBA doesn't come out against this plan in the coming day or two (really tonight as when they do voice their opinion it's usually immediate), then they really must have compromised on what they were seeking. I'm not surprised. As you can see in my recent posts, the David Stevens mouthpiece (Paul Muolo of IMF) has been publishing very favorable quotes and stories the past few weeks. This has been much more frequent than at any point in the past few years. The non-litigating shareholder is, most likely, John Paulson. While we are all on the same boat, we may be in different cabins. Paulson might help the Jrs. achieve face value and dividend reinstatement, whereas litigating shareholders may help with a meaningful compensation for the alleged nationalization. Provided we prevail in court.

Basel III (GSIB) JPS effectively limited to 1.5% of RWAs (or ~$30bn) at minimum capital requirements Moelis and FHFA: No limitations re JPS included in core capital. (Page 16) Does this relate to your inquiry? Looks like 3 billion will have to go on Basel III? * Thank you for the links, Luke.

Lol

Hello fine folks! I've been lurking here for a while reading the many fine thoughts of the posters here. Thought I'd say hi and also add to rros' post above that Judge Stras is also on the Trump short-list for SCOTUS and he is one of the 3 judges in the Saxton 8th circuit court. Like many I have been following the court cases with rapt attention and hope that the rule of law prevails in the end. Best to all! Thank you! Maybe we get lucky and get 1 more dissent.

Midas, I agree with most of what you've written. But in my mind, it has become an impossibility to analyze the nws in terms of the statute. A logical impossibility. Because the nws does neither receive nor it conserves. Yet, the companies are functioning. So depending on which judge reads it, it does i) but not ii) or vice versa and any analysis becomes a moot point. What is not in the statute is what really happened: companies changed owners. On paper, we are. HERA says it (so it must be true). But when it comes to markets, Treasury is the owner. It owns their earnings and their net worth. Because nationalization is not in the statute, and really nowhere to be found within our borders, the government created the illusion of companies continuing to operate as private entities and this has confused judges all along. What aggravates issues even more is that Judges are trained to read the statutes. And this particular one says there is conservation and there is receiving. And there is shareholder's owned entities. And they stop there. That is their observable universe. Whatever is absent in the law, like a nationalization, does not exist. Thus, it becomes an unassailable, unreachable conclusion.

That's a darn good read. One reference was to McAllister vs RTC, found at http://www.ca5.uscourts.gov/opinions/pub/98/98-50471.CV0.wpd.pdf. The top of page 18 has the money quote. This was a prior 5th Circuit opinion. Isn't that binding on the court? Or did the Collins plaintiffs just bark up the wrong tree at the beginning? saw that Midas. this is the predecessor statute on which HERA was based, and it says: (D) Powers as conservator The Corporation may, as conservator, take such action as may be— (i) necessary to put the insured depository institution in a sound and solvent condition; and (ii) appropriate to carry on the business of the institution and preserve and conserve the assets and property of the institution. you will notice that the word "only" is not in the statute, although a fair reading of the statute would assume so. McAllister court inserts the word only into its opinion, per your page 18 quote. wonder why this case was central to Ps argument? Good catch, I hadn't noticed the court adding "only" in its interpretation. I just saw that the FIRREA and HERA wordings were essentially identical (only changing "corporation" to "agency" and "insured depository institution" to "regulated entity"). If the 5th Circuit interpreted the "may" as exclusionary in the past, i.e. that FHFA as conservator can't do anything other than those two things, why would they not be bound to continue doing so? Under that interpretation the NWS is clearly ultra vires since it does the opposite of both (i) and (ii). I'm just afraid that I have my wires crossed: the different cases and the arguments in them are mixing together in my mind, so I don't remember if the Collins plaintiffs tried to challenge the NWS on these grounds at all. I am not sure the nws does the opposite of ii). At least, not completely. That has been one of the winning arguments by Howard Cayne who said both Fannie and Freddie are operating just fine, carrying on their businesses and extrapolating that to a stable real estate market. Giving away their earnings and depleting their net worth is more akin to a nationalization than to not preserving/conserving their assets. Here, in ii), we may depend on Cooper's best effort to explain the unexplainable. Obama issue. I was thinking more in terms of letting courts -specially SCOTUS- decide whether or not the action taken by the Obama administration has been confiscatory. One thing is for Trump -always politically motivated- to say Obama is a communist. A very different one, with a more profound effect, would be for the supreme court to rule on it. But perhaps you are right. Trump may have become guilty "by continuation" eliminating the possibility of him taking our side on a nws defeat in court. In Saxton's oral argument Cooper made the point that Agencies are like a blank paper. And that Congress provides them with specific powers. Thus, the word "may" becomes exclusionary. As any power that hasn't been "may'ed", it does not exist. The 5th must have reasoned exactly this to have used the word "only" in Mcallister's.

Perhaps the outcome desired by some within the Trump circle is an unforgettable lesson of something that should never had happened and make sure it never will.

This may not directly relate to that... But what would be the fastest and surest way to nail the former Obama administration as the most communist, leftist and confiscatory administration to have ever governed the US? I bet Trump would love to hit Obama as the nationalizer-in-chief. Much, much more than getting the 100 bill from the warrants.

And I just found this... J. Willet was on Trump's Supreme Court list. Did not know but members here perhaps already did. https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-supreme-court-list/ And related... https://www.finregreform.com/single-post/2018/07/18/fifth-circuit-holds-fhfa-unconstitutionally-structured/

I guess my extremely limited legal knowledge doesn't let me understand your point. Being unconstitutionally structured was not enough in 5th circuit eyes to break the limit on the judicial review logjam. J. Sweeney has not yet hinted that she is ready to leap forward even when she allowed Cooper's foot in the door (discovery/depositions). If we can't cross that Rubicon, we will never be able to take over Rome. Illegal exaction or not.

This seems only for common stock class. I was wondering if the accumulation of judges dissenting (J. Brown and J. Willet, so far) creates either incentive or momentum for new lawsuits, backed by their opinions. In which case, anything positive coming from Saxton's might be useful.

I checked the 10Q from May. The word "conservatorship" appears 35 times in the document. The phrase "exit conservatorship" does not show up. It looks like you are correct. However, it is now known with some certainty that the most likely agents of change (Mnuchin, Jerome Powell, perhaps Mulvaney) are pointing at high levels of capital and a paid-for government guarantee. So, it may be prudent to start including this information.

Easy to speak up now that he is not with ICBA anymore. So, useless.

Watt is really pushing the limits of that 4617(f) clause... :P ON THE POWERS OF THE AGENCY Section 1.2 Special (super)Powers 1.2.1 "A Conservator or Receiver may not engage in acts of sexual abuse". Watt's reading: I may not. But I can!

watt: "...I am confident that the investigation currently in progress will confirm that I have not done anything contrary to law." but didn't the contract change the law? "I was just acting as a Receiver to receive a kiss", Mel said as his justification for his improper action. (jmu > just made up) Dance it alone, Mel!

AB also published a list of potential successors beyond Hensarling: Essent is owned by Paulson. Not Hank. Our Paulson. Bright had nothing to do with HERA. Calabria, instead, yes. And Calabria -who sided with shareholders- is also another FHFA candidate.

Thank you for the link!

It makes me wonder what brilliant Treasury staffer read that statute and said "wait, we could make a case that a four-corners reading allows a conservator to do anything!" Those names -and meetings- can be found in the depositions from Berkowitz' lawsuit. No smoking gun. But...

The two possible agents are A and B. The 3 possible actions are C, D and E. Courts have upheld this relationship to be true: A) can do E) Based on the use of the word "or" allowing for overlapping of functions. But to maintain the above relationship as true, all of the following relationships must also be true: 1. A) can do C) 2. A) can do D) 3. A) can do E) (government/courts position) 4. B) can do C) 5. B) can do D) 6. B) can do E) Since a Receiver can only liquidate -as explicitely stated in the special powers section-, relationship 5 is an impossibility. For the word "or" to be interpreted as allowing overlapping all elements of the sentence must be able to combine no matter where they are placed in the sentence, indistinctly. It is not grammatically possible for the word "or" to connect A)E) as true, while -being in the same sentence- connect B)D) as not true. Because of this, it is not possible for the word "or" to mean overlapping of functions. an example where a pure textualist reading is wrong. Cs don't wind up. why you need a reading of the context, purpose and structure of the statute to understand a sloppily written provision Exactly! Willet got that right.

And while we wait... a mind game for members. The phrase in question... FHFA may The two possible agents are A and B. The 3 possible actions are C, D and E. Courts have upheld this relationship to be true: A) can do E) Based on the use of the word "or" allowing for overlapping of functions. But to maintain the above relationship as true, all of the following relationships must also be true: 1. A) can do C) 2. A) can do D) 3. A) can do E) (government/courts position) 4. B) can do C) 5. B) can do D) 6. B) can do E) Since a Receiver can only liquidate -as explicitely stated in the special powers section-, relationship 5 is an impossibility. For the word "or" to be interpreted as allowing overlapping all elements of the sentence must be able to combine no matter where they are placed in the sentence, indistinctly. It is not grammatically possible for the word "or" to connect A)E) as true, while -being in the same sentence- connect B)D) as not true. Because of this, it is not possible for the word "or" to mean overlapping of functions. Note: *specific powers* § 4617(b)(2)(E), (F) enumerates powers reserved to the FHFA as receiver—which include liquidating the GSE and organizing a “successor enterprise” to operate the GSE.

I have never considered that angle but I now see the greater value of -perhaps- a small compensation. Provided we ever win.

Locus, yes, I remember you brought up nationalization... my question to you: say, Congress comes up with a NWS bill that does what the nws does but also offers remedy/compensation to the injured, would you as an American be fine with this because it complies with the takings clause of the 5th? While compensation may remedy a taking, should a taking have its scope enlarged so much as to validate nationalization? Or should a taking be only an exceptional measure, narrow in its scope, so as to validate property rights? Here, the government has carefully extracted the inside of an egg for itself leaving the outter shell intact and eggshell is what is left (for us). The difference between a takings and a nationalization lies in the magnitude of the action and the size of the damage inflicted. While in a taking the remedy may simply be the $2 the preferreds were valued at, at the time of the nws, a full nationalization removes the whole property and any upside from you forever. Future value is gone and the Judge in Saxton who asked several times "what about future value?" understood the damage has been enormous. Not takings size, but nationalization size. Please note, Treasury used the words "all future earnings" and "sweeping going forward". And while the Treasury lady can say the conservatorship is indefinite (no timing), the structure of the nws (not the original PSPAs) has made the conservatorship eternal (timing expressed as forever). The nws not only altered compensation, it altered time from "some day" to "never". From possibly retaining earnings one day to never be allowed to do so. FHFA was not a receiver but neither it was a conservator. It acted as a nationalizer disguised as conserving. Judges trying to understand FHFA's actions in terms of the law equates to trying to fit a round peg in a square hole. Which may magically lead to concluding FHFA did something it was not allowed to. And a question to the board (and I am humbled by the great minds here reading). Did Cayne get this one wrong? He said Firrea did not even apply to Cedarminn. However, the history is this: Why does he disregard FIRREA? It's been in effect for more than 1 year when the lawsuit hit.

It is not in our best interest for any lawsuit to try to have HERA struck down. Cayne mentioned the mandate of 'protecting taxpayers' from the law itself. But down that same list at the bottom of that section of the law there's the 'companies must remain shareholders owned'. HERA protects us. The way courts are getting around your #1 is by Cayne convincing judges the companies are operational, therefore going concern. So the conservator *must be conserving*. And since markets are functioning fine this reinforces the notion of conserving. The conclusion of 'nothing to see here' helps courts get to the promised land: "Conservator authority has not been exceeded so we are barred from review" . The going concern issue can fool the untrained eye. What courts don't see is that the trick used to keep the companies as going concern has been nationalization. Just when both were about to achieve that same status on their own. Replacing own capital for government capital is key to understanding where the confusion lies. Nowhere the word nationalization shows up because HERA mandates the GSEs to remain private and because nowhere any law says a conservator is allowed to nationalize a company. The government is getting away with this because it has left the shares intact and can always go back to the reasoning the Treasury lady offered: that the shares continue to trade and may have residual value, thus no nationalization. Or, more correctly, no expropriation. Growing up in a country where everything has been nationalized by Peron I am more than familiar with how this works. Unfortunately, living in America, citizens cannot recognize what they have never seen before and remain confused. Ted Olson got it right when he told the judges on Perry's appeal: the government is running an empty shell. That's what we have. Treasury knows it and is doing an outstanding job in fooling the judges. Nationalization in our saga is the most important invisible actor. Nobody can see it. It is a threat to nobody. Except to us who have suffered its devastating consequences. It seems to me all 3 judges of the Saxton appeal panel are sensing that something is not right.

After hearing Saxton for a second time I am less enthusiastic. Still optimistic but I now think Judge Kelly had a hard time accepting any notion of ultra vires and it is hard to assess whether Cooper's antithetical argument made any impact. Although she seems to think the conservatorship did not attain its mission. It was not brought up in court but DeMarco actually went against Geithner when DeMarco raised the guarantee fees. This weakens any notion of direction. Nationalization seems indisputable from any angle. And I do not know enough about the legal implications of the Cedarminn ruling. Not sure where this leaves us but at least two judges appeared sympathetic.

We all had high hopes back then. Wayne took a plane to see this in person. We got a few below the belt since. Dementia, not nice. Perhaps, that explains it.