Luke 532

Another one posted by Rule of Law Guy. This one from this morning... http://seekingalpha.com/article/3759176-why-hindes-jacobs-plaintiffs-will-prevail-in-the-fannie-mae-and-freddie-mac-delaware-litigation-part-ii

Forbes article this morning by Epstein... Fannie and Freddie in the Dock Will Shareholders Find Relief Under State or Federal Law? http://www.forbes.com/sites/richardepstein/2015/12/16/fannie-and-freddie-in-the-dock-will-shareholders-find-relief-under-state-or-federal-law/?utm_campaign=yahootix&partner=yahootix

https://davidhstevensblog.wordpress.com/2015/12/15/reform-before-recapitalization/ Reform Before Recapitalization Posted on December 15, 2015 by DavidHStevens In response to last week’s New York Times article on the GSEs, a number of housing finance experts have come forward to point out the many problems with the Times’ false narrative. The Times column and other similar pieces contain a number of inaccuracies, regarding both the history and the future of the GSEs. We speculate this narrative is being driven by those who stand to gain windfall profits from recapitalizing and releasing Fannie and Freddie from conservatorship. A recent Wall Street Journal editorial sheds light on possible motives behind the false narrative: “The hedge funds claim they are committed to a long-term fight to see the companies recapitalized and set free, and have filed lawsuits to that effect. But they undoubtedly have also earned millions from the gyrations in Fannie and Freddie’s thinly traded shares as the penny-stock enthusiasts pile in.” The Wall Street Journal editorial is a must-read. MBA has long advocated for thoughtful GSE reform that will truly protect taxpayers and benefit small lenders and consumers. Simply put – recap and release without reform could re-open the door once again to preferred pricing and special deals for the largest lenders and leave the smallest lenders with a competitive disadvantage. So, let’s first focus on the reforms that will keep the playing field level before addressing the needs of the investors. The New York Times published a subsequent op-ed this week from Mark Zandi and Jim Parrott further detailing the need to first engage in fundamental reform to prevent repeating mistakes of the past. Effective GSE reform that protects taxpayers and the stability of the financial system would require several changes from the current state of GSE conservatorship. First, reduce the risk to the taxpayer by having the explicit guarantee back only the mortgage securities and not corporate entities. Second, encourage private capital in the secondary mortgage market which would take up front, first loss, risk in transactions, but demand that this be accessible to lenders regardless of size and transparent to all participants in the market. To ensure a robust supply of affordable rental housing, maintain the GSEs’ multifamily programs. Finally, the industry and consumer advocates should work together to develop clear policies regarding how the GSEs should meet affordable housing needs in a more efficient manner. A rush to recap and release the GSEs without any meaningful reform does nothing to improve the stability of the housing finance system.

^^^ link: http://assets.pershingsquareholdings.com/2014/09/Pershing-Square-Holdings-Ltd.-Q3-Investor-Letter1.pdf

This might prove to be interesting. Tuesday the 22nd. "Duty to Serve" webinar by FHFA. https://www.eventbrite.com/e/fhfa-duty-to-serve-webinar-tickets-19731809373

Another Fairholme e-mail sent earlier this evening... Dear Shareholder, We encourage you to read the following articles, which were published in the last week in the New York Times. “Fannie and Freddie’s Government Rescue Has Come With Claws” By Gretchen Morgenson The New York Times December 12, 2015 http://www.nytimes.com/2015/12/13/business/fannie-and-freddies-government-rescue-has-come-with-claws.html “A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie” By Gretchen Morgenson The New York Times December 7, 2015 http://www.nytimes.com/2015/12/07/business/a-revolving-door-helps-big-banks-quiet-campaign-to-muscle-out-fannie-and-freddie.html Kind regards, Investor Relations Fairholme Funds, Inc. 4400 Biscayne Blvd. 9th Floor Miami, FL 33137

Whitney Tilson long Fannie. I'm not a fan of his, but here it is: http://www.valuewalk.com/2015/12/tilson-fannie-the-big-short/

My favorite part of this article: Joseph “Woody” Woodruff is a longtime Fannie Mae shareholder who was elected to the state circuit court in Tennessee last year after practicing law for decades. “The federal government entered into a legal arrangement with the G.S.E.s that contained certain undertakings and fiduciary obligations,” Mr. Woodruff said, stressing that he was speaking as an investor, not as a judge. “Then it unilaterally rewrote the terms of the relationship and began in a very lawless manner sweeping the profits and transferring them to the Treasury,” he added. “What’s up with that?”

Another article by Pulitzer Prize winner Gretchen Morgenson... her 2nd piece this week! Fannie and Freddie’s Government Rescue Has Come With Claws http://mobile.nytimes.com/2015/12/13/business/fannie-and-freddies-government-rescue-has-come-with-claws.html?referer=https://www.google.com&_r=0

Do any of the attorneys in the room care to comment on this filing? Or is it irrelevant?

Todd Sullivan's take on it: http://www.valueplays.net/2015/12/10/what-happened-to-greg-schwind/ Page 2, Footnote 4: "In this regard, we also note that Gregg M. Schwind, one of the Government’s primary attorneys in this case, left the Department of Justice on July 10, 1015." http://www.valueplays.net/wp-content/uploads/Government-filing.pdf See Exhibit 4 of the attached document. It is a letter written by Schwind dated the very same day of his departure (July 10, 2015): "Please be advised that the Government inadvertently provided plaintiffs several documents it considers privileged." An awfully big coincidence that Schwind left the same day that it was disclosed to the courts that he had inadvertently provided documents to the Plaintiffs.

Page 2, Footnote 4: "In this regard, we also note that Gregg M. Schwind, one of the Government’s primary attorneys in this case, left the Department of Justice on July 10, 1015." http://www.valueplays.net/wp-content/uploads/Government-filing.pdf See Exhibit 4 of the attached document. It is a letter written by Schwind dated the very same day of his departure (July 10, 2015): "Please be advised that the Government inadvertently provided plaintiffs several documents it considers privileged." An awfully big coincidence that Schwind left the same day that it was disclosed to the courts that he had inadvertently provided documents to the Plaintiffs. Schwind_12-7-2015.pdf

August 21, 2015: http://gselinks.com/Court_Filings/Fairholme/13-465-0233.pdf "...defendant, the United States, respectfully requests that Jennifer O’Connor, James Walsh, and Allison Murphy be permitted access to information protected by the Protective Order. All of the applicants are attorneys representing the United States within the meaning of Paragraph 4 of the Protective Order, and work in the Office of the White House Counsel." December 8, 2015: http://gselinks.com/Court_Filings/Fairholme/13-465-0274.pdf "These three attorneys will replace Jennifer O’Connor and Allison Murphy, who were previously granted access but have left the office."

New filing in the Delaware case: http://gselinks.com/Court_Filings/Jacobs_Hindes/15-00708-0022.pdf

I wouldn't be surprised if we're released tomorrow (remember, we don't need Congress to be released) or this drags on all the way to the Supreme Court. It's best to assume the longest time frame but I don't expect the longest time frame. I still believe a release/recap/settlement is the most likely (perhaps sometime after the budget deal is signed and/or Sweeney denies motion to dismiss on jurisdiction).

This is excellent... AAMA Adopts Resolution to Promote Homeownership http://ourmayors.org/news/aama-adopts-resolution-to-promote-homeownership/ Excerpts (emphasis mine): "WHEREAS, the conservatorship and the third amendment hinder the GSEs from rebuilding any capital and from providing the liquidity and access to the secondary mortgage market that they have historically offered; and" "NOW THEREFORE, IT IS HEREBY RESOLVED, the Corporation calls on the Federal Housing Finance Agency and the Obama Administration to take the necessary actions to release Fannie Mae and Freddie Mac from conservatorship and allow them to rebuild their capital reserves;" "BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials as appropriate."

Patience, gentlemen. No more than Mr. Market being Mr. Market.

Catches my attention when someone like Christian Herzeca says the following (attached)... Herzeca_Tweet_12-7-2015.docx

Watt Tells Congress Conservatorship “Not Sustainable” http://investorsunite.org/watt-says-tells-congress-conservatorship-not-sustainable/

Fairholme e-mail earlier this evening... Dear Shareholder, An article by Gretchen Morgenson published on the front page of the New York Times on Monday, December 7, 2015, sheds light on a surreptitious campaign spearheaded by the “Too Big To Fail” banks to assume control over the mortgage market and usurp the assets of Fannie Mae and Freddie Mac. During the 2008 financial crisis, Fannie and Freddie helped save America’s home mortgage system and resuscitated our national economy by continuing to provide liquidity when credit markets froze. In the process, the big banks, lobbying groups, and individuals exposed in Ms. Morgenson’s article seized the opportunity to falsely blame Fannie and Freddie for the misdeeds of others. Record legal settlements – exceeding $18 billion to date – paid to Fannie and Freddie validate the wrongdoing by those big banks. For years, competitors and adversaries of Fannie and Freddie have conducted an unprecedented disinformation campaign, largely carried out through the mainstream media, in which they disseminated deliberately inaccurate information mischaracterizing Fannie and Freddie’s insurance businesses, exaggerating their risks, and understating their benefits. These pervasive false narratives have been particularly effective given that Fannie and Freddie were forced into conservatorship in 2008 and forbidden to speak for themselves. We wrote in an earlier letter to shareholders that, “…some in government apparently want their friends in the mortgage-industrial complex to take for free what you, the shareholders of these companies, paid for with cash.” Based on the investigation by the New York Times additional evidence has emerged about the small cabal of government officials who have deliberately debilitated Fannie and Freddie in order to benefit the Too Big To Fail banks. We encourage you to read more at: http://www.nytimes.com/2015/12/07/business/a-revolving-door-helps-big-banks-quiet-campaign-to-muscle-out-fannie-and-freddie.html Kind regards, Fairholme Fairholme Funds, Inc. 4400 Biscayne Blvd. 9th Floor Miami, FL 33137

Fortune magazine a week ago, NY Times yesterday, USA Today this afternoon,...

USA Today is picking up the story... http://www.usatoday.com/story/money/columnist/2015/12/08/delamaide-fannie-freddie/76989140/ WASHINGTON — Congressional gridlock has its uses and one of them is that the government-backed mortgage providers Fannie Mae and Freddie Mac have been able to keep providing mortgages. The hybrid public-private institutions, which function as mortgage insurers, were taken into government conservatorship in the midst of the financial crisis as losses on mortgages quickly overwhelmed their inadequate capital base. They have since languished comfortably in government care, given that a polarized Congress cannot agree on anything, let alone an issue as vexed as the government role in housing finance. While the U.S. housing finance system is routinely described as "broken," it is really anything but that, as people continue to buy and sell homes briskly with most mortgages taken up by Fannie and Freddie. The system may be limping a little, but that is due more to banks being more risk averse as they work off all the bad loans from the housing bubble and enjoy the benefit of the Federal Reserve's easy money policy, which makes even low-risk loans profitable. In the meantime, Fannie and Freddie have fully repaid the nearly $200 billion in federal aid they received during the crisis, and have transferred another $50 billion-plus in profit to the Treasury Department. However, the future of Fannie and Freddie is a piece of unfinished business for the Obama administration. The issue came under the spotlight this week as a New York Times investigative piece focused on the banking industry's efforts to snatch the lucrative lending for themselves so that they, instead of the government, reap the handsome profits from government-insured mortgages. The long piece by Pulitzer Prize-winning reporter Gretchen Morgenson describes a revolving door between industry and government that has enabled a number of individuals to influence policy in Congress and the White House in favor of handing this prize to the banks. The irony of plans to wind down Fannie and Freddie and replace them with a government-backed insurance scheme that would make the banks the main provider of mortgages is that it would reward the very culprits whose reckless behavior in housing finance brought on the crisis in the first place. There is no question that Fannie and Freddie had spun out of control prior to the crisis, with bloated executive salaries, lax regulation, a lobbying budget that functioned as a slush fund, and empire-building that took them well beyond their mission of guaranteeing affordable housing finance. But the flaws in these two institutions pale when compared with the speculative frenzy that drove banks to expand the subprime loan market, including the infamous liar loans, and then package them into deceptive mortgage-backed securities they unloaded on unsuspecting investors around the world. The simplest solution to the problem would seem to be reining in Fannie and Freddie with tougher oversight and stricter rules to keep them to their original purpose. This essentially is what has happened in the intervening years. The debate now is whether to get them out of government conservatorship by recapitalizing them and letting them go about their business, or wind them down and funnel the government-insured mortgages through the banks. The argument against just leaving them as they are — essentially nationalized mortgage insurance providers — is that taxpayers would be "on the hook" once again if there were a new housing bust. The reality is that taxpayers will always be on the hook when the prospect of millions of foreclosures forces the government to intervene, no matter how the market is structured. The difference is that under the plan favored by the industry and by the influence-peddlers in Washington it is the banks, not the Treasury Department, would reap the profits in good times, and taxpayers would pick up the tab when things go south. This is exactly the type of scenario all the financial reforms in the wake of the crisis are seeking to avoid. Perversely, it would seem to reinforce the very "too-big-to-fail" phenomenon the Dodd-Frank Act was designed to eliminate. The banks' main motive for making a grab for this business is greed, but there is an ideological twist to it as well. Fannie Mae and Freddie Mac are government-sponsored enterprises, an oxymoron for right-wing ideologues. Their official names are the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation — a sure sign of government overreach in their point of view. The original 2013 bill to wind down Fannie and Freddie and transfer the business to the banks was "bipartisan" in the sense that it was co-sponsored by a Republican, Sen. Bob Corker of Tennessee, and a "moderate" Democrat, Sen. Mark Warner of Virginia, a former businessman who would have been a Rockefeller Republican in another era. It died in committee. Fannie Mae was created in 1938 in response to the Great Depression, brought on in great part by widespread abuses at the banks of that era. Freddie Mac was added in 1970 to expand the secondary market for mortgage-backed securities, further improving liquidity in housing finance. Ideology aside, they served American homeowners well for decades until new abuses in the financial industry brought another financial crisis. There would seem to be little incentive — except for the incessant lobbying by the banking industry — for throwing out this system in favor of an untried, jury-rigged system that favors the very institutions that have twice plunged the country into severe economic downturns. So maybe Congressional gridlock leaving Fannie and Freddie in a legislative limbo is not such a bad thing.

Merkhet, thank you for adding those!

Bethany McLean tweet... Bethany McLean ‏@bethanymac12 #FannieGate New doc in the Fairholme case seems to say the gov't was expecting what the lawyers call "windfall profits" w/ 3rd amendment.

Interesting screenshots of court documents filed today (attached)... FNMAS_Swanson_12-7-2015_Tweets.docx