Steve_Berk

Just reading over these posts again. I believe that the court is just being extremely thorough. Although there are plenty of activist judges, it could be that these judges (or at least one of them) want to do everything they can exercise judicial restraint, which means that they want to limit the exercise of their own power and will only rule on what they need to rule upon. Clearly there are very complex issues that need to be decided if they take jurisdiction--I think they want to be absolutely sure that it's necessary. Because of this distinct possibility, I don't think you can see the order as a positive sign (also can't see it as a negative one either). Don't forget that this is the same court that unilaterally brought up s 4623 and asked for supplemental briefing even though neither side had raised the issue. Unclear. They could just be more thorough than Lamberth. My best guess is that they think the common law claim has merit, but they're uncertain about the jurisdictional aspects. if you recall fhfa put all of its money on the claim that the Ps gave up all of their shareholder rights under HERA. didnt argue that Ps couldnt sue fhfa, as the govt, as a matter of subject matter jurisdiction (meaning authorization to sue under statutory or constitutional law). so this indicates to me that the court is being very careful and covering all bases under which govt could win, if the arguments are available to them. this argument simply wasnt availed by fhfa because the no shareholder rights might permit fhfa to win in fed ct, and we're not the govt might permit them to win in court of claims

If I had to guess, I would agree with this. I'm not inclined to buy Carney's explanation, but also not confident that I know what it means. Also, I think it's a mistake for someone to conclude that it means that the judges are all on the same page. This could easily have been done at the direction of one judge who is not in agreement with the other two.

I agree that it's a bad idea, but it's not terribly uncommon. And in the vast majority of cases, shouldn't result in anything to upset the proceedings, so I'm not too worried about it. But I do think that the better course of action is publish articles, which isn't terribly hard to do these days.

This is a really good way to put it. What I'm trying to figure out is if he reads the statute the way we think it should be read, in what scenario could the motivation of the conservator bring them into compliance with the statute (he seemed to indicate that the record could show some permissible intent)? The statute doesn't say 'make a good faith effort' .... The way I see it, motivation of the conservator can serve as evidence that their actions which appear completely contrary to the statute were indeed executed for reasons that were also contrary to the statute. But to me, that doesn't mean that if they had the best of intentions that their actions that were prohibited by the statute would be ok.

This is one of the best summaries of the problems inherent in the questions asked during the Perry oral arguments: http://www.fidererongses.com/params/post/885629/oral-arguments-in-perry-capital-v-us-devolved-into-nonsense I really hope that the judges have done more homework since oral arguments

well this is one case where I think you'll have a strong indication of what the outcome will be based on what you hear during the oral arguments. Get ready folks--this one's gonna be very interesting.... i would agree with you. however, what i think it really means is that he had already done his research (or read his clerk's) and did not see that it would take long to write opinion. but yes, if i had to guess, i would say he would deny MTD. after all, i have a bias...:>)

The papers address the 10-Q issue I raised a couple of days ago. They say that the 10-Q is consistent with McFarlane's conservative projections and that at most would have required a small draw to pay the Treasury. And that even the 10-Q is inconsistent with the death spiral narrative that the gov't adopted to support the NWS and that the small draws that may have been required would not have triggered a tailspin, not to mention the fact that there would have been an option to go for a payment in kind option instead of cash payments. I don't think that this completely defeats the 10-Q issue, however. The defendant will still say that if the GSE's believed that the profits earned by the GSE's would not approach the 10% owed to the Treasury given the dividend owed, that they would still be helping the GSE's by sweeping profits, and preventing a draw. But I think the way to really look at this from the plaintiff's perspective is that even if the 10-Q provides a theoretical legitimate purpose that still doesn't overcome the actual evidence of an impermissible motive, which the emails clearly lay out. I will be very annoyed if the judges continue harping on the 10-Q in light of the evidence that has emerged. It's extremely common for SEC filings to contain extremely conservative forward looking statements--companies are trying to cover themselves to avoid any allegations that they are misleading investors or setting benchmarks that they can't hit. For a court to take a line from such a filing and use it to overlook clear evidence of acting on an impermissible purpose would be beyond disappointing.

more attack articles from the WSJ: http://www.wsj.com/articles/fannie-freddie-and-an-outbreak-of-amnesia-1464131687 Interesting to me to see how they approach this. I think this article says it all--they just don't like the GSE's, which is why they are less critical of what the gov't did bringing it into conservatorship and sweeping profits

i am far more optimistic now than i was right after oral arguments. I now see a plausible path for reversal, but still believe that the most likely result of the perry case is remand. I no longer think that affirmance is more likely than reversal though. And I think there's enough out there that even Millet might be thinking twice about affirming. Many of the points she was raising during oral arguments seemed to have this implicit sense of trust that the conservator/treasury was just trying their best to make the right decision for the entities and country, which goes along with the deference that a judge is supposed to give under the APA. But I have to believe, given her willingness to explore questions about motivation of the conservator, that documents revealing that the government straight out lied, will have a real impact and that she may be offended by the disingenuous nature of the death spiral explanation. If I had to guess, I still think she'll affirm, but at this point, I'm not sure about that.

i actually think the manifest conflict of interest argument is a good one. there's good case law in the 9th circuit that addresses this point directly and helpfully. Although it hasn't been adopted in the DC circuit, it hasn't been rejected. Defendants basically had to say that case was decided wrong. But it really doesn't make any sense not to recognize that conflict of interest in my view. The argument goes that you can't expect the conservator to act on behalf of the interest of the shareholders if the decision that you're asking them to make is whether they should sue themselves. here, it's especially true where the Treasury and conservator are one and the same and acting in concert millett seemed very skeptical of this conflict of interest argument in the oral hearings. hopefully she'll read the latest unsealed docs. whats the process for getting these docs into the hands of the panel judges?

so how does the argument play out on 4167 (a)(7)? that the conservator was not acting independently, as required by HERA, so therefore any acts it performed under 4167 (a)(7) that were unduly influenced by a federal agency (the Treasury) are invalid? that's a pretty strong argument 1. evidence that fhfa was subject to direction of another agency hera section 4617(a)(7) "When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency." 2. evidence that treasury induced fhfa to breach fiduciary duty to common and breach contract claims to preferred.

Just wanted to raise this again to make sure that I'm not missing something. if the Treasury was indeed in control during the enactment of the NWS, that certainly helps to establish a conflict of interest and possible application of the exception to give shareholders the right to sue. But besides adding to the overall narrative that the government was self-dealing, is there statutory relief that flows from this conflict? Is the Treasury's involvement and the FHFA's lack of independence itself a cause of action and violation of HERA? I need to read over HERA to see how it works, but not sure that this has been really addressed.

I found the 10-Q. It's interesting because it definitely talks about how things were turning around and more positive (certainly contrary to the death spiral narrative). However, this is the portion that Ginsburg threw at Olson and Olson was not able to answer, http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2012/q22012.pdf (p12): Uncertainty Regarding our Future Status and Ability to Pay Dividends to Treasury. There is significant uncertainty in the current market environment, and any changes in the trends in macroeconomic factors that we currently anticipate, such as home prices and unemployment, may cause our future credit-related expenses or income and credit losses to vary significantly from our current expectations. The dividend payments we make on Treasury’s senior preferred stock are substantial, currently $11.7 billion per year. We have paid over $25 billion in dividends to Treasury since entering into conservatorship in 2008. Although we may experience period-to-period volatility in earnings and comprehensive income, we do not expect to generate net income or comprehensive income in excess of our annual dividend obligation to Treasury over the long term. However, we expect that in some future quarters we will be able to generate comprehensive income sufficient to cover at least a portion of our quarterly dividend payment to Treasury. Sucks. Would have been a good Q.

i tried to ask a question but unfortunately they didn't get to me. It's too bad--those questions were pretty bad--it was such a good opportunity to dig in, but instead we got either softballs or questions that are unanswerable. They did not get to my question, which was, notwithstanding the fact that the newly released documents and the mcfarlane deposition appear to support the narrative that the Treasury expected the GSE's to become profitable, how do we square that with the 10'Qs that were released Aug 8,9 and essentially say that the GSE's do not expect to make any money for the foreseeable future. So how do we avoid Judge Ginsburg's characterization that there were competing views at the time?

that video is a good one to send to people who don't already know about what's happening. A good introduction into what this is all about without getting into technical details

That the Treasury was instrumental and pulling the strings of the FHFA goes to proving that the conflict of interest exception that we would like to apply to HERA is available to the shareholders. The argument goes that the FHFA and the Treasury are acting as one and the same and you can't expect that entity to bring a claim on behalf of shareholders against itself so the shareholders can bring a claim. That's how the emails coming from Parrott can be immediately helpful on the point about the Treasury taking charge

agree that Carney isn't completely wrong about his interpretation of the Lamberth opinion. But my point is that what he's doing in his latest blog at best lacks rigor. He's pretending to evaluate the newly released documents and saying that they don't prove anything, but he can only reach this point by citing Lamberth's sweeping opinion. So in reality he's not evaluating the substance of the documents at all, even though he's trying to make it seem like that's what he's doing. unfortunately lamberth basically said as much - that no document matters (in regards to motivation) because that would constitute a why not what analysis (the what analysis being whether the Third Amendment actually resulted in a de facto receivership). lamberth further said that changing the flow of profits from private shareholders to the treasury "is in no way sufficient to reclassify a conservatorship into a receivership." edit: where these documents do help in lamberth's framework is to support the argument that FHFA violated hera's prescription “not [to] be subject to the direction or supervision of any other agency of the United States... in the exercise of the rights, powers, and privileges of the Agency.”

It almost seems like he's ignoring information on purpose. I particularly found his citation to lamberth's opinion that motivation is irrelevant rather stunning since he was using it to prove that the documents don't help the plaintiffs. I mean if he's going to take that part of the lamberth opinion as unassailable then there is no conceivable document that plaintiffs could ever use no matter what it said. And if this is the case then why even bother evaluating the documents, as Carney tried to do? Also he doesn't even seem remotely aware of the legal arguments regarding the limits of the scope of a conservatorship. Not sure why he is so motivated to ignore any and all evidence. Seems so far from objective

Are you guys reading the docs? I kind of can't believe what I'm reading. Take a look at the email exchange between Chris Russell and Jim Parrott. Russell works in communications for the White House and Parrott is an economic adviser to Obama. After the NWS, Parrott sends Russell (p23 of the pdf) a statement from a Congressman who says that the NWS is an example of the Obama administration kicking the can down the road and that the reduction of the dividend means that taxpayers will be on the hook for the foreseeable future. P says to R, "this caught me by surprise. we're not reducing their dividend but including in it every dime these guys make going forward and ensuring that they can't recapitalize." WHAT?!!! That ain't preserve and conserve much less bringing the GSE to a sound and solvent state. So to me that means that the FHFA and the Treasury HAVE to win the argument that the statue allows the conservator to act as a receiver. I previously thought that they could prove that their actions achieved some kind of middle ground--like pressing pause and conserving in a different way. But you can't ignore this exchange. But wait, there's more.... R says to P "It MIGHT be net positive WHEN they r turning a profit. But based on the discussions I had this morning with other experts in the field, the consensus is that this essentially removes any pressure points to do something eventually with them and puts it well after 16. As u well know, politicians sometimes don't act unless they are forced to." In a later email R says to P, "Preference is not to have two defacto public utilities with a $274 bill capital cushion. Where is the impetus now to deal with the issue? The dividends were initially set like that for a reason. In regards to them keeping additional profits, in my mind that is only an accounting issue, gov recoups now (per new method) or later when we liquidate them and then realize those gains for the taxpayer.' OK, so obviously the purpose of the NWS is to set up the liquidation of the GSE's--they distinctly recognize the possibility that they will turn a profit, but the overall purpose is to wind down, so they can either take the money now and realize $ for taxpayers or liquidate later and realize gains for taxpayer. This sounds completely and utterly contrary to the whole death spiral explanation. I wonder if they can try to submit supplemental briefing in Perry in light of these documents. In any case, surely the judges in Perry are taking a close look here.

The 10-Q really confuses me now. If it's securities fraud, then how would that play out for the lawsuits? It's mind bending to think about.

I don't know, but in my opinion, these emails are big. Yes, I know that they may be viewed as cumulative to other things we've seen before, but I haven't seen anything that so clearly establishes: 1) the Treasury's obvious involvement and influence, 2) the clear intent to shut down the GSE's and never let them recapitalize, 3) an explanation for why Grant Thornton (and maybe even the 10Q's) doesn't adequately defeat the argument that the Treasury knew the GSE's would become profitable. Biggest points scored on 1&2. Before I thought there was no way we'd get reversal on the APA claim--now, I think there's hope.

So much for Grant Thornton: from NYT: But the documents released on Wednesday indicate that financial projections for Fannie and Freddie the judge received were significantly out of date. These projections, showing large losses in the near term were produced to the court by the Treasury in a document dated June 2012, but they actually contained figures from September 2011, when the companies’ operations had not yet begun to turn around. Those projections, produced by Grant Thornton for the Treasury to use in valuing its investment in Fannie and Freddie, did not account for improvements in the housing market that took place in late 2011 and early 2012. As the unsealed materials show, Treasury officials knew in the summer of 2012 that Fannie and Freddie had turned the corner and appeared to be well on their way to a strong recovery.

What?! When did we see this email? quoting from NYT article: Preventing the companies from using their profits to rebuild a strong capital position was an explicit goal of the Obama administration, the newly unsealed materials show. In an email sent the day the profit sweep was announced, Mr. Parrott [economic adviser to Obama] said diverting Fannie’s and Freddie’s profits would eliminate “the possibility that they ever go (pretend) private again.” Sending a message to Fannie’s and Freddie’s shareholders that they should have no hope of profiting from the companies’ recovery was top of mind to Mr. Parrott, the documents show. In another email sent the day the sweep was disclosed, he assured Treasury officials that “all the investors will get this very quickly.”

you have an impressive level of knowledge of the DC circuit. did you clerk there? Or just have done a lot of research. have really enjoyed your posts lately about past decisions and info of the judges I'll take September, too... circa 2025. ;) fwiw, the amtrak case took a little over five months: https://www.cadc.uscourts.gov/internet/opinions.nsf/7DB0A5319D2F70D385257FA4004FAB2B/$file/12-5204-1611061.pdf i choose that as an example because brown wrote opinion, and it was an "important" case, invalidating a statute of course, it also spanned the year end holiday season

i have heard of appellate judges who let opinions sit for years... I don't really know the personalities of these three. Ginsburg seems like he would want to turn it around in a reasonable amount of time--just a hunch. I'll take September, too... circa 2025. ;)