merkhet

I noticed that. I didn't send it over to him, but I'm not bothered one way or the other by it. This forum, is, after all, publicly accessible. Plus, I shared a similar summary with him via Twitter DM earlier today.

Hume saves the day on a few things that Olson dropped the ball on -- for instance, he mentions the Fannie Mae & Freddie Mac projections that show payback by 2019 & 2020. This would counter the fact that the GSEs' 10-Qs mention a dour scenario where they don't envision ever being able to pay back more than the dividend, and it would counter Ginsburg's errant statement that it was (A) only Susan McFarland that thought there was a rosy future and (B) that it was only her recollection post hoc rather than at the time. Judge Millet at one point mentions that "Virginia law for Freddie Mac is different from Delaware law, right? ... I thought that was why this was coming at us from Fannie Mae because that's where you had precedent. You didn't have it from Freddie Mac in Virginia. Am I wrong?" Hume replies that he thinks they're mostly the same in material respects, but this might be something that people want to be a bit wary on -- it's also why I only own Fannie Mae's preferred shares. Preferred has the stronger K claim and is located in the more favorable (and developed) jurisdiction for various claims. I doubt the risk is high, but why run it if you don't have to do so? (i.e. You aren't Berkowitz who needs to sink in tons of capital and needs to spread it around.) My read on how Hume handled this is still the same. He crushed it.

I'm re-listening to the audio right now, and I'm adjusting my view of Olson's part a bit. It's not as bad as I initially thought -- though I still think he missed a few great opportunities. At one point, Ginsburg agrees w/ Olson that the way that the net worth sweep is constructed, it would be impossible to put the GSEs in a sound and solvent condition. This is shortly after they say that every cent is leaving the companies and shortly before Ginsburg launches into his hypothetical about whether FHFA may have just been trying to stem the bleeding w/ the NWS. Additionally, Millett's hypotheticals make a little more sense now, because it sounds a lot like she is just testing the various bounds of Olson's repeated assertions that the NWS is, under no conditions, an appropriate action to be taken by the FHFA as conservator.

I believe that voice belongs to Judge Brown re "close enough."

Yes, I remember that exchange. I think Ginsburg is pretty solidly on the shareholders' side. My guess is that Brown is also on the shareholders' side, but I would have liked to hear her speak more.

Thanks Merkhet. It just seems that today's hearing went way beyond just this issues around should the motion have been dismissed and to the Crux of the matter on whether the NWS actually could be considered a taking. But ultimately I see the judges job to be to probe these issues I found they were aggressive in their probing but I'm not sure we can read anything from this as I would think this is a technique that you need as a judge to probe the issues One thing to keep in mind when listening to the audio is that lay people seem shocked that the judges were pretty aggressive in their questioning. That's actually just what appellate judges do. I put it this way -- when my business school friends show up to a party with my law school friends, they are all a little taken aback because all the law school people seem to be arguing with one another. That's... just what they do. They're enjoying it. Lawyers don't get invited to many parties. :P

I think that's a fact based determination that they will stay away from as an appellate court. Remember, this came up because Judge Lamberth granted a motion to dismiss so I doubt that's going to be an issue.

Maybe I missed this but is there a time line for their decisions No deadline. The supplemental briefing is due 7 days from now.

Audio is up. https://www.cadc.uscourts.gov/recordings/recordings2016.nsf/74B30C9776477AA885257F96006585FE/$file/14-5243.mp3

Were you in the middle or on the right? (Boston or Philly?) I was on the left. Asian guy w/ the orange Berkshire tie. And yes, I think we had this exact same conversation at the courthouse. I think Millett might go against us, but it's so tough to tell. I mean, on the appellate level, I've seen judges lay into lawyers on this and that and then rule in their favor -- it's tough to tell. If pressed, I'd say she's learning against, but it's difficult to know because she never really came out w/ a statement the way that Ginsburg did.

Press room. Video feed. Were you there as well?

As a side note, two things I forgot: (1) Hume made a fantastic argument in terms of looking at things economically rather than formalistically. Basically, Treasury sat at the top of the capital stack, then junior preferreds and then Treasury had 80% of the common stock and 20% of common was in other hands. He talked about how if you look at it economically, basically what Treasury did was leapfrog all the other participants. (2) In rebuttal (possibly also in his opening), he makes it very clear that what Treasury sought to do was create a second level of common (i.e. the Steele argument) above the other common AND above the junior preferred. I think that resonated well w/ Brown & Ginsburg, and I thought it was a genius move to get part of that into this oral argument rather than to wait for the MDL panel a few months down the line. In any case, the biggest surprise for me was Ginsburg saying flat out that he didn't read the conservator & receiver having the same powers. If he can convince one of the other two of that, then, by definition, the conservator is acting outside of its powers, which means 4617(f) falls and a lot of other things fall with it.

Okay, so here goes my recap: Olson went up first, and Judge Millett was pretty aggressive on the APA claim. Mostly, she parroted Lamberth's arguments on whether we should be second guessing FHFA. Moreover, she raised the question of whether, if FHFA figured that the GSEs were beyond saving, that they could have used the NWS to stem the tide of losses. In other words, what's wrong w/ saying "give us what you have, and if you make nothing, you give us nothing?" Sadly, I thought Olson missed a great opportunity to mention that the NWS is not just about profits but that they also sweep away the equity of the company over time. (And I agree w/ TH717 that Olson did not seem prepared.) Additionally, she asked whether there was fluidity between conservatorship and receivership such that FHFA could conceivably be doing what Lamberth said in his opinion, and Olson responded no. Surprisingly, she seemed to be helping him out at one point by asking whether this is just an issue about notice -- i.e. at some point, maybe they should have just notified people that they were doing receivership instead, but Olson seemed not to catch the point. (The point is that during receivership, you have different safeguards and protection, so this isn't just a situation where you "cure" the violation by backdating notice.) With more prodding from Millett, Olson did eventually get there. During Olson's time, Ginsburg also brought up the idea that the idea that Susan McFarland saying that things were going sustainably well was just one opinion. It's still possible that Treasury & FHFA might have honestly believed that things were getting worse. (However, Olson missed another opportunity to say that Treasury & FHFA's sworn affidavit was that no one thought things were turning rather than that there was some difference of opinion and they decided to make a judgment one way versus another.) Furthermore, it was worrisome because she signed off on the 10-Q a few days before that saying that they actually didn't think that things were getting better. Seemed to bother him. On the other hand, Ginsburg also brought up the question of whether there is a conceivable situation where Treasury is conserving as much as they can and that $5 trillion of assets is a lot to run down before you can even put it into receivership -- Olson said that it's possible but unlikely, and that's why they would really like to have an administrative record. Ginsburg agreed with him that an administrative record would be necessary. Hume's argument went much better, and I actually think the court was much more receptive to his claims about breach of contract, implied convenient, good faith, etc. There was some back and forth about derivative versus direct claims, but he was pretty adamant about direct claims of breach of contract, and the three judges seemed to agree. There was also some back and forth between DE and VA differences of law. One thing to note is that if this comes down to a breach of contract claim, you have a much better shot being in the preferreds than the common, IMO. Not as many questions during the Hume time. Cain (sp?) went up for the FHFA and talked a lot about 4623, which went a bit over my head. They seemed to spend most of the time talking about the classification of capital (adequate, undercapitlized, severely undeocatpialized) where the attorney was saying it's okay to run at razor thin capital because FHFA suspended capital -- but I found that to be oddly beside the point? Later on, the judges asked for supplemental briefing on 4623. Ginsburg, however, was a bit annoyed that FHFA decided to suspend capital requirements rather than following the statute and putting the companies into a category. Possibly, he doesn't like the end run around putting the company into a receivership due to capitalization by just stating by fiat that capital doesn't matter. Forget the name of the person who stood up for Treasury, but Ginsburg came alive when he started talking. I think it was Dintzer, but I'm not sure. I'll use his name unless someone corrects me. Dintzer started off talking about how the world was ending in 2008, and Congress intended for HERA to grant really broad powers to the conservator, etc. Finally Ginsburg interjected and said "I don't know why you and your colleague keep talking about things at 30,000 feet and haven't referenced the statute." They have a bit of back and forth, and they get to a point where Ginsburg asks him to point to the statute where the conservator is allowed to wind things down and then says that he reads the conservator and receiver having different powers because of the word respectively. Specifically, he says "that's not how I read the statute." In any case, that throws the government lawyer off his game a little bit. Millett actually also lays into the government lawyer a little bit by adopting some of the arguments from the appellants, which is what makes her a bit harder for me to read. Moreover, the government lawyer says something about how the liquidation preference hasn't been changed at all so the appellants aren't harmed, and Ginsburg says something to the effect of "and what does that leave them with?" to which the government lawyer has no response and then the courtroom chuckled a bit. Both Olson & Hume closed w/ good rebuttals. Olson pointed to Lockhart's statements in 2008 about conservatorship being to rehabilitate things and shareholders being left with residual value as what FHFA understood its role to be. Hume closed with the idea, again, that their claim for breach of K was direct and not supplanted by the statute that says shareholder claims accrue to the FHFA. I thought Olson really came back strong in the rebuttal. Judge Brown was surprisingly silent. She basically made a clarifying remark saying that appellants are arguing that 4617(f) is not a bar because conservator acted ultra vires, beyond their power, and then asked Olson a question about "why isn't this just a bad judgment on the part of FHFA," during rebuttal, and he answered that FHFA's action wasn't just a bad judgment because it was beyond the scope of their powers -- picking up on her earlier ultra vires comment.

Also, someone mentioned that the audio will be posted eventually but I don't know if that's true.

(Update from the phone while in an uber) So, as far as I can tell, the worst case scenario is that they will remand it to the district court to get a full and complete administrative record. Ginsburg was pretty adamant on that. Millet was a hard read as she came down hard on both sides. Not sure how she's going to come out. What was very interesting was that at one point Ginsburg specifically stated that he didn't read that one provision that Gov cites (about conservators and receivers both being able to wind down) they same way that Gov does. His exact quote was something along the lines of "that's why it says respectively." More updates later because typing on a phone sucks.

Just got out of court. My read is winner winner chicken dinner. Will update when I'm back at a computer.

+1 I fully expect the government to be taken out to the woodshed tomorrow morning, but this isn't over until the fat lady sings. @doughishere, I think it all depends on your personality. If you find that "this finance shit kills the spirit," you should pursue a different path. Especially since you're pretty well off. To paraphrase Munger, when you're poor you have to do some stuff you don't like; but if you're rich and you're still doing stuff you don't like, you're bonkers. At 31 years old, you can still find something that's interesting/fulfilling for you.

Order Granting Motion to De-Designate Seven Documents. Attached. Judge Sweeney is done messing around. Dropping the boom. Her language here seems to bode well for the Motion to Compel. 2016-04-13_Order_Granting_Motion_to_De-Designate_Seven_Documents.pdf

Occasionally, when people are in a bad situation, they roll the dice because taking action now will immediately recognize the loss and hope is cheap. Same reason that a trader who is already deep in the hole will take riskier and riskier bets. Heads, they find a way out. Tails, they're screwed anyway. So I can understand why the government keeps going.

That's assuming an ass whuppin' on Friday would lead to a legal resolution. Many a slip twixt cup and lip. If the beating is bad enough, there may be intervening actions before an opinion comes out.

So after poring through the Exhibits and reviewing some of the briefs, I'm starting to make more sense of the stuff behind the scenes. (1) Originally, the government pushed the idea that they implemented the NWS to stop the circular draw and because of the imminent possibility that they would have another draw. (2) Then, as discovery & depositions showed that this was a lie, they backed away in their filings from mentioning these things, and, instead, relied on what they believed was good cover from Lamberth in interpreting HERA broadly enough to allow them to do whatever they want without judicial review. (3) As luck would have it, they drew Judges Brown & Ginsburg, who both innately dislike delegating Congressional powers over to the administrative agencies because they are worried about (a) government overreach and (b) lack of oversight. With a helping of Judge Brown believing the government is naturally inclined to deprive private owners of private property. So, because of the development of the case, the government backed itself into a situation where it can no longer argue that it had a good reason for doing what it wanted to do (as that reason is now pretty clearly false) and has to argue for the exact type of thing that worries two of the three appellate judges. I know I've said this before, but I think Friday's oral argument is going to be fun.

Ain't that the truth. She denied the alternative to merely allow reference to the docs. I'm with @cherzeca. I think it is now more likely than before that Sweeney grants the Motion to Compel.

I just skimmed through the Exhibits. (I'll dig in more deeply this afternoon.) If my initial reaction to the released documents is correct, the government is going to get crushed on Friday.

Link to the unredacted docs https://www.scribd.com/doc/308174677/Documents-unsealed-by-Margaret-M-Sweeney

Ugh. Just... ugh.