merkhet

Stephen Hawking has said similar things, that might be what you are thinking of. http://www.theguardian.com/commentisfree/2010/apr/26/stephen-hawking-issues-warning-on-aliens Yes. That's the one. Thanks!

I can't remember who wrote/said that in the history of civilizations meeting for the first time, there has never been an instance in which a weaker and stronger civilization meet in which the stronger civilization doesn't immediately and aggressively dominate the weaker one. (It's possible this is a movie quote rattling around in my brain...)

Would you go as far to say the government's most logical choices at this point are to either (1) try again to get an extension (delay) beyond the 10th, (2) push to settle or release rather than let Sweeney decide on whether or not to unseal, (3) hope for the best with Sweeney's decision on whether or not to unseal, or (4) other? I would think #1 might not be a possibility since she has already set August 10th as the date after the government asked for August 17th. It's probably an unanswerable question, but I'd be interested in what you believe are the probabilities of 2, 3, or 4? I think you have the order of preference right, but I think assigning probabilities would be a difficult thing to do.

I think the most important date right now is August 10th. If the government files a response, they will lose control of the timing in the case (i.e. Sweeney could rule at any time for unsealing depending on whether Fairholme is required to post a rebuttal).

I think the issue Steele is pointing out is more than just a technicality. (Though even if it were a technicality, it's still a question of whether or not it's legal.) The issue is similar to the brief that Pershing Square put through at one point stating that a preferred stock with these characteristics is akin to putting a second class of common on top of the original class & junior preferred. That is more than a technicality under Delaware law and under the PSPA/HERA because there are rules about issuing more common stock.

Lamberth interpreted it a as a very low bar. However, it's possible that this doesn't even pass that bar. Hard to tell -- which is why I think Myron Steele's argument that the preferred shares are, by law, void is a much better argument.

There's still probably a healthy gap from this sort of document to being certain a court will grant relief, I think. e.g. if you go back to the Lamberth decision, he pretty much concludes that the reasons for the FHFA's actions are not relevant, so depending on the claim it's not clear if these documents would matter much in a court's decision. That said this filing is obviously good news! I think the Amici Curiae from former Delaware Supreme Court Justice Myron Steele is more helpful than the documents in the Perry brief if the appeals court agrees that FHFA has broad discretion on how it operates as a conservator. (https://www.dropbox.com/s/iyhdmn2o1vnhuy3/2015-07-06%20myron%20steele%20amicus%20curiae%20brief.pdf?dl=0) However, it remains to be seen whether using the GSE cash flow for political purposes (allegedly to keep from hitting the debt ceiling) would be a permissible conservator action. I think that's where the action is in terms of the appeal re FHFA's powers as conservator.

Looks like the deadline has been extended until August 10th, 2015. https://www.dropbox.com/s/ylhxz23usa0ufiu/2015-07-15%20Order%20on%20Motion%20for%20Extension%20for%20Fairholme.pdf?dl=0

Another redacted motion was released today, this one on Freddie Mac documents. https://www.dropbox.com/s/og946x4jcc4awtc/2015-07-15%20Plaintiffs%20Redacted%20Motion%20to%20Unseal%20Freddie%20Mac%20Documents.pdf?dl=0

No. That's not what I'm saying at all. The threat of making things public is what might force a settlement. Actually making things public would remove the incentive to settle. If Sweeney rules for the government on non-disclosure, then we will have to move on to trial and it will take longer.

If the judge grants the motion to unseal, I think the government won't settle. At that point, the damaging information is already out there, and they might as well bet their bottom dollar and see if they can be redeemed through the legal process. Imagine borrowing money from a loan shark to go gambling and losing 80% of the money. Well, you might as well bet the remaining 20% because if you don't, you're going to get your legs broken anyway but if you win, you might come out even. I'm unclear on what happens to the New York Times filing if the government decides to do something to settle this stuff before the judge grants any of the motions to unseal.

Actually, Fairholme isn't doing anything today, it's just the court releasing the redacted motions. I would highly recommend that everyone read through the redacted motions. Here are the parts that I found particularly interesting: Government's Response to Fairholme's Opposition to Government's Extension of Time. This is probably what the Government will be arguing in its response to Fairholme's Motion to Unseal -- that the jurisdictional discovery does not require anything other than legal analysis, so there's no reason for Fairholme to have to involve anyone else in the analysis. However, that's not actually the standard -- the standard is that the information actually be required to be kept under seal because it falls under the definition of protected information. This is nonsensical given that I can't tell how Fairholme received any sort of economic benefit from disclosing the privilege log in February 2012. And also, still not the point! The point is whether the information deserves to be under seal. Redacted Deloitte Motion: There is an internal memo dated March 23, 2012 from Deloitte that indicates that Treasury is in control of FHFA. Redacted Fannie Mae Motion: There is a July 19, 2012 board meeting presentation that shows that there was no GSE death spiral. Also, there is apparently an August 9, 2012 Treasury meeting presentation showing the same. Redacted Grant Thorton Motion: The redaction seems to show that Grant Thorton's documents/analysis does not show that the GSEs were going to have a circular draw. There is a lot redacted here, so it's hard to tell much more. Redacted PwC Motion: There is apparently a Freddie Mac consultation memo that directly contradicts the idea that Treasury does not control FHFA. Moreover, there seems to be an August 7, 2012 PwC memo that also contradicts the idea that the GSEs would be unable to meet the 10% dividend requirements. Redacted Treasury & FHFA Motion: (save the best for last) There is apparently an August 2008 memo that talks about the DTAs. Probably indicating that they would have to write down the DTAs but that the DTAs would come back with profitability. Mario Ugoletti wrote an e-amil which suggests that Treasury does have control of FHFA. And last, but not least, there is an e-mail suggesting that there was a political motivation behind the Net Worth Sweep -- my guess is that the e-mail suggest that the Administration could use the GSE cash flows to avoid hitting the debt ceiling.

Redacted motion for the Grant Thorton documents https://www.dropbox.com/s/rdnky99g1aohh0f/2015-07-14%20Government%27s%20Reply%20to%20Plaintiffs%20Opposition%20to%20Motion%20for%20Extension.pdf?dl=0

It could be tomorrow or it could be a year from now. I don't know that I have a ton of insight into the timing of a possible settlement. The motions to unseal are a pretty big deal, so if they are a lynchpin, then a settlement could be close.

More docs https://www.dropbox.com/s/rdnky99g1aohh0f/2015-07-14%20Government%27s%20Reply%20to%20Plaintiffs%20Opposition%20to%20Motion%20for%20Extension.pdf?dl=0 https://www.dropbox.com/s/jm3zsx3tjhu8o3r/2015-07-14%20Plaintiffs%20Redacted%20Motion%20to%20Unseal%20Deloitte%20Documents.pdf?dl=0 https://www.dropbox.com/s/g5fyaad9z3ne3w3/2015-07-14%20Plaintiffs%20Redacted%20Motion%20to%20Unseal%20Fannie%20Mae%20Documents.pdf?dl=0 https://www.dropbox.com/s/el1bv0cmanfb60d/2015-07-14%20Plaintiffs%20Redacted%20Motion%20to%20Unseal%20PwC%20Documents.pdf?dl=0 https://www.dropbox.com/s/t1o40b7uv4174hd/2015-07-14%20Plaintiffs%20Redacted%20Motion%20to%20Unseal%20Treasury%20and%20FHFA%20Documents.pdf?dl=0

You mean why wouldn't Grant Thorton just immediately cooperate? I suppose someone put in a call and asked them to delay -- when you get into a litigation situation, there's a very strong behavioral aspect where you develop an us vs. them perspective. All the plaintiffs are part of a "tribe" and all the others are part of another "tribe."

The New York Times & Fairholme oppose an extension past July 27th, 2015. https://www.dropbox.com/s/9c8u95j8zz3kcqj/2015-07-14%20New%20York%20Times%27%20Opposition%20to%20Motion%20for%20Extension.pdf?dl=0 https://www.dropbox.com/s/xfh3gbhxplo3fmu/2015-07-14%20Plaintiffs%27%20Opposition%20to%20Motion%20for%20Extension.pdf?dl=0

I don't know why everyone keeps pointing that out. It's not that big a deal. He probably left to go into a private law firm. At the DOJ he was probably making $150K when he'd be making over $400K on the private side -- if not more.

Finally, the filing from the Government for an extension of time. https://www.dropbox.com/s/vxvllqbzei9b4c4/2015-07-13%20Motion%20for%20Extension%20of%20Time%20for%20Depositions%20and%20New%20York%20Times.pdf?dl=0 Yup, the discovery documents were filed in the Perry appeal. This request is incredibly weak. Again, I would love to see Sweeney deny their extension of time. (They don't even bother arguing why they should be granted an extension of time w/ the NY Times inquiry.)

If you read the actual motions, you'll see that plaintiffs have only consented to an extension until July 27th and not August 17th.

Two motions to extend the unsealing of depositions until August 17th. https://www.dropbox.com/s/syfynjdvdjjkfy3/2015-07-13%20Motion%20for%20Extension%20of%20Time%20for%20Grant%20Thorton%20Documents.pdf?dl=0 https://www.dropbox.com/s/ux0tpt3mqsvk0by/2015-07-13%20Motion%20for%20Extension%20of%20Time%20for%20Various%20Responses.pdf?dl=0 The second one is more interesting because it notes the following: Confirms my hunch that the court has allowed for documents to be filed under seal in the Perry appeal. The reason that Grant Thorton wants a motion for extension is pretty thin. (I suspect that the Government's will be thin as well.) Both of them have had an extension already to boot. I would love to see Sweeney deny them the extension, but I don't know if she's willing to do that.

Correct, then we would proceed again along the legal lines of the Perry appeal, the Fairholme case, etc. Secondary news about Fannie & Freddie? What news is making you anxious?

What do you mean?

Yes. The blackmail potential is strongest with the threat of release. Once it's released, we would have to wait for the legal process. Still fine but just longer.

I would not. If they come out, the government loses any incentive to settle. At that point, they might as well roll the dice and see if they are vindicated through the legal system.