FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[Steve_Berk]

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.

 

On the one hand, sure, it's helpful to have been assured that it wasn't sent anywhere. On the other hand, why was it in the form of an email then? Why bother with that formatting?

 

If you guys can recall, back about a year ago, there were people leaving messages on Sweeney's answering machine and faxing things to her court. Doesn't really matter whether they try to do it through the court clerk or directly. It's a bad idea. At this point in the game, it's in the government's interest to seize on any opportunity to delay and/or throw a wrench in the process.

[Mephistopheles]

The Perry Appeal Judges just asked for more information from the parties, can't find the filing though but here is a picture on twitter:

 

[merkhet]

Attached.

 

Here's the focus on the common law claims that people were asking about from before. I suspect that plaintiffs' response will be that FHFA was stepping into the shoes of F&F as a private entity when it was a conservator -- defendants will argue the opposite. Unfortunately for FHFA, they've argued in other cases that when the FHFA acts as a conservator, it acts as a private actor. However, even if they argue the opposite in this case, I'd expect Fairholme to immediately file in the Takings case that FHFA is a government actor.

2016-06-21_Order_for_Supplemental_Briefing_on_Jurisdiction_for_Common_Law_Claims.pdf

[Luke 532]

Would the court need this much time and/or information if they were to simply agree with Lamberth or remand it back to him without specific instructions?  I'm probably biased at this point, but wouldn't this logically lead to remand with instructions or full overturn as the two most plausible outcomes?

[Guest cherzeca]

Agreed merk FHFA can't claim it was acting in govtal capacity in perry consistent with its position in fairholme.

[merkhet]

Would the court need this much time and/or information if they were to simply agree with Lamberth or remand it back to him without specific instructions?  I'm probably biased at this point, but wouldn't this logically lead to remand with instructions or full overturn as the two most plausible outcomes?

 

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.

[Mephistopheles]

I'm glad that at least they're paying close attention to the supplemental briefs, which some folks wore worried they wouldn't be doing so this far along after the arguments. I hope this means they take into account the bold face lie in the 7.5% return number.

[Guest cherzeca]

Would the court need this much time and/or information if they were to simply agree with Lamberth or remand it back to him without specific instructions?  I'm probably biased at this point, but wouldn't this logically lead to remand with instructions or full overturn as the two most plausible outcomes?

 

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

[Guest cherzeca]

On the one hand, sure, it's helpful to have been assured that it wasn't sent anywhere. On the other hand, why was it in the form of an email then? Why bother with that formatting?

 

If you guys can recall, back about a year ago, there were people leaving messages on Sweeney's answering machine and faxing things to her court. Doesn't really matter whether they try to do it through the court clerk or directly. It's a bad idea. At this point in the game, it's in the government's interest to seize on any opportunity to delay and/or throw a wrench in the process.

 

author was advised not to send and did not send.

[doughishere]

Maybe some of the lawyers should enter those graphs into the record. The email is truthful, no?

[Guest cherzeca]

@steve_berk; @merkhet

 

doesn't the order read like it was written by millet?

[Guest cherzeca]

talk about confirmation bias.

 

this from carney:  "While the questions from the court do not necessarily indicate which way it is leaning in the case, there are hints. Most notably, the questions are directed at the class action plaintiffs and not the individual plaintiffs. This could mean that the court is not inclined to accept the demands for injunctive relief—namely, the reversal of the 2012 change to the bailout terms–that were emphasized in their briefs.

 

The questions may also suggest that the court has not found any of the previous claims for jurisdiction persuasive. That is to say, the court may be leaning toward agreeing with the trial court that the 2008 law does operate to deny jurisdiction."

 

to be clear, i think the judges are wondering why fhfa didnt hammer Ps on lack of jurisdiction on theory that a claim against govt for damages must only be made in federal court of claims.  such an obvious claim for fhfa to make...except fhfa decided to hold itself out as a non-govtal entity for purposes of the fairholme litigation, which the judges either are not aware of, or want to be made aware of through briefing in the perry case.

 

if anything, this indicates to me that the case will be sent down on remand, and the judges just want to be careful in determining which claims they will tell lamberth to consider.  if there were two votes for reversal already decided, i am not sure this order would have been issued.

 

[doughishere]

talk about confirmation bias.

 

this from carney:  "While the questions from the court do not necessarily indicate which way it is leaning in the case, there are hints. Most notably, the questions are directed at the class action plaintiffs and not the individual plaintiffs. This could mean that the court is not inclined to accept the demands for injunctive relief—namely, the reversal of the 2012 change to the bailout terms–that were emphasized in their briefs.

 

The questions may also suggest that the court has not found any of the previous claims for jurisdiction persuasive. That is to say, the court may be leaning toward agreeing with the trial court that the 2008 law does operate to deny jurisdiction."

 

to be clear, i think the judges are wondering why fhfa didnt hammer Ps on lack of jurisdiction on theory that a claim against govt for damages must only be made in federal court of claims.  such an obvious claim for fhfa to make...except fhfa decided to hold itself out as a non-govtal entity for purposes of the fairholme litigation, which the judges either are not aware of, or want to be made aware of through briefing in the perry case.

 

if anything, this indicates to me that the case will be sent down on remand, and the judges just want to be careful in determining which claims they will tell lamberth to consider.  if there were two votes for reversal already decided, i am not sure this order would have been issued.

 

 

Bill Maloni's blog was interesting yesterday....which, to me, highlights his frustration when talking to the other side....because he actually breaks down the non-hedge fun plaintiffs...but the Russians are coming.

 

 

 

[Steve_Berk]

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.

 

 

@steve_berk; @merkhet

 

doesn't the order read like it was written by millet?

[Guest cherzeca]

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.

 

 

@steve_berk; @merkhet

 

doesn't the order read like it was written by millet?

 

thanks for reply, steve, i just wanted your senses, steve and merk.  i know it is fruitless to speculate, but it just seemed to me a pretty ineffectual order.  i mean, asking whether fhfa was acting in both conservator and regulatory capacity in connection with NWS. c'mon, look at the 3rd A, it reads fhfa as conservator. the supplemental briefing covered the HERA statutory distinctions pretty carefully. and the fact that fhfa punted on sovereign immunity argument but this order wants it addressed seems to me (with my confirmation bias :>)) a plea to find a basis to uphold...and that just sounds to me like millet. that's all.

[doughishere]

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.

 

 

@steve_berk; @merkhet

 

doesn't the order read like it was written by millet?

 

thanks for reply, steve, i just wanted your senses, steve and merk.  i know it is fruitless to speculate, but it just seemed to me a pretty ineffectual order.  i mean, asking whether fhfa was acting in both conservator and regulatory capacity in connection with NWS. c'mon, look at the 3rd A, it reads fhfa as conservator. the supplemental briefing covered the HERA statutory distinctions pretty carefully. and the fact that fhfa punted on sovereign immunity argument but this order wants it addressed seems to me (with my confirmation bias :>)) a plea to find a basis to uphold...and that just sounds to me like millet. that's all.

 

Speculation but it could be a "playing devils advocate move", no?

[Eye4Valu]

Even if Millet, at least CofA wants P and D to make their case again on these issues. I view that as a positive, even if I have no idea how they will ultimately rule.

[doughishere]

Even if Millet, at least CofA wants P and D to make their case again on these issues. I view that as a positive, even if I have no idea how they will ultimately rule.

 

Always on the sunny side...at least they arnt universally dismissing with out looking at both sides..........

[merkhet]

I haven't a clue who wrote the order. On the one hand, it could be "why shouldn't I just dismiss the common law claims?" On the other hand, it could be "I'm looking for a way to get to the common law claims on the merits."

 

Anyhow, the first part of the question is just trying to figure out whether the Federal Tort Claims Act applies or if something else does.

 

The second part of the question deals with various exceptions to the FTCA: http://biotech.law.lsu.edu/cases/immunity/ftca_exceptions.htm

 

I believe regulatory actions are excepted. Moreover, if FHFA is acting as a private entity as a conservator, then that's a whole different issue.

[Guest cherzeca]

the treasury exposure to breach of fiduciary duty claim strikes me as a standard exception to the sovereign immunity question, which is that when govt enters market as a participant it cant hide behind cloak of immunity.  i am sure hume will be all over this

[merkhet]

Okay, so I took some time to go over some of the case law, and I think that we will win the "other claims" or Section (2) of the order.

 

First, let's tackle the source of subject matter jurisdiction since it's the simplest one. The court has subject matter jurisdiction under the Class Action Fairness Act of 2005 (http://codes.lp.findlaw.com/uscode/28/IV/85/1332) which expanded federal jurisdiction to cover class actions with:

 

(1) Minimal diversity - where the class comprises at least 100 plaintiffs, and where any members of a class of plaintiffs is a citizen of a state different from any defendant, unless at least two-thirds or more of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state in which the action was originally filed, and

 

(2) Amount in controversy - over $5 million

 

Both of these requirements were pled in the Initial Opening Brief for Class Plaintiffs on page 17. (http://gselinks.com/Court_Filings/Perry/14-5243-1560310.pdf) My guess is they did not fuck up on this given that it's pretty easy to fulfill.

 

The District Court had subject matter jurisdiction over Class Plaintiffs’ state law claims under 28 U.S.C. § 1332(d)(2)(A), in that at least some members of the Class (including named Plaintiffs) are citizens of States different from the States in which Defendants are citizens, and the matter in controversy exceeds $5 million. The District Court’s jurisdiction is also supported by 12 U.S.C. §§ 1452©(7) and 1723a(a).

 

Next, let's tackle the issue of sovereign immunity. The main thing to realize is that there are two worlds here:

 

World #1, defendant is the government:

 

(1) You need to have some statute that allows for the suit, or

(2) Some other waiver of sovereign immunity

 

World #2, defendant is not the government:

 

(1) You can then sue

 

In this particular case, the argument is that the breach of contract was not regulatory in nature but rather conservatorship in nature. (If anyone can make a cogent argument for why the breach of K was regulatory, I'd be interested to hear it.)

 

In fact, FHFA makes this case on our behalf in their motion to dismiss in the Fairholme case in front of Judge Sweeney (http://gselinks.com/Court_Filings/Fairholme/13-465-0020.pdf) on page 13:

 

Here, FHFA, as conservator for two congressionally-chartered, private institutions, stands in the shoes of the Enterprises. Plaintiffs’ claims against FHFA and its actions as conservator are effectively claims against Fannie Mae and Freddie Mac – neither of which are alleged to be Government entity. This Court has jurisdiction only “to hear cases in which a plaintiff seeks just compensation for a taking under the Fifth Amendment as such a claim is ‘against the United States founded . . . upon the Constitution.’” Souders v. S.C. Pub. Serv. Auth., 497 F.3d 1303, 1307-08 (Fed. Cir. 2007). Indeed, the Fifth Amendment applies solely to Government action. “There clearly can be no taking when whatever acts complained of are those of private parties, not the government.” See Alves v. United States, 133 F.3d 1454, 1458 (Fed. Cir. 1998); 767 Third Ave. Assocs. v. United States, 48 F.3d 1575, 1580 (Fed. Cir. 1995). By suing the conservatorships, plaintiffs – the Enterprises’ shareholders – are effectively suing private corporations for the decisions of their management. Accordingly, plaintiffs’ challenge to FHFA’s actions as conservator must fail.

 

Importantly, the federal circuits of DC have some precedents concerning what happens when the FHFA is acting as a conservator. See Herron v. Fannie Mae for the stance from the trial level (https://www.gpo.gov/fdsys/pkg/USCOURTS-dcd-1_10-cv-00943/pdf/USCOURTS-dcd-1_10-cv-00943-0.pdf):

 

The purpose of the conservator or receiver is to restore the entity to fiscal feasibility or to liquidate and distribute its assets. The conservator or receiver steps into the private status of the entity. For example, when the Federal Deposit Insurance Corporation (“FDIC”) takes over as conservator or receiver for a failed bank, it obtains the rights and powers of the bank’s shareholders, officers, and directors. See 12 U.S.C. § 1821(d)(2)(A). As conservator or receiver, it may take over the assets and operation of the insured depository institution to conduct all of the institution’s business, in order to preserve and conserve the assets and property of Fannie Mae. Id. § 1821(d)(2)(B). FDIC in its role as conservator or receiver is placed “in the shoes of the insolvent” entity. O’Melveny & Myers v. FDIC, 512 U.S. 79, 86-87 (1994) (examining 12 U.S.C. § 1821(d)(2)(A) & (B)). A claim against FDIC as receiver is “a claim against the depository institution for which the FDIC is receiver.” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1144 (D.C. Cir. 2011). Further, when acting as receiver, FDIC does not pursue the interests of the government. Atherton v. FDIC, 519 U.S. 213, 225 (1997). Courts have similarly held that FDIC as conservator was not acting for the United States. See, e.g., Ameristar Fin. Servicing Co. LLC v. United States, 75 Fed. Cl. 807, 811 (2007).

 

Moreover, Herron repeats this again:

 

As described above, a conservator or receiver steps into the shoes of the private entity — it assumes the private status of the entity. See O’Melveny, 512 U.S. at 86-87; Am. Nat’l Ins. Co., 642 F.3d at 1144; Beszborn, 21 F.3d at 67-68. Fannie Mae was a private entity; when FHFA took over as conservator of Fannie Mae, it stepped into Fannie Mae’s private role. In sum, FHFA as conservator of Fannie Mae is not a government actor, and Ms. Herron’s Bivens claim will be dismissed.

 

What's interesting here is the citation to American National Insurance Company happens to be a case from the court of appeals for the D.C. Circuit (the court for the Perry Appeal)!

[stevevri]

https://twitter.com/nsfraudbuster/status/745588295715823616

 

This is floating around Twitter today... Anyone know if more documents were released?

[doughishere]

Anyone can draft anything up these days.....especially in the Wikileaks era we are living in......im a bit cautious to believe anything. If its true theres a case numbee and a document number on the left. and by left i mean right side...check pacer.

 

https://pacer.login.uscourts.gov

[stevevri]

It's on Pacer. It is real. Lots more too.... Attached is just part of it.

01512287199.pdf

[doughishere]

Thanks steve!

 

 

Go Team Treasury!

 

They even ask if the profits from the winddown are paid to the Treasury as dividends lol.

 

 

 

 

 

"Preference is not to have two defacto public utility with a 274 bill capital cushion"

 

Everyone should be reading these emails.