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

[doughishere]

I bet we get some emails that go: "Were totally gonna f*uck the shareholders" or some other expletive line or something totally acknowledging what they are gonna do......watch.

 

 

Like in those movies where the brokers are all talking to one other joking not thinking that the phones they are on are recording.

[muscleman]

Looks like we'll get to peak behind the curtain a little more with some more unsealed documents by this Friday.

 

Why is it unopposed....... I thought the government always oppose to everything the plaintiffs demand.

[doughishere]

Looks like we'll get to peak behind the curtain a little more with some more unsealed documents by this Friday.

 

Why is it unopposed....... I thought the government always oppose to everything the plaintiffs demand.

 

capitulation?

[merkhet]

Fairholme responds to the 4623(d) argument in its supplemental brief. Still waiting on the Class Plaintiffs' reply.

2016-07-20_Fairholmes_Supplemental_Reply_Brief_in_Response_to_Order.pdf

[Steve_Berk]

Thanks for posting that Merkhet. I had actually been spending some time trying to understand 4623(d) -- tried to find any regulations or legislative history, read the California court decision cited to in plaintiff's original supplemental briefs (overstated by the plaintiffs IMO) and had been reading the supplemental briefs from both sides. This is one case where I'm glad not to be the law clerk/judge. I think it's very tough to figure out the applicability of that provision to the APA claims, but the plaintiff's arguments strike me as more persuasive. I'm not at all confident, but it seems like the FHFA is reaching to characterize the actions of the director as a reclassification of capital requirements--inextricably linked to the NWS-- and also overreaches to say that plaintiff's essentially argue that there must be some minimal level of capital, so they are asking for a different capital requirement. I am more persuaded by the argument that this provision is intended to govern the actions of the Director as a regulator and not conservator. And I think the best argument is made in the most recent filing that the invalidation of the NWS doesn't even require any change in the suspension of capital classifications. They're saying that it's wrong to conflate those two things, and that the purpose of the suspension of capital classification was to give the FHFA more flexibility with respect to payments made to the Treasury.

 

Also, notably, nice bit of trash talking in the intro: "FHFA has grown so enamored of the argument that 12 U.S.C. § 4623(d) bars this action, an argument that FHFA did not assert before this Court’s prompting the day of argument, that FHFA devotes most of its supplemental brief to the issue even though the Court’s June 21, 2016 briefing order did not raise it."

 

But I would not have been on board with their quoting Ginsburg's 'stake through the heart' comment...  Not horrible, but slightly uncomfortable.

[Guest cherzeca]

Fairholme responds to the 4623(d) argument in its supplemental brief. Still waiting on the Class Plaintiffs' reply.

 

you may wonder why fhfa thought invalidating NWS would "affect the effectiveness" of fhfa as regulator's suspension of capital classif for GSEs...

 

fairholme comes out with guns ablazin'

 

"First, equitable relief invalidating the Net Worth Sweep would not “affect the

effectiveness,” FHFA Suppl. Br. 7, of FHFA’s suspension of capital classifications

at all. The suspension of capital classifications was fully effective as of October

2008, while the Net Worth Sweep was executed nearly four years later in August

2012. The equitable relief sought by Fairholme would invalidate the Net Worth

Sweep and return the parties to the prior terms of the Treasury agreements. The

suspension of capital classifications would remain in full effect, just as it was from

October 2008 to August 2012....

The suspension of capital classifications did not, however, affirmatively strip

Fannie and Freddie of their capital and ensure that they would not emerge from

conservatorship. That was the effect of the Net Worth Sweep: “But when the Third

Amendment was announced the Treasury said we’re going to wind this thing down,

we’re going to kill it, we’re going to drive a stake through its heart, and we’re going

to salt the earth so it can never grow back.” Tr. of Arg. at 108 (Ginsburg, J.). That

was not the effect of the suspension of capital classifications. Indeed, FHFA’s

announcement of the suspension assumes that the Companies someday could emerge

from conservatorship by stating that FHFA had decided only to “suspend capital

classifications . . . during conservatorship,” not that it had decided to salt the earth.

See FHFA Announces Suspension of Capital Classifications During

Conservatorship, http://goo.gl/MzpAUH. It is this latter decision that Fairholme

challenges, and Fairholme’s challenge is not barred by Section 4623(d)." 

[Guest cherzeca]

@steve

 

"They're saying that it's wrong to conflate those two things, and that the purpose of the suspension of capital classification was to give the FHFA more flexibility with respect to payments made to the Treasury."

 

indeed, to make any dividend distributions at all

 

btw, i think the dripping sarcasm in fairholme's reply is just fine.  fhfa came in with a brief that cited no precedent and tried to bootstrap a regulatory decision as the basis for supporting a conservatorship decision four years later.  it was a weak argument and it is time Ps start blasting the govt w/o mercy imo.

 

[rros]

But I would not have been on board with their quoting Ginsburg's 'stake through the heart' comment...  Not horrible, but slightly uncomfortable.

 

S Berk, it may make the judge a bit self-conscious. On the other hand, no words have ever been spoken that drive the message of what they did so clearly and so powerfully. So, why not use them?

[Steve_Berk]

I loved the sarcasm in the intro--thought it was very funny. Just not sure about quoting Ginsburg to advance a proposition, almost holding him to a viewpoint that he might have been more playfully proposing for rhetorical purposes. Judges can be touchy, so I viewed that as at least slightly risky.  And to answer rros--the downside (which I don't want to characterize as significant) is that Ginsburg might be annoyed and think it presumptuous. I just remember as a former litigator almost treating the judges in a god-like fashion and avoiding any mere possibility of offending them... in all likelihood it won't matter.

 

@steve

 

"They're saying that it's wrong to conflate those two things, and that the purpose of the suspension of capital classification was to give the FHFA more flexibility with respect to payments made to the Treasury."

 

indeed, to make any dividend distributions at all

 

btw, i think the dripping sarcasm in fairholme's reply is just fine.  fhfa came in with a brief that cited no precedent and tried to bootstrap a regulatory decision as the basis for supporting a conservatorship decision four years later.  it was a weak argument and it is time Ps start blasting the govt w/o mercy imo.

[rros]

You are good with words, s_berk.

[Eye4Valu]

Look, what's most important is what the judges had for breakfast that day.

[Guest cherzeca]

this is way surprising:  https://www.dropbox.com/s/nhj8j25a8ot90m8/perry%20fdic%20amicus.pdf?dl=0

 

fdic just filed an amicus with perry appeals court saying that while fhfa claims it is not the US govt, fdic wants appeals court to know that fdic considers itself US govt

 

this should have relevance in faitholme's case before court of federal claims

[Guest cherzeca]

class P supp reply brief:  https://www.dropbox.com/s/avgg1j07c5l8dsm/perry%20inst%20P%20reply%20supp%20brief.pdf?dl=0

 

edit:  this stuff is hard. the argument that suit for injunctive relief against treasury rests on a prior dc app ct case, usia v krc, which is a judge ginsburg decision. seems to work.  the argument against fhfa is strong and much more straightforward.

 

[rros]

this is way surprising:  https://www.dropbox.com/s/nhj8j25a8ot90m8/perry%20fdic%20amicus.pdf?dl=0

 

fdic just filed an amicus with perry appeals court saying that while fhfa claims it is not the US govt, fdic wants appeals court to know that fdic considers itself US govt

 

this should have relevance in faitholme's case before court of federal claims

 

Can the FDIC influence the court in that the FHFA has sovereign immunity in spite of FHFA itself not claiming it?

[Guest cherzeca]

this is way surprising:  https://www.dropbox.com/s/nhj8j25a8ot90m8/perry%20fdic%20amicus.pdf?dl=0

 

fdic just filed an amicus with perry appeals court saying that while fhfa claims it is not the US govt, fdic wants appeals court to know that fdic considers itself US govt

 

this should have relevance in faitholme's case before court of federal claims

 

Can the FDIC influence the court in that the FHFA has sovereign immunity in spite of FHFA itself not claiming it?

 

pretty weird, right?

 

no, if a party isn't claiming something, an amicus can't do it on the party's behalf.

 

it looks like amateur hour to the judges though...

[muscleman]

this is way surprising:  https://www.dropbox.com/s/nhj8j25a8ot90m8/perry%20fdic%20amicus.pdf?dl=0

 

fdic just filed an amicus with perry appeals court saying that while fhfa claims it is not the US govt, fdic wants appeals court to know that fdic considers itself US govt

 

this should have relevance in faitholme's case before court of federal claims

 

Can the FDIC influence the court in that the FHFA has sovereign immunity in spite of FHFA itself not claiming it?

 

pretty weird, right?

 

no, if a party isn't claiming something, an amicus can't do it on the party's behalf.

 

it looks like amateur hour to the judges though...

 

I have an amateur question. Why doesn't FHFA claim sovereign immunity? It seems so convenient for them to do so, and FDIC and probably some other guys high up wanted them to do so.

 

[Mephistopheles]

 

I have an amateur question. Why doesn't FHFA claim sovereign immunity? It seems so convenient for them to do so, and FDIC and probably some other guys high up wanted them to do so.

 

 

I have an amateur answer, so take it with a grain of salt. I think it's because it would hurt them in the Court of Claims. They've been trying to have their cake and eat it too with the "not the Govt/are the Govt" argument, and claiming immunity would destroy that argument.

[merkhet]

Class Plaintiffs eviscerated FHFA's reply, IMHO.

[Guest cherzeca]

 

I have an amateur question. Why doesn't FHFA claim sovereign immunity? It seems so convenient for them to do so, and FDIC and probably some other guys high up wanted them to do so.

 

 

I have an amateur answer, so take it with a grain of salt. I think it's because it would hurt them in the Court of Claims. They've been trying to have their cake and eat it too with the "not the Govt/are the Govt" argument, and claiming immunity would destroy that argument.

 

professional answer

[merkhet]

 

I have an amateur question. Why doesn't FHFA claim sovereign immunity? It seems so convenient for them to do so, and FDIC and probably some other guys high up wanted them to do so.

 

 

I have an amateur answer, so take it with a grain of salt. I think it's because it would hurt them in the Court of Claims. They've been trying to have their cake and eat it too with the "not the Govt/are the Govt" argument, and claiming immunity would destroy that argument.

 

professional answer

 

Agreed w/ @cherzeca

[Mephistopheles]

Thanks; I'm glad to have learned quite a bit about law thanks to this forum!

[Luke 532]

Thanks; I'm glad to have learned quite a bit about law thanks to this forum!

 

+1

[BeerBBQ]

another amateur Q: Why can't FHFA be the government in one court but not the Gov't in another court? Hume said FHFA needs it that way for him to lose - is that not a possibility?

[doughishere]

another amateur Q: Why can't FHFA be the government in one court but not the Gov't in another court? Hume said FHFA needs it that way for him to lose - is that not a possibility?

 

I feel that's the equivalent of trying someone as a minor only to loose then decide since that didnt work you want to try them as an adult.

 

 

The truth is that the government has painted themselves into a corner one way....then separately they have painted themselves into a corner another way and now they are trying to cross uses their arguments to get out of both corners....did the govt intend to do so or is it now just throwing shit onto the wall to see if it sticks?

[Guest cherzeca]

another amateur Q: Why can't FHFA be the government in one court but not the Gov't in another court? Hume said FHFA needs it that way for him to lose - is that not a possibility?

 

a govt agency can be the govt for purposes of one statute, and not for another statute. here, fhfa apparently believes it must be consistent before both federal court and court of claims that it is not the govt. presumably, fhfa thought at beginning of this case that its largest exposure was in court of claims for a taking, hence the no govt position. but by taking that position, it opens fhfa up to suit in federal court.  the federal courts have held that fhfa as conservator "steps into the shoes" of the GSEs, and the GSEs are clearly private parties, so i believe fhfa took the "right" position, and wasnt just trying to be strategic.  which is why fairholme is seeking to prove that fhfa is subject to direction of treasury in court of claims, and therefore both fhfa and treas can be sued there