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Agree or disagree it’s well worth a read. Why? SCOTUS majority frequently accepts PLF Amicus Briefs.
Now…if only Chief Roberts would finally heed the word of the spokesman for Duluth Underwear and “get a pair.”
“Why not file said lawsuit yourself?”
Honestly that is probably just as valid an idea, as any other raised to date. In a way I wish I owned at least a single share so I would meet standing. But I do not. Best I can do is kibbutz.
Some limits are sensible, to avoid layering of risk in certain concentrations. But the objections I hear about are where Calabria set arbitrary portfolio caps via this “letter” without a heads-up. That’s a tough one to swallow for lenders. No lead time. Plus the cap is a ‘hard stop’ with a rolling 12-month calculation.
I am aware of some lenders cut out of these market segments right after Q2. So for the rest of the next 2 quarters in 2021, their sales must be $0 just to STAY AT the cap. Why? Again: no lead-time, and a 12-month denominator. Who besides North Korea regulates this way?
Lenders have forward commitments, not to mention their active open loans, and none were allowed to clear their pipelines or any other leeway. The letter authorizes Calabria to issue exceptions, but he didn’t. What an A$$clown.
Quote: “There is a paragraph on the bottom of Page 18 which will allow the UST to recognize 50% of expected profits if legislation is just INTRODUCED.”
Well, correction, I think:
It says the 50% would be recognized upon *Administrative* rule and policy. This means the Executive branch (President) including any federal agency actions.
It also says *no* recognition ($0) for legislation, *until* fully passed & signed!
Quote:”Maybe things have changed post Collins which will prompt JB to go back to the NWS (&) indefinite conservatorship?”
I don’t see justification for a reversion to the original NWS. Despite popular criticism, the Collins decision reaffirms that at minimum, FHFA *must* follow a reasoned decision-making process as Conservator, to avoid a finding of APA arbitrary action. So an excuse like “the devil made me do it” would not fly (but admittedly, the bar seems barely higher…). Bottom line, FHFA and Biden would need to state a real rational justification plus support it with an objectively verifiable record.
SCOTUS is not gonna fall for the “banana in the tailpipe” twice. Though they may still slip on a peel.
Regarding the Lucas case: IMO Lucas may not be the good fit it seems to be. It cuts both ways. Lucas only requires that a state regulation have some foothold in prior law or practice in situations where it completely destroys the value of an owner’s property. This ‘foothold’ (as set out in Scalia’s exception) ended up swallowing most of his rule, and was later used in both regulatory use takings & non-regulatory physical takings. Lucas ends up, at best, an ad hoc inquiry by the judge into whether the state’s background in such a total taking was well-rooted in some old custom, however esoteric. (I’m mildly surprised no one tried to use the locally-funded and sponsored witch trials in Salem MA). Scalia gave no guidance on its exception methodology, and ultimately this subjectivity would undercut the goal of Lucas, which was meant as a clear, bright line rule *in favor of* owners’ rights.
((If Hard cases make bad law, Lucas is IMO “Exhibit A”.))
Lucas tried to leap beyond the prior balancing approach of benefit v harm, but ultimately most Lucas cases still just become new varieties of Penn Central in their ad hoc subjectivity, so the state wins.
Fortunately —and I think for GSE shareholders , maybe also timely— the SCOTUS majority seems to agree that Takings law is in dire need of revision.
Professor Richard Epstein’s recent blog on the June 2021 Cedar Point vs. Hassid takings case is (IMO) *spot-on*. It doesn’t go all the way to pre-New Deal law, but it sure has all the hallmarks of a turning point. I agree 90% with Epstein. I think the next case or two in Takings will be selected specifically to overrule Penn Central (thus also Lucas). Penn Central was wrong then and is wrong today. Whether this change comes in time to aid shareholders is anyone’s guess. GLTA.
Yet, good news on Wells and its kind:
Before Dodd-Frank: TBTF (Too Big to Fail)
After Dodd-Frank:TBTB(Too Big?Too Bad!)
Is Peter North still chairman of the broad?
Now what? Who exactly is going to enforce this ruling?
I think it depends mainly on the court. And the claim.
Take for example the CFC: the Tucker Act —*plus* later amendments in the 70s—allow a money judgment vs USG, *plus* allows the CFC to order any federal internal accounting adjustments that may be necessary to facilitate resolution of judgment. This latter ability is rarely mentioned in popular media but it is critical. It’s a ‘soft touch’ enforcement power, but the legal effect is to supersede any other statutory shield. How? No Agency literally has any power unless Congress gives it, and, the CFC is an Article I (Congressional) court. So It is not unusual at all for one federal agency to sue another in the CFC, which is the master of its domain. Cheers.
Quote: “Make any ruling you want...it's UNENFORCEABLE. “
Can you give an example of a final judgment that you think will be likely unenforceable, and the reasons why?
Maybe you were just expressing doubt on a more general level? And if that’s the case —so be it. You clearly are not alone. Just wondering if you had more specifics to say. TIA.
Maybe. The fact remains that the original post did say "HUGE".
That's a good point, one not made by the original poster.
kthomp19 is correct on all points again
I don’t know if this is big news. The CBO has already been accounting for GSEs in its federal budgetary models since 2009.
https://www.cbo.gov/publication/25019
Thank you!
I agree with everything you said
Thanks for the detailed response. Your last point raises my biggest curiosity:
Quote: The juniors have the ability to just refuse all offers and stay above the existing and new common shares in the capital stack; that's their main advantage here.
If Conservator’s rights include (for now) the JPS shareholders’ certificate right of a 2/3 vote, then, cannot FHFA today simply direct each GSE’s board to cancel JPS?
Perhaps some compensation might be fairly paid, but, this choice would seem a purely discretionary one. Because, again, JPS shareholders lack voting rights, hence any such right (e.g., within a contract) has been temporarily displaced. In place of JPS holders, the FHFA-C would vote, and I can guess which way the vote would go.
I agree. So in a scenario where a 2/3 vote by jr preferred shareholders is undertaken, is that happening post-conservatorship? If indeed all voting rights have transferred, then it seems to me that to revert voting rights to any currentbshareholders, the Conservatorship must end. The Director also appears to have enough power to initiate a prelim vote so that a firm commitment to end the Cship can be executed contingent on final vote outcome, and so forth.
kthomp19
Have you an opinion whether HERA’s succession clause —which appears to transfer to Conservator “all … rights…of shareholders”— included voting rights?
I am new to the board so apologies in advance if this conversation has passed.
I should note I practiced law for a decade. But I am now quasi-retired. I think I have a grasp of the legal issues and have reached some early conclusions; but I would like to hear a few of your & others’ thoughts without me first muddying the waters or stepping in carelessly.
I need a day or so to chew on it; will let you know.
Yeah I saw this too. Interesting. FNMA is clearly still in the best position to lead the market with these type of automation and process fulfillment advances. Before 9/30, interesting timing.
FWIW, (all of us being ‘just some guy on the internet’) I am hearing both GSEs are targeting a *substantial* increase in single family aff housing total volume, despite the current Calabria-signed letter “caps”in certain buckets. That to me pretty much confirms the new Director is going to clear the field of many of the steaming divots left by our ol’ pasture horse Calabria.
See prior post’s question you avoided:
1) Why can Congress not use its template for rescue of Industry X, for industry Y?
2) Again. Simply Explain: Why?
3) How does any link you provided lend any support to your sweeping conclusion?
Here’s an idea I just shared with my 10-year old. I bequeath it to your generation as well. (I presuppose, if errantly, at least not haphazardly, that you are over 10.)
So, if you want to read and repeat what others say, OK fine. Just be careful. When you make a false claim, say, for example, a haphazard exaggeration tittering on a bald presupposition, don’t be surprised if you end up both examining and exemplifying those infamous first 3 letters in assume.
“FDIC laws are applied only to FDIC and Banks.”
No one claimed they were not.
“HERA is copy of FDIC laws. “
False. If HERA was a copy, it would be identical.
“There are so many articles about this.”
Which “article” says HERA was identical? None.
Your premise, then, is that an Industry X regulatory and recovery statute is *never* a reasonable basis for a Industry Y?
If merely parroting and reparroting a fact is the same as a well-articulated reasoning about the logical relevancy of that fact in relation to to the claim made, then you should quit while you are ahead.
“ Plaintiffs, defendants and Judges have discussed this aspect. Please read DC appeal court's Perry ruling.”
Which statement by the US Appeals Court for The DC Circuit are you citing?
“The most contentious NWS challenge is based on incidental powers of Conservators that is copied from FDIC laws.”
Which claim? How so?
Copied? False. Before repeating conclusions, reach them yourself and explain them. Absent that it is a waste of any rational adult’s time.
“It was completely patterned…”
Well, Completely is a stretch. What about the “patterning” after FIRREA?
But your post was the least false of all the overly assumptive fallacious replies. Hey. That’s something.
Well when the absence of explanation is the same as explanation, I’ll join the tune.
Who claimed FNMA is AIG? To be clear.
BCDE,
“Not sure why the attorneys for plaintiff have never challenged the use of banking laws (HERA) to regulate insurance companies (FnF)”
I don’t know that HERA is “banking law”. HERA covers Government Sponsored Entities, which is a term defined very specifically. At this time the GSEs under HERA are the Federal Home Loan Banks (FHLBs), FNMA and FHLMC.
The FHLBs are not necessarily fundamentally dissimilar, either. In the GFC the Seattle FHLB bank effectively fell into a zone of insolvency. So, it was merged administratively into the Des Moines FHLB. How did it fail? Seattle FHLB had too much book exposure with a single partner you may have heard of: Washington Mutual.
Yes. AIG commons fairly wiped out. Treasury took 92% of commons, so that’s roughly akin to diluting my value of 100 shares downward to 10 shares.
Treasury also took a 20% preferred stake in 2 of the spin-off entities mandated by the Fed Reserve oversight.
The company in large was resuscitated but a long term shareholder would have had to endure this.
https://projects.propublica.org/bailout/entities/8-aig
Agree with both ideas
But I would mention:
1a.
The intelligible principle test is under serious doubt as to how much longer it can survive. The more fundamental the liberty, the higher the scrutiny will be.
1b. The last relevant case (Gundy) was decided in a rare 8-vote holding, 5-3, and for 2 reasons. One, Kavanaugh was not affirmed at Orals so he could not join the dissent. Two, Gorsuch only joined in the Gundy concurrence (IMO) because the alternative 4-4 outcome would have been published as a per curiam opinion, i.e. 2 pages long, with *neither side* explaining their thought process. Instead Gorsuch took a gambit—yielding the ground but signaling a future fight may yet loom.
1c. SCOTUS since Gundy has - oddly- universally denied all Cert requests on several nationally critical nondelegation challenges. Several liberty cases have been rejected. Why? I don’t know. But its clearly not because of lack of interest, and not for lack of majority control. One idea is they are waiting for ‘percolation’ - one or more lower courts to try out one of the new tests. Relatedly, when to do so? Maybe a case where Congressional blame can be mitigated under the circumstances. A 100-year old law updated in a rush to avoid a 2nd Great Depression might just suffice.
2. Yes. Agree. But that’s not as much a stretch as it may seem. Its often a last resort because obviously you’d prefer to first pursue a more traditional remedy path.
I don’t know how Ripeness specifically has affected any single case so far. I don’t follow them that closely.
Ripeness started to be deployed by courts about 75 years ago; after a series of wrong decisions, they were forced to misread the Fifth Amendment as if it was a promise to pay (contract), when in fact it was always meant as a structural limit on government power over individual liberty (taking).
Happily, and most recently, SCOTUS majority is clearly trending *against ripeness*. So IMO ripeness is unlikely to remain a fatal bar to legitimate property Takings claims.
And good riddance to bad rubbish.
https://www.cato.org/sites/cato.org/files/serials/files/supreme-court-review/2013/9/hawley.pdf
(a)”if you think derivative claim would not go through, why the defendants in the august 4th call were arguing for derivative claim and against direct claim? or were they just arguing against dirct claim and avoided the topic of derivative claim?”
Ds pounded away (saying ‘Ps claims are deriv’) because the vast majority of courts agree; most courts hold that HERA bars Deriv claims. FWIW, one P (Arrow?) did argue a direct claim. But IMO that Ps atty mischaracterized his position by omitting a key part of case precedent.
(b) has anyone filed for "due process" claim if there is such a thing?
Yes—Sort of. Due Process can be part of a nondelegation doctrine (“ND”) violation. Rop lost at district on ND (see Claim IV); but the Ps can try to motion for leave to amend, on appeal.
(c) how do you think this will resolve? if there is a resolution.
TBH, no idea. It’s a ‘species of one’. But if there is a ‘wild card’ out there yet to play, it’s the nondelegation doctrine, and/or due process within it. Three current justices have publicly proposed their own versions of a new ND test, in recent years. (Reading the dissent in Gundy is a very decent place to start.) Of the 3, Alito’s test is the least disruptive to precedent (IMO). So I wonder if Rogers assigning the Collins opinion to Alito might, in a way, be anticipating a future round of mostly the same facts —but —a much different Const claim? Odds are probably 200 to 1 against. But…What if? Crazy times.
Not sure this answers your Q in full.
I think reading the entire statute together, a question about “Person” becomes a non-question, as Congress designed HERA to specifically preclude the possibility of FHFA v FHFA. Other opinions vary, but my view is This means HERA makes some very difficult and silent assumptions. Thus in my view it means HERA may also violate due process.
I think no one in Congress predicted the NWS so there is no good HERA reading that allows for a suit in such a case. But that very fact of the lack of a pathway is, in my mind, a problem for the government.
Robert, you said
“I'm pretty sure that the SCOTUS said that the anti-injunction and succession clauses DO NOT APPLY TO CONSTITUTIONAL VIOLATIONS SUFFERED BY THE SHAREHOLDERS. That seems to naturally include the 5th Amendment Takings Clause.”
I disagree. In the Separation of Powers briefs of Collins, the Amicus’ for the US Gov had argued that HERA transferred *all rights* to Conservator. This was IMO a ‘fat pitch’ for Alito (easy to refute). Alito counters that the Amicus’ assertion cannot be facially true, because HERA clearly transfers only shareholder rights and interests “with respect to the company”.
But Alito does not say HERA does not bar any Constitutional suit. Rather he refutes (*narrowly*) by showing *one* right that lies outside “with respect to a company” because it is shared by shareholders and non-shareholders alike (i.e., a generalized grievance to vindicate a public interest: separation of powers).
But he goes no further. Why?
(1) To avoid a Constitutional conflict he must read HERA narrowly, and, apply HERA strictly to the case facts/dispute.
(2) For judicial economy. He already knew the APA claim would be barred at the back door (Anti-Injunction).
(3) *IMO* also because the APA Claim hung by the Direct/Deriv outcome—a hornets’ nest requiring muddy state law.
(4) Alito also knows that other GSE Constitutional claims exist out there. And he knows that while the Fifth Amendment guarantees a right to $ for private property taken for a public use, the Constitution does *not* (emphasis) guarantee access to a court to sue on such grounds. The APA Claim invariably would affect these claims.
(3) By avoiding further HERA analysis, in my mind, Alito has left a door open for a Due Process claim. Due process requires notice & hearing. If Congress entirely bars the door to Courts where an Agency can act with indefinite, near-impunity power with respect to private property, it raises Due Process issues. HERA bars Derivative claims (IMO), and nearly all such claims in fact have been so barred. But this is also why, analyzing the NWS, the Rop court ‘pulled from its own hat— a Conflict of Interest exception —to specifically avoid a Due Process problem. And that was BEFORE Collins found FHFA to have super powers.
Final Thought:
In the 8/4 Oral, a judge lobs this same issue (another ‘fat pitch’) to a Ps atty — I think it was Arrowood’s guy—asking the Atty how the Rop court resolved the Deriv question. The appellate judge really teed it up … and yet the Ps atty still sliced it, pretty badly. The atty recovered somewhat but mostly missed the ‘new fairway’ he was being steered toward. Again…IMO.
-C. Beaks III, esq