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We heard FHFA's "update" Friday. This topic was already going to be discussed at this Secondary 15 conference that Stevens is on his way to in New York. He says big discussion Monday on single security. He's seems a little excited about it, hmmm.
@DavidHStevens: Headed to NYC for #Secondary15 - biggest attendance in over a decade. See you there @MBAMortgage
@carney: @robertqking It seems like Boeis won judge over. I wouldn't be surprised if plaintiffs win. The reasoning in opinion will matter a lot.
Here's the rest of the doc if anyone is interested. Notice the attorneys at the the bottom, Olson, Cooper, Boies. If they don't stop them, I don't know who will! :)
Background
These consolidated appeals challenge the August 2012 decision by the Fed- eral Housing Finance Agency (“FHFA”), as conservator for Fannie Mae and Fred- die Mac, to amend the Companies’ then-four-year-old stock purchase agreement with the Department of the Treasury (“Treasury”). That 2012 amendment, known as the “Sweep Amendment,” fundamentally altered the structure of how Treasury would be compensated for the financial assistance it provided to the Companies following the financial crisis of 2008. Prior to the Sweep Amendment, if the Companies elected to pay cash dividends to Treasury, Treasury was entitled to re-
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 3 of 10
ceive a 10 percent annual dividend, paid quarterly, based on the amount of money that the Companies had received from Treasury; the Sweep Amendment replaced that 10 percent dividend with a “net-worth sweep,” in which Treasury would re- ceive the Companies’ entire net worth (minus a declining capital cushion) every quarter. In 2013 alone, Treasury collected $130 billion from the Companies under the Sweep Amendment.
Appellants—aggrieved investors in the Companies’ preferred stock—sued in the district court under various theories: (1) claims for injunctive relief under the APA brought by Perry Capital, Fairholme, and Arrowood; (2) common law claims seeking damages and injunctive relief for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty brought by Fairholme, Arrowood, and the Class Plaintiffs; and (3) takings claims under the Fifth Amendment for damages brought by the Class Plaintiffs. Following exten- sive briefing in which the Institutional Plaintiffs submitted opening briefs totaling 134 pages, and a reply brief totaling 50 pages, while the Class Plaintiffs submitted a single brief totaling 75 pages, the district court dismissed all claims in a 52-page decision. Appellants then brought this appeal from the district court’s order.
Appellants’ Separate Principal Briefs And Reply Briefs
Good cause exists for allowing Appellants to present their respective argu- ments in separate, non-overlapping principal briefs and reply briefs. Given the
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 4 of 10
unique nature of each set of claims, there is no danger that Appellants’ proposal will present the Court with repetitious submissions.
Under this proposal, the Institutional Plaintiffs would file a Principal Brief addressing their claims for injunctive relief under the APA and common law. The APA section of the Institutional Plaintiffs’ Brief would argue that FHFA violated the APA by exceeding its conservatorship authority under the Housing and Eco- nomic Recovery Act of 2008, Pub. L. No. 110-289 (“HERA”), because, among other things, FHFA’s decision to give all of Fannie Mae’s and Freddie Mac’s net worth to Treasury did not “preserve and conserve” the Companies’ assets, nor did it act to “put the Companies” in a “sound and solvent” condition. See 12 U.S.C. § 4617(b)(2)(D). The APA section also would argue that Treasury’s decision to execute the Sweep Amendment violated the APA because Treasury did so after its authority under HERA to act with respect to the Companies’ securities expired on December 31, 2009, 12 U.S.C. §§ 1455(l)(4), 1719(g)(4), and because Treasury acted arbitrarily and capriciously, 5 U.S.C. § 706(2)(A). The common law claims section of the Institutional Plaintiffs’ Brief would argue that the district court erred by dismissing the claim that, by executing the Sweep Amendment, FHFA breached fiduciary duties to the Companies’ shareholders. Perry Capital, Fairholme, and Ar- rowood would file a Joint Reply Brief limited to rebutting Appellees’ arguments only as they relate to the APA claims and common law claims.
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 5 of 10
The Class Plaintiffs also would submit a separate brief addressing their claim that the Sweep Amendment constituted a taking without just compensation in violation of the Fifth Amendment and their derivative and direct claims for damages under the common law. The Class Plaintiffs would submit a separate Re- ply Brief limited to rebutting Appellees’ arguments only as they relate to the tak- ings claims and common-law damages claims.
This briefing allocation not only avoids overlapping topics, but also supports efficiency and avoids presenting potentially adversarial legal theories in a single submission. First, the Institutional Plaintiffs worked together according to the dis- trict court’s coordinated briefing schedule, and submitted joint APA briefing, while the Class Plaintiffs coordinated briefing amongst themselves. The proposal pre- serves the parties’ working relationships in the district court and likely will result in more efficient briefing. Second, the Government has argued that the APA claims and takings claims rely on potentially adverse legal theories. In particular, the Government has argued that if a plaintiff makes a claim that “necessarily hing- es” on an “allegation that FHFA exceeded its statutory authority,” then “just com- pensation for a taking is not an available remedy.” See Defendant’s Motion to Dismiss at 17-18, Fairholme Funds, Inc. v. United States, No. 13-465C (Fed. Cl. Dec. 9, 2013), ECF No. 20 (quotation marks omitted). Although Appellants do not agree with this argument, if the Government were correct, a ruling in favor of the
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 6 of 10
Institutional Plaintiffs’ claims that Treasury and FHFA acted in excess of their statutory authority could prove harmful to the Class Plaintiffs’ takings claims. Providing the Class Plaintiffs with a separate brief on their takings claims will avoid any arguable tension that would arise within a single brief for all Appellants.
This Court has allowed parties to present separate briefs in appeals involving complex, non-overlapping issues like those presented here. See Order, Verizon v. FCC, No. 11-1355 (D.C. Cir. May 25, 2012) (allowing three different petitioners to each file separate briefs where the parties held conflicting positions); EME Homer City v. EPA, No. 11-1302 (D.C. Cir. Jan. 18, 2012) (allowing two petition- ers to each file separate briefs). Accordingly, Appellants submit that they should be allowed to file separate, non-overlapping Principal Briefs and Reply Briefs.
Word Allotments For Appellants’ Briefs
Treasury and FHFA have informed counsel that they intend to submit a sep- arate proposal in which each agency would submit separate Principal Briefs of 14,000 words each, giving Appellees Principal Briefs totaling 28,000 words.
Appellants propose that they file separate Principal Briefs totaling 28,000 words: the Institutional Plaintiffs would file a Principal brief totaling 17,000 words and a Reply Brief totaling 8,500 words; the Class Plaintiffs would file a Principal Brief totaling 11,000 words and a Reply Brief totaling 5,500 words. If the Court does not adopt Appellants’ proposal to file separate briefs, Appellants respectfully
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 7 of 10
propose to file a single Principal Brief of 28,000 words and a single Reply Brief of 14,000 words.
Permitting Appellants to file Principal Briefs totaling 28,000 words is ap- propriate for at least five reasons. First, these consolidated appeals concern sever- al independent issues—violations of the APA; breaches of contract and fiduciary duties; and takings without just compensation—each of which was extensively briefed in the district court. Second, Appellants here have divergent interests, see supra, and therefore may require additional words to articulate their unique posi- tions on particular issues. Third, the issues in this appeal implicate the federal government’s management of two of the most important institutions to the United States’ economy, and questions whether Treasury had, and continues to have, the legal authority to seize hundreds of billions of dollars from Fannie Mae and Fred- die Mac. Fourth, Appellants’ proposal to file two Principal Briefs totaling 28,000 words requests only half of what the Federal Rules of Appellate Procedure would otherwise permit for four separate groups of appellants. See Fed. R. App. P. 32(a)(7)(B)(i); D.C. Cir. R. 32(a). Fifth, Treasury and FHFA are proposing to file Principal Briefs totaling 28,000 words to defend their actions—Appellants are enti- tled to similar treatment.
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USCA Case #14-5243
Document #1532685
Filed: 01/16/2015 Page 8 of 10
Dated: January 16, 2015
/s/ Theodore B. Olson
Theodore B. Olson
Douglas R. Cox
Matthew D. McGill
GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036
Telephone: 202.955.8500 Facsimile: 202.467.0539
Janet M. Weiss
GIBSON, DUNN & CRUTCHER LLP 200 Park Avenue
New York, N.Y. 10166
Telephone: 212.351.3988
Facsimile: 212.351.5234
Counsel for Perry Capital LLC
/s/ Drew W. Marrocco
Drew W. Marrocco
DENTONS US LLP
1301 K Street, N.W., Suite 600, East Tower Washington, D.C. 20005
Telephone: 202.408.6400 Facsimile: 202.408.6399
Respectfully submitted,
/s/ Charles J. Cooper Charles J. Cooper
Brian W. Barnes
Howard Curtis Nielson, Jr Peter A. Patterson
David H. Thompson
COOPER & KIRK, PLLC
1523 New Hampshire Avenue, N.W. Washington, D.C. 20036 Telephone: 202.220.9600 Facsimile: 202.220.9601
Counsel for Fairholme Funds, Inc., et al.
Michael H. Barr
Richard M. Zuckerman Sandra D. Hauser
DENTONS US LLP
1221 Avenue of the Americas New York, N.Y. 10020 Telephone: 212.768.6700 Facsimile: 212.768.6800
???Counsel for Arrowood Indemnity Co., et al.
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 9 of 10
/s/ Hamish P.M. Hume
Hamish P.M. Hume
BOIES, SCHILLER & FLEXNER LLP 5301 Wisconsin Avenue, N.W.,
Suite 800
Washington, D.C. 20015
Telephone: 202-237-2727
Facsimile: 202-237-6131 hhume@bsfllp.com
David L. Wales
BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP
1285 Avenue of the Americas
New York, N.Y. 10019
Telephone: 212-554-1409
Facsimile: 212-554-1444
Blair A. Nicholas
David R. Kaplan
BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP
12481 High Bluff Drive, Suite 300
San Diego, CA 92130
Telephone: 858-793-0070
Facsimile: 858-793-0323 blairn@blbglaw.com davidk@blbglaw.com
Jay W. Eisenhofer
GRANT & EISENHOFER, PA 485 Lexington Avenue
New York, N.Y. 10017 Telephone: 646-722-8500 Facsimile: 646-722-8501 jeisenhofer@gelaw.com
Geoffrey C. Jarvis
Michael J. Barry
GRANT & EISENHOFER, PA 123 Justison Street Wilmington, DE 19801 Telephone: 302-622-7000 Facsimile: 302-622-7100 gjarvis@gelaw.com mbarry@gelaw.com
Lee D. Rudy
Eric L. Zagar
Matthew A. Goldstein
KESSLER TOPAZ MELTZER & CHECK, LLP
280 King of Prussia Road Radnor, PA 19087
Telephone: 610-667-7706 Facsimile: 610-667-7056
?Interim Co-Lead Class Counsel for Class Plaintiffs
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USCA Case #14-5243 Document #1532685 Filed: 01/16/2015 Page 10 of 10
CERTIFICATE OF SERVICE
I certify that on this 16th day of January, 2015, I caused the foregoing to be filed with the Clerk of the United States Court of Appeals for the D.C. Circuit us- ing the appellate CM/ECF system. Service was accomplished on the following persons by the appellate CM/ECF system:
Mark B. Stern
Alisa B. Klein
Abby Christine Wright
U.S. Department of Justice Civil Division, Appellate Staff 950 Pennsylvania Avenue, NW Washington, DC 20530-0001 Telephone: 202-514-2000 mark.stern@usdoj.gov alisa.klein@usdoj.gov abby.wright@usdoj.gov
Counsel for the U.S. Department of the Treasury and Secretary Jacob J. Lew
Howard N. Cayne
Asim Varma
David B. Bergman
ARNOLD & PORTER LLP 555 12th Street, N.W. Washington, D.C. 20004 Telephone: (202) 942-5000 Facsimile: (202) 942-5999 Howard.Cayne@aporter.com Asim.Varma@aporter.com David.Bergman@aporter.com
Counsel for Defendants Federal Housing Finance Agency and Director Melvin L. Watt
/s/ Theodore B. Olson Theodore B. Olson
"Appellants—aggrieved investors in the Companies’ preferred stock—sued in the district court under various theories: (1) claims for injunctive relief under the APA brought by Perry Capital, Fairholme, and Arrowood; (2) common law claims seeking damages and injunctive relief for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty brought by Fairholme, Arrowood, and the Class Plaintiffs; and (3) takings claims under the Fifth Amendment for damages brought by the Class Plaintiffs. Following exten- sive briefing in which the Institutional Plaintiffs submitted opening briefs totaling 134 pages, and a reply brief totaling 50 pages, while the Class Plaintiffs submitted a single brief totaling 75 pages, the district court dismissed all claims in a 52-page decision. Appellants then brought this appeal from the district court’s order."
This is from the Perry Capital appeal. With an injunction, I guess a big challenge is that they must show irreparable harm. Maybe this low pps is at least good for that! :)
Thanks for sending good questions, looking forward to hearing their answers, Monday!
Yes, get 'em! Can't wait to hear depositions!
Absolutely no change for Fannie or Freddie. There's no funny business going on here! :)
Don't most companies try not to delist until they are told they have to? How many intitiate the process, "please delist me?" :) voluntary delisting?
"A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets," said DeMarco.
http://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Directs-Delisting-of-Fannie-Mae-and-Freddie-Mac-Stock-from-New-York-Stock-Exchange.aspx
Delisting by Demarco was a big, planned out control move. Could the sweep even have been enacted if they were still on the NYSE at the time?
What to expect at MBA’s Secondary Market Conference
Thousands of mortgage professionals set to descend on NYC
Ben Lane
May 15, 2015
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Thousands of mortgage and secondary market professionals are set to descend on New York City this weekend as the industry gathers for the Mortgage Bankers Association’s National Secondary Market Conference 2015.
According to the MBA, the conference is designed for industry leaders and decision makers from residential and capital markets, including CEOs and senior-level executives, mortgage investors, investment bankers, rating agency professionals, risk managers, mortgage lenders, mortgage insurers, federal home loan bank members, regulators, real estate investment trusts, wholesale, correspondent and retail production executives, mortgage-backed securities investors, buyers and sellers of distressed assets, mortgage brokers and warehouse lenders.
The conference, taking place this year at the Marriott Marquis, features legendary NBC newsman Tom Brokaw as the keynote speaker. Brokaw will take the stage Monday morning with David Stevens, the president and chief executive officer of the MBA.
Last year, Stevens set off a firestorm with his remarks on minority borrowers. Soon after opening the conference last year, a Twitter war developed between Stevens and Josh Rosner, a well-known analyst at Graham, Fisher & Co. HousingWire publisher Paul Jackson recapped the Twitter war here.
Stevens also said last year that the government’s position in the housing industry hadn’t changed in four years.
“Here’s the problem. It is four years later and the government isn’t still just the backbone, but has become the entire central nervous system of the real estate finance market, Stevens said last year. “When the federal government is still backing nearly 90% of the mortgages made in today’s market, it’s apparent that the real estate finance system is stuck in the same place it was when I took this stage four years ago.”
Stevens is set to address the crowd at MBA Secondary at 8:30 a.m. Eastern Monday.
Other speakers of note include Doug Duncan, Fannie Mae’s senior vice president and chief economist; Leonard Kiefer, Freddie Mac’s deputy chief economist; Ted Tozer, the president of Ginnie Mae; and Benjamin Lawsky, the superintendent of the New York Department of Financial Services.
In its conference literature, the MBA said that the conference will feature discussions on the “hottest topics” in the second market, including:
Single-security platform: Hear from the Federal Housing Finance Agency and the GSEs on the latest details, including transition/exchange protocol for legacy securities, disclosures and other protocols
Private-label securities: Gain insight into opportunities on the horizon, while balancing risk retention considerations
MSR trends: Find out about shifts in buyer and seller behavior as rates change and the impact on valuation
Business strategies: Explore the resurgence of correspondent lending, trends in execution from best efforts to mandatory and home loan bank execution, plus the latest on non-QM lending
HousingWire will have boots on the ground in New York City and will be reporting throughout the conference. Check back often for the latest from MBA Secondary.
Also, follow along on Twitter with the hashtag #Secondary15.
http://www.housingwire.com/articles/33913-what-to-expect-at-mbas-secondary-market-conference?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire
Does the 3rd ammendment need to be resolved before single security?
I think that is somewhere in this 60 page doc. :)
http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Single%20Security%20Update%20final.pdf
Sweeney also wants to know when and how conservatorship will end.
Thanks Hvpatel, now I'm adding some questions about the single security update also!
Expecting a 50/50 reaction, just because it's hard to trust the gov with anything where they still have some say. Interesting timing that they released this update, officially yesterday. :)
Progress on developing a Single Security is also tied to the Enterprises’ Scorecard objective of developing the CSP, which is being designed to provide new infrastructure for most of the Enterprises’ current securitization functions for single-family mortgages. The Enterprises will use the CSP as the operational and technical platform through which they will issue Single Securities. In the second half of 2014, FHFA, the Enterprises, and the CSP development team began working to ensure that the CSP platform has the operational and system capabilities necessary to issue the Single Security. That work, which continues in 2015, is part of the broader effort to develop the Enterprises’ operational plans to integrate with the CSP.
Since issuing the RFI, FHFA has continued to provide input and direction to the Enterprises about developing the Single Security. In January 2015, FHFA issued the 2015 Scorecard, which directs the Enterprises to finalize the Single Security structure this year (including security features, disclosure standards, and related requirements) and to develop a plan to implement the Single Security in the market.
http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Single%20Security%20Update%20final.pdf
U.S. housing regulator moves closer to allowing single security
Reuters
10 minutes ago
FNMA
2.68
+0.75%
FMCC
2.58
+1.18%
Federal National Mortgage Asso …? Watchlist
2.68+0.02(0.75%)
OTC BB9:56AM EST
U.S. housing regulator moves closer to allowing single security Reuters 11 mins ago
WASHINGTON, May 15 (Reuters) - The regulator of U.S. housing finance firms Fannie Mae and Freddie Mac on Friday moved closer to allowing the two firms to issue a common security, rejecting a series of suggested changes to the agency's plan.
The Federal Housing Finance Agency hopes a single security will lower borrowing costs by increasing liquidity in the market for mortgage-backed securities. An FHFA official told reporters the plan had been generally well received by investors.
In a document released on Friday, the FHFA said it had received 23 letters from people in the industry that included advice and proposals over the regulator's initial plan for a single security, which was published in August.
The FHFA listed suggested technical changes to that plan, such as requiring that Fannie Mae and Freddie Mac make loan eligibility rules more similar, jointly guarantee each other's securities and standardize their legal documents. The FHFA rejected these and other suggested changes.
Currently Fannie Mae and Freddie Mac, which were taken over by the government in 2008 following a bailout, each issue their own securities. The FHFA aims to finalize its rules for a single security this year.
(Reporting by Jason Lange; Editing by Ted Botha)
• Funded the mortgage market with approximately $124 billion in liquidity in Q1 2015.
Pershing Square Capital Management, L.P.
1Q 2015 Quarterly Conference Call
Event Date: Monday, May 18, 2015
Event Time: 11:00am – 12:00pm EDT; 16:00-17:00 BST
US Toll-Free Participant Event Plus Dial-In Number: (844) 489-4527
Participant International Dial-In Number: (925) 418-7826
Conference ID 46690604
Questions for Bill and the investment team may be sent to ir@persq.com.
Following the call, a replay of the event will be available by audio webcast until Monday, June 1, 2015 at midnight EDT/Tuesday, June 2, 2015 at 5:00am BST.
After hours news at 5:15 on 51515! Just a hunch, don't start any rumors! :)
Here were some of Sims tweets. He just commented at the time on what was already out there.
SimsOnFinance: Hearing new rumors of NYSE uplisting tonight but no reason to believe them yet. $FNMA $FMCC
@SimsOnFinance: @NajmElie these are SEC filings that are searchable on the NYSE site, nothing more
Nice! Also, it seems like they would want to hold a status conference on the 20th? Then maybe we'll hear more about depositions!
Fannie lift? :)
Why are you so happy? Do you know something we don't? jk!
That is a theme song for this stock! Tough to just hold 'em.
$101 million and the Treasury can't have it! :)
Yes, I hope someone asks that CSP question! :)
Get your questions in before Monday!
Pershing Square Capital Management, L.P.
1Q 2015 Quarterly Conference Call
Event Date: Monday, May 18, 2015
Event Time: 11:00am – 12:00pm EDT; 16:00-17:00 BST
Dial-in information and a link to the live audio webcast will be available on this page Friday, May 15, 2015.
Questions for Bill and the investment team may be sent to ir@persq.com.
Following the call, a replay of the event will be available by audio webcast until Monday, June 1, 2015 at midnight EDT/Tuesday, June 2, 2015 at 5:00am BST.