Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Happy Holidays Skeptic7! You have been the most correct on this Board but someday the brilliance of the Constitution will win out.
If SCOTUS rules against the JB Admin in the CFPB case the open issue is whether the FHFA is just as unconstitutionally structured as the CFPB. Will SCOTUS handle this in the CFPB case or will the 5th Circuit rule on the REMAND of the Collins case leaving SCOTUS the decision to grant Cert or not. Unless SCOTUS definitively decides - the future preferences of the GSE cash flows most likely will be invalid. Congress did not have the power to structure the FHFA in a way to violate the Appropriations clause and the FHFA does not have the power to increase the liquidation preference under the SPSA and possibly a new NWS. This is different from Collins because the issue is the Congressional power of the purse and not the Unitary power of the President. Nothing may happen until it matters but for sure the JB Admin wont be able to pursue an Admin action. Otherwise as time passes - common shareholders will have more incentive to challenge the future operation of the SPSA since there are billions more that should be allocated to shareholders and not the UST.
Thanks Clarencebeaks21 and Robert.
Schiltz made a factual determination with no opportunity to argue the facts on whether Trump could have replaced Watt. Remember the DC Circuit overturned Kavanaugh and a three judge panel En Banc and ruled that the CFPB WAS CONSTITUTIONAL in January of 2018. It took Seila to give Trump the power to remove Kraninger who was openly competing against Mulvaney when Corduray resigned. Warren and other members of the Senate were openly challenging Trumps ability to appoint Mulvaney. Schiltz is clearly wrong on the facts - sad to think that this guy is going to be Chief Judge.
See the link on the DC Circuit PHH En Banc Decision:
https://orlans.com/en-banc-panel-surprises-phh-v-cfpb-decision/
Hi Glen, If you are right about Jacob Bernstein taking over the NEC then we should have high expectations. The Admin will get nothing done if the litigation continues and in fact the All American settlement hurts the case of the Admin since they will need SCOTUS to differentiate the FHFA from the CFPB
So the 5th Circuit does not matter?
Do you think the 5th Circuit will hear the appeal of Judge Ellison's Collins dismissal?
Hvp123 - check out the email timeline from the FCIC docs in this previous post.
Thanks for the post Hvp123 - I could not find the reference to GWB's words about not wanting it look like a nationalization - did I miss that in the article. Hindes is completely right - the US is a "just nation" and that is why common shareholders are not going to get screwed and why the JPS is going to be paid PAR.
Do you have the link to the GWB quote? Does he have a twitter? Do you think he knew about the Jason Thomas NEC Memo to UST Under Secretary Steele? What is really bad about the timing of the For Your Eyes Memo is the timeline because it was in the midst of negotiations with Shelby and Dodd to bail out the GSEs in March. Steele got the Memo and withing a couple of hours sent another email pushing for further negotiations knowing full well that the Barron's article was coming out over the weekend. This is while Mudd who was the CEO of Fannie was on a fund raising trip in HK thinking that the bail out was going to happen. It is all there in the email trail over that weekend as disclosed by the FCIC.
Nice Find Release Us! He did say he would be following the Collins case on remand so I wonder if he waits to see what the 5th Circuit does with the case until making a decision. We deserve a trial on the facts.
SInce he has two strikes against him already maybe he will do the right thing and give shareholders their Constitutional right to a trial on the facts.
Not much good has come from GWB and Harvard when it comes to the Constitution or ordinary people like small shareholders.
A big thank you and Happy Holidays Robert! Thank you so much for all your contributions.
Maybe 2023 will be our year - probably not - but we should never give up on the fight for truth and justice. Too many innocent young men and women have fought for the ideals of America and the imbedded truths of our Constitution.
The Kelly Suit is before Judge Davis at the US Court of Claims. Kelly is seeking new Counsel since his old Counsel was the same as Washington Federal which seemed to have gave up. It is a long shot to get to trial at this point. Dont know what Familymang thinks?
The Kelly Suit is before Judge Davis at the US Court of Claims. Kelly is seeking new Counsel since his old Counsel was the same as Washington Federal which seemed to have gave up. It is a long shot to get to trial at this point. Dont know what Familymang thinks?
The Mike Kelley Lawsuit includes the NEC Memo regarding the "benefits of nationalization". Mike Kelley lost $ 1 bn in JPS preferred and while providing financing for the south side of Chicago.
https://www.glenbradford.com/wp-content/uploads/2021/10/21-cv-01949-0001.pdf
Good Guy getting screwed by his own government.
This is 6 months after the National Economic Council sent a Memo to Hank's Undersecretary about the "benefits of nationalization" and leaked the Memo to Barron's on March 8, 2008. Bear Stearns failed the next week and the dominos started to fall leading to the run on GSE MBS spreads
https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf
Tender price for $ 1,000 note is $ 1,013. Paid out at PAR plus
https://www.fanniemae.com/newsroom/fannie-mae-news/tender-offer-for-any-and-all-certain-cas-notes
Why would the plaintiffs give up now? They have been litigation for almost 10 years - what is a couple of year's more. If SCOTUS lets Collins stand by itself they are just publishing a road map for future nationalizations of public private partnerships. The cost of equity will have to go up for any public capital for the risk of nationalization.
Judge Edith Jones is a realist who believes in the Constitution. It aint over until the 5th Circuit is done with this or until SCOTUS either grants Cert or decides on what the 5th Circuit rules.
Judge Thapar in the 6th is also a Constitutional realist but it is up to SCOTUS to grant Cert on Rop or not.
Thanks Robert and Rodney5. The CBO had the same opinion in its 2020 report:
https://www.cbo.gov/system/files?file=2020-12/56783-chapter-2.pdf
The difference is that the total 10 year deficit reduction dropped from 35.6 bn to 15.6 bn.
Robert - wouldn't the fact that the CBO thinks the GSE debt should be consolidated and that the obligation is mandatory help with the CFPB separation of powers violation determination?
Right again - Robert.
Did you catch this quote from Senator Toomey regarding the CFPB?
"To make matters worse, the CFPB implemented this controversial change in law by fiat—without even rulemaking. This overreach was possible because the CFPB is structured to be unaccountable to Congress. It can simply take funds from the Fed, which also is not subject to appropriations, thereby doubly insulating the CFPB from congressional appropriations and control. That’s why the Fifth Circuit recently found the CFPB unconstitutional, holding its funding violates the Appropriations Clause.
The court noted: “The Bureau’s perpetual insulation from Congress’s appropriations power . . . renders the Bureau ‘no longer dependent and, as a result, no longer accountable’ to Congress and, ultimately, to the people.”"
Got to believe that Edith Jones will want to overturn the District Court in Collins. Not sure if the others will agree.
https://www.banking.senate.gov/newsroom/minority/toomey-to-biden-admin-stop-abusing-authority-to-advance-misguided-liberal-legal-theory
Welcome! The FHFA has become the woke socialist manager of our housing sector by a perpetual conservatorship. The woke socialist playbook is wait for a crisis - team up with greedy wall street guys who will make money on the crisis - get Congress to pass emergency legislation - and then take private investor capital by controlling the companies in a perpetual conservatorship.
Now it is the housing sector - next up will be Farmer Mac and the Farm Credit System since it is also dependent on the implied full faith and credit of the UST. Wait until the woke socialist control all of rural America via woke requirements for getting loans from the local Farm Credit Associations.
Good Morning Glen,
Have you thought about how the CFPB Appropriations clause Cert petition by the Solicitor General may impact Admin action - shouldn't Congress decide how to spend UST assets rather than POTUS?
How about how the Student Debt relief Admin Action - isnt this kaput? Seems like in one case POTUS wants to forgive principal on UST assets and in another case POTUS wants to spend principal and interest on UST assets without Congress oversight?
Is Deese staying or going? How about Yellen?
Doesnt this mean more revenue for the GSEs ? As housing prices increase mortgage amounts increase and GSE fees increase in dollar terms. Guess the question is who makes the dough - UST or the private investors?
Good Morning Skeptic,
You have been on this Board for many years and actually you have been right the most because nothing has been done. So what is your opinion on what the JB Admin will do - nothing? It does not seem like they can turn on the NWS sweep again until they get close to the Capital rule min levels? What happens to the added profit from all of this extra cash being retained by the GSEs - $ 200bn with a 3% ROA is an extra $ 6 bn per year and 5% is $ 10 bn - are you saying that the politicians will just keep on finding ways to screw the investors?
Seriously WOW Donot -
Here is how a good guy in Chi-town got screwed and lost $ 1 bn while trying to make his hometown better
https://www.glenbradford.com/wp-content/uploads/2021/10/21-cv-01949-0001.pdf
WOW! Donot - Do you know about First Bank of Oak Park and Park National - didnt they have a condo development on Michigan Avenue that failed because of the GSE Preferred Stock?
Remember what Dr. Susan Wachter said at the end of her FCIC interview - the USG was pressuring investors to buy subprime. At the same time they were marketing JPS while they were discussing the benefits of nationalization.
Here are some excerpts from the Kelly Complaint:
41. On March 10, 2008, Barron’s published a critical article about Fannie Mae that
suggested the company was insolvent. The article was sourced by the White House with full
knowledge of the Treasury. As detailed by the Financial Crisis Inquiry Commission (“FCIC”), in
advance of the article, a member of the Bush administration sent the Undersecretary to the Treasury
(via email) a report identified as the source for the Barron’s article, stating that the report should
be used to “help inform potential internal Treasury discussions about the potential costs and
benefits of nationalization.”
42. On March 19, 2008, OFHEO (at Treasury’s behest) eased capital restraints on the
GSEs in exchange for the agreement of the GSEs to raise significant capital at some undetermined
point in the future. This change exacerbated the accumulation of high-risk holdings by the GSEs.
Requiring the GSEs to take such risky steps reveals, in hindsight, that the Government was laying
the groundwork to impose a conservatorship apart from whether conservatorship could be lawfully
Case 1:21-cv-01949-KCD Document 1 Filed 10/01/21 Page 17 of 45
- 15 -
imposed under HERA. As detailed by author Timothy Howard in The Mortgage Wars, the former
CFO of Fannie Mae later stated that Treasury Secretary Henry Paulson’s “action to not just allow
but actually encourage Fannie Mae and Freddie Mac to add new mortgages with no firm
commitment to raise capital to back them is understandable only if by then he had concluded that
Treasury would be able to use the road map from the GSE insolvency paper . . . to put the GSEs
into receivership or conservatorship.”
43. Although not publicly revealed until 2011, throughout the summer of 2008, the
Government continued to destabilize the GSEs through press leaks and leaks to Wall Street
executives and hedge fund managers that GSE conservatorship was imminent. This included a
meeting between Secretary Paulson and Wall Street executives before the passage of HERA in
which Secretary Paulson revealed that the GSEs would be placed into conservatorship. Barron’s
published a second article based on information from White House sources predicted an imminent
takeover of the GSEs on August 18, 2008. As discussed below, the Government takeover did not
occur immediately as Secretary Paulson tried to suggest in the leaks. Furthermore, there were no
statutory grounds to impose a conservatorship. But these leaks, as the Government intended,
caused GSE share price to drop significantly. This is classic governmental conduct preceding a
governmental nationalization or massive expropriation.
44. Throughout this period, Government officials and regulators made repeated public
statements, in contrast to what hedge funds were told in private, emphasizing the sound financial
status of the GSEs. On March 31, 2008, for example, the Director of OFHEO classified the GSEs
as adequately capitalized. On July 10, 2008, Secretary Paulson and Chairman of the Federal
Reserve Ben Bernanke testified before the House of Representatives that both GSEs were
adequately capitalized, and the Director of the OFHEO issued a news release stating the same.
Case 1:21-cv-01949-KCD Document 1 Filed 10/01/21 Page 18 of 45
- 16 -
Secretary Paulson specifically emphasized that there was no sudden deterioration in conditions at
the GSEs that motivated their support for HERA.
45. On July 24, 2008, with Treasury’s support, HERA was enacted. HERA established
the Federal Housing Finance Authority to regulate and supervise the GSEs. HERA gave the FHFA
greater regulatory authority than the OFHEO held under the 1992 Act.
46. Despite the government incentives discussed above, encouraging investors such as
the FBOP Subsidiaries and River Capital to purchase GSE preferred shares, proposed protection
for individual shareholders who had been holding preferred stock in Fannie Mae and Freddie Mac
did not pass Congress. Congressman Barney Frank, then chairman of the House Financial Services
Committee, stated that the treatment of preferred stocks in Fannie Mae and Freddie Mac arose
during the negotiations of the 2008 Act. Concern focused on community banks and individual
investors who had purchased preferred shares and would be affected by the legislation. In a letter
to constituents on the financial crisis dated October 11, 2008, Congressman Frank explained his
proposal: “At my urging, in order to ensure that community banks and other institutions holding
the preferred stock of Fannie Mae and Freddie Mac receive some protection, the bill allows losses
from such preferred stock to be treated as ordinary loss for tax purposes.” Congressman Frank
also explained why his proposal did not become law: “While I fought also
The Mike Kelly Lawsuit includes this fact pattern. Not only did he invest in the JPS he was helping the USG provide financing to the Southside and South Suburbs of Chicago. You knew about Mike Kelly didn't you? - didn't you say you know Chicago?
https://seekingalpha.com/article/4458446-new-cofc-gse-lawsuit-challenges-conservatorship
You are awesome Robert! Thank you so much! Check out the Rock Star opinion of Judge Edith Jones in the All American Case which was settled last week. No wonder the USG wanted to settle
https://www.ca5.uscourts.gov/opinions/pub/18/18-60302-CV2.pdf
The Retroactive relief discussion and the precedence from Collins starts on Page 41.
Edith Jones, Baron De Montesquieu and Alexander Hamilton will prove to be right some day. Keep up the good fight - thank you!!
Hi skeptic7 - Why do you think the USG settled this CFPB case? Looks like Gray is paying money but is getting credit for it. Wasn't this case about retroactive relief?
https://www.consumerfinancemonitor.com/2022/11/14/cfpb-lawsuit-against-all-american-check-cashing-ends-in-settlement/
There were a lot of lawsuits filed but not by JPS shareholders because we believed that the USG would abide by the rule of law, treat JPS shareholders like FDIC insured depository investors. If we knew that the UST had been discussing the " potential benefits of nationalization" while the IBs were selling us stock we could have brought a lawsuit much earlier.
This is an example of one of the lawsuits that were going on during this time period:
https://money.cnn.com/2013/08/01/news/companies/tourre-goldman-verdict/index.html
Whatever happened to Fabulous Fab?
Thank you for working on this Vancmike
I purchased FNMAT at $ 25 on May 8, 2008 exactly two months after the NEC sent a "for your eyes only" memo to the Undersecretary of the UST discussing the "benefits of nationalization" of the GSE's
https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-08_Treasury_Email_from_Hason_Thomas_to_Robert_Steel_Re_Source_document_for_Barrons_article_on_FNM.pdf
I believe there were $ 5 to $ 10 billion of JPS securities that were sold after this memo and not one investor knew that the NEC and the UST were considering nationalizing the GSEs only a few months earlier.
One week after this Memo was leaked to Barrons, Bear Stearns failed since confidence had been lost in the private MBS market.
Hi Robert, Thanks again for all your contributions to the cause.
You are exactly right regarding the relevance of the violation of the Article I Appropriations issues. See Page 19 and the following pages of the Plaintiffs Answer in the Collin's case on remand to Judge Ellison in the Southern District of Texas.
https://www.glenbradford.com/2022/08/fnma-fanniegate-1173/
Here is an excerpt - the key is that after Collin's the FHFA is clearly under the control of the Executive Branch and the only potential balance of power by Congress is the Appropriations Clause. See how the Plaintiffs see the CFPB structure is relevant to the FHFA:
Defendants attempt to distinguish FHFA from the CFPB based upon the relative scope of
these two agencies’ powers, but their arguments are strikingly similar to others that the Supreme
Court has already rejected in this very case. See Collins, 141 S. Ct. at 1784–85. If anything,
FHFA’s funding structure is more problematic than that of the CFPB. The CFPB is allowed to
collect and spend no more than 12% of the Federal Reserve’s budget. 12 U.S.C. § 549(a)(1). In
contrast, FHFA can impose any assessment on Fannie, Freddie, and the Federal Home Loan Banks
that its Director deems “sufficient to provide for reasonable costs . . . and expenses,” 12 U.S.C.
§ 4516(a), and “necessary . . . to maintain a working capital fund,” 12 U.S.C. § 4516(a)(3). In
practical terms, that amounts to an unlimited power to collect and spend money, for FHFA
regulates entities that have over $8 trillion of assets from which it may freely draw. Statement of
Sandra L. Thompson, FHFA Director, Before the House Comm. On Fin. Servs. (July 20, 2022)
https://bit.ly/3AnDFVq (last visited Aug. 15, 2022).
Defendants attempt to downplay Judge Jones’s concurrence in All American as a “minority
opinion,” FHFA Br. 24–25; Treas. Br. 21, but nothing in the en banc majority’s reasoning in that
case is inconsistent with the Jones concurrence. The considered views of five judges on the Fifth
Circuit deserve at least as much weight as Defendants’ contrary out-of-circuit precedents. That is
particularly so because Defendants’ cases rejected challenges to the funding structures of FHFA
and the CFPB as part of broader separation of powers analyses that the Supreme Court has since
repudiated. Compare, e.g., PHH Corp. v. CFPB, 881 F.3d 75, 77–80 (D.C. Cir. 2018) (en banc),
with Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2192 (2020). This Court should follow the Jones
concurrence, which is the only judicial opinion that has examined the Appropriations Clause issues
Case 4:16-cv-03113 Document 86 Filed on 08/15/22 in TXSD Page 27 of 31
24
before the Court with careful attention to the Constitution’s original public meaning.
Other cases Defendants cite have “no bearing on the constitutionality” of FHFA’s funding
structure. See All Am. Check Cashing, 33 F.4th at 39. The Court in OPM v. Richmond, 496 U.S.
414, 424 (1990), and Reeside v. Walker, 52 U.S. 272, 291 (1850), merely declined to grant
unauthorized monetary remedies. And Cincinnati Soap Co. v. United States, 301 U.S. 308, 321
(1937), upheld a tax while noting that the “interjection of the [appropriations] question . . . is
premature.” Similarly, Defendants’ “non-appropriated fund instrumentality” (NAFI) cases
involved disputes over the scope of the federal government’s waiver of sovereign immunity under
the Tucker Act; they do not concern Appropriations Clause objections of the sort presented here.
See, e.g., AINS, Inc. v. United States, 56 Fed. Cl. 522, 524 (2003)
There was a NYT article about Countrywide's Mozillo but more importantly was the comment of Dr. Susan Wachter in her FCIC interview. She talks about this in the las 5 minutes or so. When asked who in the USG pressured the GSEs to buy these mortgages she goes off the record to answer at the very end of the interview.
http://fcic-static.law.stanford.edu/cdn_media/fcic-audio/2010-10-06%20FCIC%20staff%20audiotape%20of%20interview%20with%20Susan%20Wachter,%20University%20of%20Pennsylvania.mp3
Hi Kthomp and Bobstruth
Check out the interview that Dr. Susan Wachter did with the FCIC. The question about who in the USG was pushing the GSE's came up at the end of the hour long interview. She was asked the question and then answered off the record. Listen to the last minute from 58:50.
http://fcic-static.law.stanford.edu/cdn_media/fcic-audio/2010-10-06%20FCIC%20staff%20audiotape%20of%20interview%20with%20Susan%20Wachter,%20University%20of%20Pennsylvania.mp3
Great interview - she predicted the next housing crisis would be due to an interest rate shock.
Hi Robert, Thank you for your reporting and all your contributions to this Board over the years. Do you know if we get a mistrial if the plaintiffs can opt for a judge decision in the new trial or if they are bound for another jury trial?. I did not realize that Fed jury decisions have to be unanimous - seems like almost an impossible goal for shareholders in DC
You guys are the smart ones - bought FNMAT at $25 on May 8, 2008.
Representative Patrick McHenry - New Chair of House Financial Services Committee on 5th Circuit CFPB Opinion:
https://republicans-financialservices.house.gov/news/documentsingle.aspx?DocumentID=408460
Kudos to your little birdie. The worse case outcome would be for SCOTUS somehow to parse out an Appropriations Clause violation for the CFPB and not say that the FHFA structure violates the Appropriations Clause. Lets see what happens - perhaps your little birdie is in the Jury Room right now whistling sweet nothings to the ladies deliberating our fate.
$1.6 bn is all we need because it is going to be appealed - more important is we need is a small victory and admissions of fact under oath that could be deemed relevant in other trials. We have evidence of arbitrary and unreasonable actions by an unappointed Director of an unconstitutionally structured agency. We need a judgement in our favor and the amount really does not matter much at this point because it will be appealed. Dont you expect an appeal? Dont you think the best case to win on appeal is a smaller judgement and $ 1.6 bn seems more than reasonable under these facts and circumstances?
Hamish Hume is a patriot and scholar! Whatever happens he came up with a legal strategy to get us a day in court despite all of the naysaying from skeptics and swamp creatures.