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1:37 – Can there be any doubt that an action that doesn’t fit this purpose is against Congressional intent?
1:38 The net worth sweep exceeded the purpose defined powers (of HERA).
1:39 – The intended purpose of the net worth sweep was to deny ownership to private stockholders as evidenced by an internal memo within Treasury.
1:40 – Cooper states that the complaints are supported by the comments out of the mouths of the officers of the Treasury.
1:41 – In 2012, the housing market had recovered and Fannie and Freddie had returned to eye-popping profitability. The government knew this. Losses were going to be reversed. Within two weeks of the time that Fannie and Freddie became profitable on a record basis, the government decided the original deal was no longer good enough. Not just 10% interest and 80% of the equity.
1:36 The purpose of the action defines the scope of the authority. – Cooper
1:36 Cooper quotes
(D) Powers as conservator
The Agency may, as conservator, take such action as may be—
(i) necessary to put the regulated entity in a sound and solvent condition; and
(ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.
1:34 – The reason that a conservator comes into existence is for a purpose. The purpose is hardly irrelevant. If as the government says, a regulated entity were placed into a conservatorship for any purpose other than those stated, would there b
1:30 – Cooper says the motive for the net worth sweep is quite relevant. When conservatorship was announced, it was stated that the capital structure for Fannie and Freddie would remain in place. Private stockholders will continue to retain all rights in the stock’s worth. Fannie and Freddie’s stockholders are still in place and going forward there may be some value in that interest. (James Lockharts words)
If the conservatorship is successful the conservatorship will be terminated and the entities returned to the market.
1:29 Cooper responds that if he is correct on the facts, then he gets past the jurisdictional bar.
1:27 – Defendants do not contest the facts as presented by Cooper. The objective of the conservatorship is to stabilize the entities and return them to normal business operations.
Judge Pratt interrupts and says he needs to decide if he has subject matter jurisdiction.
1:26 – Not challenging the 1st and 2nd amendments. Just challenging the 2012 “net worth sweep”. Cooper wants to remind the court that the government decided the 10% interest and 80% of the common wasn’t good enough. The government decided they wanted 100% of all profits.
1:25 – Cooper says that they are not challenging the original deal with the 10% dividend and warrants for 79.9% of the common equity. They are challenging the 3rd Amendment.
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All the way to Supreme Court if we have to
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1:21 – Cooper says the net worth sweep exceeded the conservators powers and the court can hear the claim. There is no restraint for reviewing the claim if it exceeded the powers granted by Congress.
1:20 – Judge Pratt asks Mr. Cooper whether any other Judge besides Judge Wilkin has ruled that a conservator has exceeded it’s powers. Cooper responds that he is not aware of any other Judge.
1:19 – If the claim that the net worth sweep exceeds the authority of the conservator, then 4617F is not relevant and the court has power to review.
1:18 – Cooper discusses the central claim that the net worth sweep in the 3rd Amendment from 2012 exceeds the scope of the conservators powers under HERA.
1:17 – Charles Cooper steps up and says hello.
1:14 – Defendant says the plaintiff says the payment of cash dividends wasn’t necessary. Defendant says Lamberth already ruled on this. Again citing 4617F.
1:10 – Defendant mentions the “contemporaneous stock ownership rule” to say the issue has already been adjudicated by Lamberth.
1:07 – Second defendant is echoing some of the exact same claims as the first lawyer….
1:02 – Defendant basically tells Judge Pratt that he has no power to review conservators action.
1:00 – Next defense lawyer steps up and quotes 4617F. “No court can take any action to restrain the conservator.” Believes this analysis is straightforward.
Under 4617B, there is a list of powers that the conservator has to run the enterprise.
Judge Pratt interupts and tells him to slow down.
58:45 – Defendant claims that Treasury was the only game in town and that none of the plaintiffs have infused “penny number one” into the entities since the conservatorship.
(Side note: I thought they purchased stock in these companies. If they didn’t sell, then they were supporting the entities by holding their shares.)
55:00 – Defendant accepts that the entities have become massively profitable.
(Side note: Seems to contradict his argument that the SPSPA is keeping “Fannie and Freddie alive.”)
The "because they said so defense" LOL
48:35 – Defendant says that FHFA made a statement to Treasury that the companies’ net worth was below zero and that is why the infusions were made. Says plaintiff is trying to shut down the mechanism that is “keeping Fannie and Freddie alive.”
(Side note: Sounds like defendant is making the case that Fannie and Freddie are not profitable businesses. Easily refuted.)
46:30 – Judge Pratt tells the defendant that there is “no hurry” after defendant asks Judge to refer to the Lamberth ruling for a judgement. Defendant was saying that they want to end these claims as quickly as possible.
43:30 – Pratt asks defendant whether he should rely on Lamberth’s ruling. Defendant says yes, Judge Lamberth got the analysis correct and it was well-reasoned.
41:50 – Defendant keeps referring to Treasury “being on the hook” for massive amounts of money under the SPSPA. He says plaintiff refers to the massive profitability when saying this is irrelevant.
(Side note: Again, thanks to the defendant for making the case apparent.)
D.Sims
39:30 – Defendant talks about the need to keep Fannie and Freddie as private owned companies but essentially says this objective was trumped by the requirement to “protect the taxpayer.”
Prior posts David Sims I U
Court Room Video Link
Adding notes below.
This topic was modified 32 minutes ago by dpsims.
December 17, 2014 at 8:49 am #3338 REPLY
DPSIMS
Participant
7:00 minutes in, Judge Pratt asks if this case is as simple as “read the statute”?
10:30 – Winding up and liquidation mean two different things.
December 17, 2014 at 8:51 am #3339 REPLY
DPSIMS
Participant
12:30 Pratt asks the defendant if the shares held by the plaintiff have become property of the government. The defendant says that the shares are not property of the government, but that the government has all power.
December 17, 2014 at 8:56 am #3340 REPLY
DPSIMS
Participant
14:30 Defendant believes prayer for relief is “clearly barred”
December 17, 2014 at 8:57 am #3341 REPLY
DPSIMS
Participant
15:10 – Treasury has infused $187 billion into Fannie and Freddie
December 17, 2014 at 8:58 am #3342 REPLY
DPSIMS
Participant
15:50 – Defendant says that the Treasury is still on the hook to deliver 1/4 trillion to the GSEs if needed. This is the “government doing good.”
December 17, 2014 at 9:00 am #3343 REPLY
DPSIMS
Participant
17:24 – Defendant says “Plaintiffs are asking the court to shut down the agreement that was at the center of the bailouts for the past few years. Plaintiffs believe the agreement wasn’t fair.”
(Not sure why he is explaining this view point to the judge.)
December 17, 2014 at 9:02 am #3344 REPLY
DPSIMS
Participant
18:50 – Pratt interupts the Defendant to read Cooper’s words and says that the issue appears to be a constitutional claim which is why they are in the court of claims.
Defendant responds that this is incendiary rhetoric.
December 17, 2014 at 9:08 am #3345 REPLY
DPSIMS
Participant
21:49 – Defendant says that there is no termination date for this “open ended” infusion.
(Side note- I am not sure why this matters because we all know that losses are not infinite.)
December 17, 2014 at 9:10 am #3346 REPLY
DPSIMS
Participant
23:03 Defendant talks about how the plaintiff is not happy with the 3rd Amendment and claims that the companies were nationalized under the amendment. He claims to not know what the word “nationalize” even means. (REALLY?!)
December 17, 2014 at 9:12 am #3347 REPLY
DPSIMS
Participant
25:00 Judge Pratt asks the defendant about the meaning of the words conservator and receiver. Asks defendant if this also relates back to “read the statute.”
December 17, 2014 at 9:12 am #3348 EDIT | REPLY
ALWAYSWONDERING
Participant
Thanks so much David. The I itial and secondary link will not work for me. Updates are certainly appreciated.
December 17, 2014 at 9:13 am #3349 REPLY
DPSIMS
Participant
26:30 – Defendant essentially says that the court has ruled (Lamberth) that there is no liquidation happening because that cannot be reconciled with the fact that the entities are massively profitable.
December 17, 2014 at 9:17 am #3350 REPLY
DPSIMS
Participant
28:45 – Judge Pratt mentions the brief filed by the plaintiff and asks “At some point, what are the limitations on the power of Mr. Watt?”
Defendant responds by saying that this is incendiary and says we are talking about powers that go to the core. Talks about a 3rd party hired to manage a property and violates the law. This is “clearly” not in the heartland of what we are talking about. He then asks a bunch of questions like “how should the entity be financed?”
December 17, 2014 at 9:20 am #3351 EDIT | REPLY
ALWAYSWONDERING
Participant
Lol, defense is spinning!
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Discussion › Discovery and Litigation Updates › Iowa Court Room Video
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December 17, 2014 at 9:20 am #3352 REPLY
DPSIMS
Participant
31:30 – County of Sonoma – Judge Pratt talks about a tax levied by California on land-owners and Judge Wilkin said this was a violation. 9th circuit came along and made a ruling. Pratt took this as a message that Fannie and Freddie would not take any of these mortgages that had the tax into their portfolio. Is this demonstrative of the power of the conservator?
Defendent – Yes. Conservator made a business judgement. Certain types of loans were subject to a prior lien were excessively risky…
(Side note: Net worth sweep is a business judgement?)
December 17, 2014 at 9:23 am #3353 REPLY
DPSIMS
Participant
35:00 – Defendant says that the plaintiff claims the entities were not insolvent at the time the entities were placed into conservatorship. Defendant says that he will accept this, but later in the year, draws were made because the entities net worth dropped below $0.
(Side note: This seems like an opportunity for Cooper to say “gotcha” because the act of placing the entities into conservatorship actually caused them to book losses on the deferred tax assets.)
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Viewing 2 posts - 16 through 17 (of 17 total) ?12
Reply To: Iowa Court Room Video
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SUBMITLOGOUT
All comments appreciated. Glad people here are doing their part. Keep the comments coming !
Just the opinion of an unidentified assumed AUSA that may or may not even work in the same district the case is being heard.
That apple picked opinion to close is gibberish.