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Just bored today, but I enjoy the constitutional, legal, and administrative law issues and of course real estate, finance, and economics. My other investments are boring and predictable.
Thursday and Friday I'm sort of busy but tomorrow I'll probably spend some time here.
This has got to be the most bizarre investment I've ever held and I've been investing in the GSES since 1988 and will continue holding until the end.
Seems like a lot of investors looking for quick silver have bolted to the sidelines by reducing their stakes or exiting all together.
So what are you investing in these days?
Don't worry, James Lockhart assured us that the CONservatorship was temporary !
$15B+ in lost capital rebuild since the initiation of the CRT program. Is this yet another example of the giveaway to the financial establishment?
There's still lots of unresolved Constitutional issues here, that likely requires the USSCT to answer.
The financial establishment wins again! https://www.fanniemae.com/newsroom/fannie-mae-news/results-tender-offer-any-and-all-certain-cas-notes
Nobody wants to be the individual and/or individuals to award billions of dollars to us evil mortgage banksters/hedge fund guys.
Take a look in the mirror, Skepi !
This is an important point that you need to understand, the Fannie Mae and Freddie Mac guarantee of the timely repayment of principal and interest to investors in their MBS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT.
EVERY SINGLE MBS issued has that statement conspicuously stated in BOLD on the front page of the Prospectus. Thus, the federal government is implicit NOT explicit.
Everyone in the financial world understands that given the $7.5T in outstanding GSE MBS and their importance to the US housing market and world economy that the US Government will come in and rescue GSE MBS Investors.
Since the FHFA and UST have Nationalized the GSES and have 100% control over them, including all their Economic Rights, the US federal government owns the GSES and therefore the guarantee of timely repayment of principal and interest to all GSE MBS Investors. The premise that Fannie Mae and Freddie Mac are private corporations has been destroyed by the actions of the federal government during the 14+ years of CONservatorship.
Any idea if Moody's, Fitch, and/or S&P, have ever mentioned the GSES nationalization as having a negative impact on the US Government Debt Market?
Collins and Seila Law were about reining in 2 federal agency Directors who were accountable to NO ONE. Both the CFPB and FHFA are self funded federal agencies and bypass the power of the purse.
These cases are about the US Constitution and the Seperation of Powers.
Changing the structure of the US Government in multi Billion dollar litigation just takes time.
Despite the exclusion of multiple evidentiary items, 4 out of 8 saw the injustice and victimization of the Plaintiff Shareholders.
The theft was SO big that res ipsa loquitur (the thing speaks for itself) applies.
Well, they should have a decision by the end of June (although as I recall Collins took until July). They will hear oral arguments and then make a decision.
Given the immediacy of the student loan forgiveness program on tens of millions of Americans, the Supremes will weigh in.
Even Nancy Pelosi said that the POTUS can't control the power of the purse (just like djt couldn't appropriate Billions for a wall he wanted).
THERE'S LIMITS ON THE POWER OF THE POTUS AND THE POWER OF THE PURSE BELONGS TO THE LEGISLATIVE BRANCH, NOT THE POTUS.
Here's an interesting commentary in yesterdays Washington Post (btw, todays acceptance of the USSCT of the 5th Circuit's Pittman decision throws the Major Questions Doctrine into the mix):
The Supreme Court's student loan case tests a president's powers
The six states challenging the administration's effort say relying on the pandemic "is a pretext to mask the President's true goal of fulfilling his campaign promise to erase student-loan debt." The law's purpose, they argue, "is to keep certain borrowers from falling into a worse position financially in relation to their student loans. Yet the Secretary uses it here to place tens of millions of borrowers in a better position by cancelling their loans en masse. The Act does not allow the Secretary to effectively transform federal student loans into grants."
Notably, among those who once agreed is Pelosi. "People think that the President of the United States has the power for debt forgiveness," she said in 2021. "He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress."
Maybe that's right; maybe it's wrong. Certainly, there's a distinction between redirecting funds that Congress has already appropriated, as Trump did in the case of the wall, and implementing a policy change that, because of the large sums involved in the student loan program, has enormous financial consequences.
Still, this presents an important question about administrations of both parties and their increasing reliance on emergency authorities to sidestep Congress and implement policy changes. Liberals who warned about autocratic tendencies when Trump invoked such powers ought to be just as concerned now, even if the policy is more to their liking.
Which gets to the even thornier issue in the case: Who, if anyone, has standing to challenge the White House action? Federal courts aren't supposed to issue advisory opinions; the Constitution gives them the authority to decide "cases" or "controversies." What this means is that a party bringing a case must show a "concrete" injury caused by the challenged action.
The paradox of the loan forgiveness case is that while many individuals benefit from the program and while its costs are enormous, it is difficult for any plaintiff to show the kind of particularized injury required to sue. The courts have limited the ability of individual taxpayers or even lawmakers to bring such cases. That more or less leaves states, which the Supreme Court has said are "entitled to special solicitude" in deciding whether they have standing.
In this case, the states argue that, among other things, Missouri has standing because a state-created nonprofit, Mohela, services loans from borrowers in all 50 states. Mohela, the states argue, stands to lose money as a result of the loan forgiveness program, which would harm Missouri directly by depriving it of revenue that Mohela is supposed to pay into a fund to support public colleges in the state.
This potential harm, the Biden administration contends in response, is too tangential and speculative to confer standing, despite a ruling by the federal appeals court letting the states proceed. "If the Eighth Circuit's contrary theory were taken to its logical conclusion," Solicitor General Elizabeth B. Prelogar told the court, "banks could sue anyone who causes financial harm to their borrowers, credit-card companies could sue anyone who causes financial harm to their customers, and governments could sue anyone who causes financial harm to taxpayers."
That seems right as a question of law - and standing isn't an issue on which the administration or a court can choose to look the other way. It has to be present for the case to proceed. But this hurdle is problematic as a matter of policy.
How can it be that a president has unreviewable power to effectively spend $400 billion - and maybe more - without the legality of his action being subject to challenge? Maybe the administration is correct about its interpretation of the Heroes Act, but somebody other than the administration ought to be able to make that determination. This is what courts are for, and what the rule of law is about.
The matter of state standing has gotten out of hand in recent years, as states have raced to courts to challenge administration policies with which they disagree, often manipulating where they file suit to have the case heard by a sympathetic judge.
In a case heard last month by the Supreme Court, Texas challenged the Biden administration's enforcement priorities about which undocumented immigrants to deport. Its injury, Texas claimed, was that a greater number of undocumented immigrants in the state would cause it to incur greater costs.
As Prelogar told the justices in that case, "That theory has no limiting principle. ... Federal courts should not now be transformed into open forums for each and every policy dispute between the states and the national government."
That's true, but it is also unsatisfying, especially in a case such as the loan forgiveness program, in which the impact on the federal treasury is so large and the authority so untested.
Claiming unreviewable executive authority to act in emergency situations is a dangerous impulse - no matter the president; no matter the party; no matter, even, how wise or well-intended the policy.
There is a 30 or 60 day window to challenge the Conservatorship in HERA and that would likely prevent the filing of a lawsuit challenging the inception of the 14+ year CONservatorship.
Once fraud is discovered, I believe that generally Plaintiffs have a "reasonable amount of time" once the fraud is revealed.
Another problem is that so much of the Smoking Gun Evidence that the Plaintiff Shareholders need to adequately proceed is excluded from trial due to the "Executive Privilege" and "National Security" exemptions.
Look at all the Smoking Guns excluded from Evidence and the Jury in Lamberth's trial.
Lamberth even quipped to the Gubmint lawyers (Arnold and Porter) about this problem when they tried to limit the Plaintiff Shareholders arguing a certain way during Motions in Limine.
I hear you and a strong dose of skepticism is appreciated, especially in light of the Collins decision, which sort of shocked many, as the USSCT allowed the tail to wag the dog in HERA, creating a Super Conservator with self dealing powers.
It's not far fetched that the Plaintiff Shareholders haven't asked the right question yet for the USSCT to consider.
It is possible for a majority of textualists on the USSCT to rule that HERA granted a federal agency super conservator powers yet still have the federal agency act in such a way as to violate the 5th Amendment, the Seperation of Powers, and/or the Major Questions Doctrine.
But I know you won't be holding your breath and remember, you'll be able to tell us how you forewarned everyone in the end !
We'll find out shortly if there is 4 or 5 Supremes that at least want to entertain the legal theory that the NWS was a violation of the 5th Amendment Takings Clause.
Perhaps the USSCT will determine in the end that the shareholders of GSES and possibly financial intermediaries backed by implicit and/or explicit Gubmint guarantees in conservatorships do not have protected property rights, even if Cert is granted.
I'd at least like the USSCT to explore the issue.
Seems to me it would be a bad idea to allow a self funded federal government agency to maintain a conservatorship into perpetuity so long as it's "in its best interests."
I think what the federal government eventually does here will be largely dependent on whether or not the courts endorse the status quo.
Seems Plaintiff Shareholders attorneys could even quote the CBO Annual Report.
"As a result, the Congressional Budget Office concluded, the institutions effectively became governmental entities whose operations should be reflected in the federal budget."
Seems especially relevant since THE ENTIRE FHFA ANNUAL OPERATING EXPENSES ARE PAID FOR BY THE PERPETUAL CONSERVATORSHIP!
So how do you think the story ends, if ever?
Ahh, the conflict, it seems the Administration is having a hard time with the reality that they have Nationalized the GSES continually since September 06, 2008.
"As a result, the Congressional Budget Office concluded, the institutions effectively became governmental entities whose operations should be reflected in the federal budget. By contrast, the Administration considers the GSEs to be nongovernmental entities. CBO projects that under current law, the mortgage guarantees issued by the GSEs will have a budgetary cost—that is, the cost of the guarantees is expected to exceed the fees received by the GSEs."
Where's the 3 MAJOR CREDIT WATCH AGENCIES S&P, MOODY'S, AND FITCH COMMENTING ON THE IMPACT OF THE NATIONALIZATIONS ON THE FEDERAL BALANCE SHEET?
"The recently unsealed documents only scratch the surface of the massive collection of documents that the government has used “executive privilege” to keep under wraps because they supposedly reveal the truth about the GSE bailout.
According to Taibbi, the series of now-unsealed depositions given in the shareholders’ lawsuits are just the beginning of an “11,000-document cache of government communications” relating to the governmental takeover of the GSEs.
Taibbi writes that the still-sealed documents do more than show Fannie and Freddie weren’t actually in the supposed “death spiral” that the government claimed when it modified its conservatorship agreement with Fannie and Freddie to claim all the profits from the GSEs."
The CFPB case will be interesting as both CFPB & FHFA HAD single unremovable at will Directors as well as currently posses CONGRESSIONALLY APPROPRIATED FUNDING BYPASS MECHANISMS:
"To insulate the agency from the whims of future politicians, Congress made two key decisions about its structure.
First, the Dodd-Frank Act authorizes the CFPB’s director to serve five-year terms after appointment by the president and confirmation by the Senate, and – until Seila Law – constrained the president from firing the director except for “inefficiency, neglect of duty, or malfeasance in office.” Second, the act places the agency’s funding in control of the Federal Reserve. Each year, the Fed can grant a budget request by the CFPB’s director of up to 12% of the Fed’s operating reserves. Although the director must comply with an annual audit by the comptroller general and submit regular reports to certain committees in Congress, the act shields the agency from oversight by the House and Senate Appropriations Committees."
https://www.scotusblog.com/2022/11/government-appeals-decision-against-consumer-financial-protection-bureau/
The Status Quo has so far saved the federal government from putting the $7.5T of MBS on the federal balance sheet. In theory, the "conservatorships" are "temporary".
Sandra and other politicians claim that they are preparing to exit the CONservatorships, but after beginning our 15TH YEAR and with the federal government enjoying 100% control over both the GSES operations as well as the Plaintiff Shareholders Economic Rights, some are skeptical to say the least.
By the way, the FHFA annual operating budget bypasses the US Congress's Powers of the Purse and is financed EXCLUSIVELY FROM THE GSES BALANCE SHEET!
The federal government needs Private Capital in a 1st Loss Position if they want to keep that $7.5T off the Liabilities side of the Federal Balance Sheet.
The Federal Reserve is also indirectly vested in the GSES remaining private corporations as GSE MBS can be an effective tool for influencing the long end of the Treasury Yield Curve.
We do SO MUCH risking our own personal private capital as Plaintiff Shareholders and the Gubmint treats us so badly.
Where's the love, Uncle Suggy ?
Buffett and Munger want to make sure that they feel absolutely confident about getting their investment capital returned in the future and the federal governments creation of the NWS and handling of the 14+ year CONservatorship could keep them away.
This is a pretty good interview Mr. B gave in the beginning of the year:
https://charlierose.com/videos/31221
If the federal government wants to continue its defacto nationalization of the GSES then they need to put the $7.2T on the federal balance sheet and compensate the Plaintiff Shareholders.
"The Net Worth Sweep eliminated
private shareholders in all but name, and made Treas-
ury the only shareholder of the Companies."
"This is not a case where company assets were trans-
ferred and all shareholder interests were uniformly
diluted. Pet.20–23. The government took over private
companies, made itself one of the shareholders, and then, years later, took all profit and liquidation distri-
bution rights for itself. Even the lone sentence of Pe-
titioners’ Complaint that the government excerpts
(from ¶2) shows this: What the United States expro-
priated was the Companies’ “net worth”—profits—“to
benefit the government at the expense of the Compa-
nies’ other shareholders.” See also supra 1–2. Petition-
ers were directly injured as a result, and this injury is
independent of any harm that the Companies may
have suffered.
The government ignores Petitioners’ arguments
that the Net Worth Sweep destroyed Petitioners’ prop-
erty interest in their stock and left them with worth-
less paper. Pet.26–27. The government similarly ig-
nores both how Collins confirmed the nature of this
harm to the private shareholders and how it recog-
nized the lack of any clear harm to the Companies.
Pet.24–25. The Companies’ operational assets were
not depleted; rather, their net worth was transferred
to Treasury, the government shareholder, at the direct
expense of Petitioners, whose equity was extinguished.
And to remedy this injury, any recovery must go to
shareholders.
The government also incorrectly claims that the
Net Worth Sweep “provided for the [Companies] to
transfer their quarterly net worth to Treasury in re-
turn for hundreds of billions of dollars in capital.”
BIO.15. This conflates what happened in 2008 with
what happened in 2012 (as the Federal Circuit did,
Pet.11). In 2012, when the government imposed the
Net Worth Sweep, it did not provide the Companies
with any new capital or investment. Rather, the gov-
ernment changed shareholders’ dividend and liquida-
tion rights, taking all for itself. Pet.5–6."
"Imagine two scenarios. First, the government grabs
all the stock certificates of private shareholders of a
company. Pet.23. Second, a government-controlled
company with both governmental and private share-
holders announces that, henceforth, whenever it is-
sues a dividend, it will pay it only to the government
shareholder. Pet.18–19. In both situations, it would be
clear that the shareholders have a direct claim for just
compensation for the taking of their rights. It would
not be clear whether the company itself, although ef-
fectively nationalized, suffered harm and thus had
any claim. But the shareholders obviously would. And,
in any event, “the right claimed by the shareholder”
would not be “one the corporation could itself have en-
forced.” Daily Income Fund, Inc. v. Fox, 464 U.S. 523,
529, 531 (1984).
Substantively, the Net Worth Sweep is the same—
but on an unprecedented scale. And substance is what
matters. See Stop the Beach Ren. v. Fla. Dep’t of Env.
Prot., 560 U.S. 702, 715 (2010) (“If a legislature or a
court declares that what was once an established right
of private property no longer exists, it has taken that
property, no less than if the State had physically ap-
propriated it or destroyed its value by regulation.”)
(emphasis omitted). The Net Worth Sweep “trans-
ferred the value of [the private shareholders’] prop-
erty rights in [the Companies] to Treasury,” which
“left nothing for” them. Collins v. Yellen, 141 S. Ct.
1761, 1779 (2021). That “injury” “flows directly from”
the Net Worth Sweep. Id. The shareholders thus have
a direct claim for just compensation for that transfer
of their rights—“to redress the United States’ wiping
out of [their] shares in” the Companies “by seizing for itself all earnings of the solvent Companies in perpe-
tuity.” Owl Creek Compl. ¶1, Pet.App.486; id. ¶114
(Count I: “the United States directly appropriated for
itself [their] property interests in the Junior Preferred
Stock ‘to benefit taxpayers.’”), Pet.App.526. Although
the Net Worth Sweep materially changed the nature
of the Companies—from “private firms” to national-
ized ones—it left them operational and (wildly) profit-
able. Pet.5, 25; Collins, 141 S. Ct. at 1774, 1777–78.
And the Companies in any event could not enforce pri-
vate shareholders’ ownership rights. Pet.29."
OWL CREEK ASIA I, L.P., et al.,
Petitioners,
v.
UNITED STATES OF AMERICA,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Federal Circuit
REPLY BRIEF FOR PETITIONERS
"Instead,the correct legal test for determining whether a shareholder may bring a direct Takings claim is much simpler than that. The test is whether the shareholder identified a property right that the shareholder owned, and whether the shareholder has alleged that such property right was taken by the government. If the shareholder has properly alleged those two things, then the shareholder has a right to bring a Takings claim – period. The body of state law addressing when state law claims are direct versus derivative does not govern that question.
The Government has no answer to this argument. In a two-page chart set forth on pages 21-22 of the Cacciapalle Petition, the Cacciapalle Class describes in precise detail the property rights owned by the private preferred shareholders before the Net Worth Sweep, and demonstrates how those property rights were
appropriated by the Government through the Net Worth Sweep. Cacciapalle Pet. at 21-22. The Government never addresses this chart or the allegations it summarizes.
Further, whatever arguments the Government might advance about the merits of the Takings claim, such arguments do not address the Federal Circuit’s error in foreclosing the ability of shareholders even to bring their claim. That decision is misguided and warrants review. Only the shareholders own the property rights
identified; only the shareholders can bring a claim that those rights have been Taken without payment of Just Compensation as required by the Fifth Amendment; and
only the shareholders can recover any Just Compensation owed for that Taking."
CONCLUSION
The Court should grant the Cacciapalle Petition."
REPLY BRIEF IN SUPPORT OF PETITION
FOR WRIT OF CERTIORARI
"To put it another way, the Government “forcibly took property worth vastly more than the debts these [Companies] owed, and failed to refund any of the difference. In some legal precincts that sort of behavior is called theft.” Hall, 51 F.4th at 196 (internal quotation marks omitted)."
"This Court has repeatedly established that the
Takings Clause “is addressed to every sort of interest
the citizen may possess.” United States v. Gen. Motors
Corp., 323 U.S. 373, 378 (1945). The Companies’ net
worth is one such interest. The Court has further
instructed that governments may burden those property interests in a manner consistent with
"background principles.” Lucas, 505 U.S. at 1029. But
what this Court has had “no occasion” to determine, Palazzolo v. Rhode Island, 533 U.S. 606, 629 (2001),
is under what circumstances statutory enactments
can so inhere in a property owner’s title as to deprive
him of any interest that could be taken.
The circuits are divided. On one side are the many
circuits that conduct a careful evaluation of history, tradition, and longstanding practice to ascertain the contours of a property interest in light of background
principles. On the other side is the Federal Circuit, which instead allows constitutional property interests to be redefined or abolished by the mere ipse dixit of
statutory enactments. Petitioner respectfully submits that now is the occasion to ensure that the Court with exclusive appellate jurisdiction over the Court of Federal Claims—and thus the lion’s share of takings
claims against the federal government—does not continue to disregard the Constitution’s protection of private property.
CONCLUSION
The Court should grant the petition for a writ
of certiorari."
PETITIONER’S REPLY BRIEF IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI
Filed at SCOTUS on 11/29/22
Here's what ipse dixit means:
Ipse dixit is a Latin phrase that translates to “he said it himself.” Ipse dixit means a person’s own assertion without relying on any authority or proof. It usually implies an assertion of authority, as in a statement is true based on the speaker’s authority and nothing else. In legal context the term is usually used to criticize arguments based solely upon authority and not backed by any proof.
I think familymang has a pert chart on the 4 or 5 major litigation cases.
Don't know how this 14+ year CONservatorship ends but for some reason I enjoy keeping up with the legal and FHFA/UST iterations. We'll see shortly if the "Nationalization" talk at orals in Collins was just a head fake or not.
The CFPB case is one that I'm watching, I appreciate any updates that you share on this board.
Senator Toomey will no longer be a Co-Chair on the SBC, I believe starting next month.
The government may be slightly disappointed that they didn't get the slam dunk in Lamberth's trial that they are use to getting in almost all the other courts to date.
A day of calculated risk aversion by the Defendants today?
or are you saying the Executive does stuff that is "lets say" 50-50 at best constitutional - so that it stands for a while --- until SCOTUS can rule later and say yes or no?
So, it wasn't you that ran up the JPS today, OR WAS IT !
They know what they did was wrong and that the shareholders are closing in !
Check out the JPS, is that you buying?
Presidents and their Executive Branch administrators too often act 1st to implement constitutionally dubious short term actions and then they will typically be out of office by the time the Supremes rule.
The USSCT has the power to draw lines in the sand so that future politicians don't infringe upon our Constitutional Rights, we'll see if that happens here.