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Too bad Toomey is retiring, this whole 14 year CONservatorship really doesn't fly with him. Unfortunately, my Senator, Mark Warner probably told SM to keep the Sweep going through the Liquidation Preference when they had dinner and went bike riding down by the Potomac in the previous administrations final months.
One thing that I will say is during the 14 year CONservatorship, Fannie and Freddie have become even more irreplaceable in the Secondary Mortgage Market and the federal government implicit guarantee on the $7T+ of GSE MBS has apparently become a nice tool for the Federal Reserve to manipulate a traditionally difficult area of the yield curve, LONG TERM INTEREST RATES!
So, I don't think these giants are going anywhere anytime soon and YES THEY NEED SOME 1ST LOSS PRIVATE CAPITAL, thanks to the transfer of $100's of billions into the Treasury IN RETURN FOR NOTHING!
HeeeHeee! Bro, you gotta come to DC for the Lamberth case if it goes to trial, open offer to buy you and your friend lunch.
Plus, I'll advise on all the cool things to do.
My personal favorite, the US CONSTITUTION on Constitution Avenue. Let's hope the 9 Justices take a look at it prior to making a decision on the Petition!
Really? Explained it? Are you maintaining that the Net Worth Sweep will hold up against all legal attacks?
Don't worry the fulcrum security will protect you !
"We are not aware of a single decision by this Court
that could support the conclusion that a person who owns
property that was taken by the government lacks standing
to bring a Takings claim, or is somehow otherwise
precluded from bringing such a claim. It should make
no difference that the property owned is the right to
receive future dividends as a shareholder in a company.
When that property has been taken in its entirety for the
benefit of the government, the shareholder must have a right to bring a claim under the Takings Clause. Holding
otherwise is a drastic abdication of the extent to which
the Takings Clause protects the property rights owned
by shareholders. Such a significant decision should not
be made without review by this Court."
Justice Gorsuch on the importance of the federal judiciary enforcing our Bill of Rights in America:
"North Korea has an excellent Bill of Rights," he offers.
"They promise all the rights we have, and a bunch more. Right to free medical care, right to free education, and my favorite, a right to relaxation."
"Now, ask political prisoners how is that working out?" he queries.
For Gorsuch, those promises "aren't worth the paper they're written on" because there aren't structures to keep the power "from flowing into one set of hands."
https://www.google.com/amp/s/amp.cnn.com/cnn/2019/09/10/politics/neil-gorsuch-precedent-north-korea-washington-nationals-trump/index.html
Good stuff from the Learned Brother, Hamish, in explaining one of the previous courts mistaken assumption upon which they based their decision (btw, Nice analogy to Lucas!):"First, the
Net Worth Sweep did not “indirectly dilute the value”
of petitioners’ property rights; it nullified them in their
entirety, and transferred their value to the Treasury.
Before the Net Worth Sweep, petitioners held rights that
had value because of the potential for future dividends – in
particular, they would have considerable value when and if
the Treasury ever sought to receive dividends in excess of
their 10% senior preferred dividend. After the Net Worth
Sweep, petitioners had no rights – zero. No matter how
much money the GSEs might make, 100% of it must go
to Treasury. This government action did not “indirectly
dilute the value” of petitioners’ property; it effected a total
deprivation of 100% of the value of petitioners’ property,
and thus was a categorical taking under this Court’s
decision in Lucas v. South Carolina Coastal Comm’n,
505 U.S. 1003 (1992).
Second, petitioners did not allege an “overpayment”
by the GSEs. The words “overpayment” and “overpaid”
cannot be found in petitioners’ complaint. And that is for
good reason: when the GSEs were forced by the FHFA to
agree to the Net Worth Sweep, they were not “paying” for
anything; they were simply being told to give away 100%
of their future net worth to the Treasury, so that nothing
could ever go to private shareholders such as petitioners,
no matter what. That is not an “overpayment.” It is a
direct taking of 100% of the property held by private
shareholders.
In any event, it does not matter whether the
government takes private property directly, indirectly,
or via a forced “overpayment” by a related party, so long
as the property is taken. If A owes a stream of future
payments to B, it makes no difference whether the
government passes an ordinance requiring A to pay all
future amounts to the government, or instead passes an
ordinance expressly appropriating B’s right to the future
stream of payments from A. Either way, the impact is the
same: all of the future payments that would have gone to
B are instead going to the government. Thus, either way,
B has a right to bring a claim under the Takings Clause.
We are not aware of a single decision by this Court
that could support the conclusion that a person who owns
property that was taken by the government lacks standing
to bring a Takings claim, or is somehow otherwise
precluded from bringing such a claim. It should make
no difference that the property owned is the right to
receive future dividends as a shareholder in a company.
When that property has been taken in its entirety for the
benefit of the government, the shareholder must have a right to bring a claim under the Takings Clause. Holding
otherwise is a drastic abdication of the extent to which
the Takings Clause protects the property rights owned
by shareholders. Such a significant decision should not
be made without review by this Court.
If the Federal Circuit’s decision were correct, that
would mean that the Government could promulgate a rule
requiring 100% of future dividends from any company to
be paid directly to the Treasury, and the shareholders of
that company would have no right to bring a claim for just
compensation under the Takings Clause. That cannot be
correct, and should not be allowed to stand.
Hard to tell exactly what the Supremes will do. Most casual observers with limited knowledge of what is really going on here may think, "Wow, free money for the Treasury and punish the evil mortgage banksters shareholders at the same time, that's a Win/Win Situation !"
The problem of course with that type of thinking is that the Judiciary will be green lighting the future unilateral use of the Net Worth Swipe by the federal government, and future corporate boards will refuse government financial assistance during the next inevitable financial crisis.
Banana Republics, Venezuela, and Zimbabwe haven't done their citizens any favors by Nationalizing their big corporations and usually end up with shortages of food, medicine, gas, and other life necessities.
Merika, my kinda country !
Be patient, multi Billion dollar litigation against an adversary with unlimited time and resources can be daunting at times, but for our sake and most importantly that of our posterity and the future of capitalism in America the status quo should not stand.
Nice!, "We are not aware of a single decision by this Court
that could support the conclusion that a person who owns
property that was taken by the government lacks standing
to bring a Takings claim, or is somehow otherwise
precluded from bringing such a claim. It should make
no difference that the property owned is the right to
receive future dividends as a shareholder in a company.
When that property has been taken in its entirety for the
benefit of the government, the shareholder must have a right to bring a claim under the Takings Clause. Holding
otherwise is a drastic abdication of the extent to which
the Takings Clause protects the property rights owned
by shareholders. Such a significant decision should not
be made without review by this Court.
If the Federal Circuit’s decision were correct, that
would mean that the Government could promulgate a rule
requiring 100% of future dividends from any company to
be paid directly to the Treasury, and the shareholders of
that company would have no right to bring a claim for just
compensation under the Takings Clause. That cannot be
correct, and should not be allowed to stand."
Yes, this is the Petition for a Writ of Certerrori to the Supreme Court filed by Hamish Hume and his legal team on behalf of his clients after the Federal Circuit 3 Judge panel ruled that the shareholder plantiffs could not pursue their derivative nor their direct claims against the government under the 5th Amendment Takings Clause.
https://www.supremecourt.gov/Docket/SearchCase.aspx?Case=22-98&SearchTerm=Petition+
Here's what the 5th Amendment to the US Constitution (part of our Bill of Rights as American Citizens) says:. “No person … shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law …"
Something has to be done about this most anti capitalist, large corporation shareholder destroying Net Worth Sweep! If the current round of litigation is fruitless we need to consider other legal doctrines.
"Mortgage balances rose 1.9% for the quarter, or $207 billion, to about $11.4 trillion, even though the pace of originations moved lower. That annual increase marked a 9.1% gain from a year ago as home prices exploded during the pandemic era."
https://www.cnbc.com/2022/08/02/household-debt-tops-16-trillion-as-inflation-surges-and-rates-rise.html
Yes, but you are avoiding the main issue I am raising which is NOT that the NWS was authorized by HERA, BUT RATHER HERA IS UNCONSTITUTIONAL UNDER THE VOID FOR VAGUENESS DOCTRINE!
Yes it WOULD require a new legal challenge, but WHY WOULD IT FAIL TO SUCCEED?
IF you have access to a legal team, ASK THEM.
That and two other new lawsuits is what I am beginning to analyze and if the current round of litigation is fruitless for shareholders then we can always launch new ones.
Prolonging the uncertainty of R,R, and R with future litigation is not ideal by any stretch of the imagination, BUT if shareholders walk away with goose eggs from the current round of litigation, do we really have a choice?
C. This Court Should Grant Certiorari Because
The Federal Circuit’s Decision Conflicts With
This Court’s Reasoning In Franchise Tax
Board On Which The Federal Circuit Relied.
In assessing whether petitioners could bring a direct
Takings claim, the Federal Circuit cited this Court’s
decision in Franchise Tax Bd. v. Alcan Aluminium,
Ltd., 493 U.S. 331 (1990) for the proposition that only
“shareholders with a direct, personal interest in a cause
of action” have standing to bring a direct claim, whereas
those whose injuries are “entirely derivative of their
ownership interests” in a corporation do not. App.20a
(quoting id. at 336–37 (alteration omitted)).
In Franchise Tax Board, this Court held that
shareholders had Article III standing to bring claims
challenging the state tax laws imposed upon their
subsidiaries, since they were indisputably injured by
those laws and had claims that would redress that injury.
493 U.S. at 336. After finding that the shareholders had
Article III standing, this Court expressed doubt as to
whether the shareholders could “meet the prudential
requirements of the standing doctrine,” including the requirement that the plaintiff “must assert his own legal
rights and interests, and cannot rest his claim to relief on
the legal rights or interests of third parties.” Id. (quoting
Warth v. Seldin, 422 U.S. 490, 499 (1975)). In particular,
the Court alluded to the “so-called shareholder standing
rule,” which it summarized as follows:
[T]he rule is a longstanding equitable restriction
that generally prohibits shareholders from
initiating actions to enforce the rights of
the corporation unless the corporation’s
management has refused to pursue the same
action for reasons other than good-faith
business judgment. There is, however, an
exception to this rule allowing a shareholder
with a direct, personal interest in a cause of
action to bring suit even if the corporation’s
rights are also implicated.
Id. (citation omitted).
In Franchise Tax Board, this Court did not apply this
“so-called shareholder standing rule” because it held that
the Tax Injunction Act, 28 U.S.C. § 1341, prohibited the
plaintiffs’ claims in that case. 493 U.S. at 338. This Court
has not revisited the “so-called shareholder standing rule”
since Franchise Tax Board.
The Court should grant certiorari to address whether
the shareholder standing rule it described in Franchise
Tax Board was correctly applied in this case. It was not.
First, as shown above, petitioners assert their “own
legal rights and interests,” and do not rest their claims “on the legal rights or interests of third parties.” Petitioners
claim that the property rights they (and they alone) own
have been taken. Whether they are right or wrong is
the relevant question, not whether the claim is “direct”
or “derivative.” Petitioners rely on their own, direct
ownership of the right to receive future dividends on their
preferred stock under certain contingent circumstances,
and allege that this right was taken from them and given
to Treasury. Petitioners do not rely upon the property
rights of the GSEs, but upon their own property rights as
owners of preferred stock in the GSEs. For that reason,
petitioners have a “direct, personal interest” in their cause
of action, and readily satisfy the standard for bringing
direct claims as described in Franchise Tax Board.
Second, given the nature of the Taking, it is not the
case that petitioners’ injuries are “entirely derivative
of their ownership interests” in the GSEs. By giving
Treasury 100% of all right to all future dividends, the Net
Worth Sweep took away any and all economic interests
that the shareholders had in perpetuity. At that point,
the shareholders’ interest was not just diluted, but
destroyed. Petitioners would have had exactly the same
direct Takings claim if the Net Worth Sweep had provided
that (a) the GSEs would keep their earnings and rebuild
capital, but (b) when and if they paid dividends, they would
pay 100% to Treasury. This would have caused zero injury
to the GSEs, but the same injury to private shareholders.
The 2019 and 2021 amendments to the Sweep
illustrate this. They allow the GSEs to retain their profits,
but simultaneously ensure that Treasury’s liquidation
preference is increased by the increase in the GSEs’
net worth. This regime does not harm the GSEs, but it directly harms the private shareholders by ensuring they
can never recover anything. It therefore highlights the
fact that shareholders suffered an independent injury that
was not dependent on harm to the GSEs.
Third, this Court’s description of the shareholder
standing rule in Franchise Tax Board recognized “an
exception to this rule allowing a shareholder with a direct,
personal interest in a cause of action to bring suit even
if the corporation’s rights are also implicated.” 422
U.S. at 336 (emphasis added). By contrast, the Federal
Circuit effectively adopted a 2021 Delaware Supreme
Court ruling in a fiduciary breach case that “abolished”
this “dual nature” concept, proclaiming the absolute
rule that “claims are derivative in nature whenever the
shareholders’ claims are not completely independent
from the claims of harm to the corporation.” App.19a
n.6 (citing Brookfield, 261 A.3d at 1267). The Federal
Circuit thus used a Delaware Supreme Court case to
overrule this Court’s description of the shareholder
standing rule in Franchise Tax Board. Under the Federal
Circuit’s absolute rule, “if the corporation’s rights are
also implicated,” then the claim must be derivative. That
directly contradicts the exception identified by this Court
in Franchise Tax Board.
Fourth, this Court’s discussion of the issue in
Franchise Tax Board was made in the context of a case
involving a Foreign Commerce Clause challenge to a state
tax regime. It did not involve a claim by U.S. citizens
raising claims that a fundamental right had been infringed.
Here, petitioners claim that their right not to have their
private property taken without just compensation has
been violated. That invokes a fundamental individual right protected by the Fifth Amendment. It deserves
greater scrutiny than was given by the Federal Circuit,
and warrants revisitation of the shareholder standing
discussion in Franchise Tax Board.
D. The Federal Circuit’s Decision Fails To
Properly Apply The Takings Clause To An
Historically Egregious Taking Of Private
Property.
The Court should also grant certiorari on the
question of direct shareholder claims to ensure a full
consideration of all issues relating to this historic decision
that dramatically shrinks the application of the Takings
Clause to shareholders in regulated financial institutions.
The Federal Circuit’s ruling would place severe
restrictions on the ability of shareholders to challenge
government abuses that appropriate shareholder rights.
By preventing shareholders from challenging the taking of
their property without examination of the merits of their
claim, the Federal Circuit effectively opens the door to
all manner of government abuses.
The facts of this case are stark enough. As shown
in the Factual Background section above, to date, the
Treasury has received over $379 billion of value from the
GSEs – over $300 billion in cash dividends, and over $78.3
billion in increases to its liquidation preference based on
increases in the GSEs’ net worth since the third quarter
of 2019 (essentially, dividends paid in kind rather than in
cash). See Section A.4, above. And these amounts continue
to grow each quarter. The property Treasury has taken
far exceeds what Treasury loaned to the GSEs (about $190 billion), and what it bargained for when it agreed to
provide financial support to the GSEs.
Of the $379 billion Treasury has received, it received
approximately $324.2 billion since the Net Worth Sweep.
This amount is roughly $150 billion larger than the
maximum amount Treasury would have received under
the original 10% senior preferred dividend (and even that
number assumes the GSEs would not have been permitted
to repay Treasury rather than paying the incredibly
expensive 10% dividend ad infinitum). Under the original
terms of the PSPA, if Treasury had wanted to take the
maximum value it could from the GSEs, it could have
received close to 80% of that $150 billion: but it would have
had to pay some of that amount to the private preferred
and common shareholders. Treasury was unwilling to do
so; it wanted 100%, and it took 100%.
Taking property on such a scale should not be
permitted without review by this Court. Moreover, as
discussed in Section II, below, the drastic nature of the
Federal Circuit’s decision is compounded by its holding
that the derivative Takings claim also had to be dismissed.
According to the Federal Circuit, once the Government
has regulatory authority to put an enterprise into
conservatorship, it has the power to take 100% of its net
worth for the financial benefit of the Government without
triggering the Takings Clause. App.52a–53a. No prior
case supports that holding, and this Court should not
allow it to stand.
If both of the Federal Circuit’s holdings are considered
together and taken as true, it means the Takings Clause
would have no application to any of the following events: • Congress passes a law requiring all shareholders
in regulated financial institutions to transfer their
stock to the U.S. Treasury.
• Congress passes a law requiring all shareholders
in regulated financial institutions to transfer any
dividends they receive to the U.S. Treasury.
• Congress passes a law requiring all regulated
financial institutions to pay 100% of all future
dividends to the U.S. Treasury.
• Congress passes a law appropriating some or all
of the assets held by some or all of the regulated
financial institutions in the country.
• Congress passes a law expressly nationalizing
some or all of the regulated financial institutions
in the country.
These examples undoubtedly seem extreme. But the
Federal Circuit decision holds that the Takings Clause
would have no application to any one of them.
And while perhaps marginally less extreme, the facts
here are similar in kind: this Court itself recognized
during oral argument in Collins that the Net Worth Sweep
was effectively a “nationalization” of the GSEs. Transcript
of Oral Argument at 13–14, Collins, 141 S. Ct. 1761 (No.
19-422). And the Net Worth Sweep has caused Treasury
to receive hundreds of billions of dollars in dividends
that would otherwise have been shared with private
shareholders, who themselves invested over $30 billion
into the GSEs, including $20 billion in the distressed years
of 2007 and 2008. In Collins, this Court held it was lawful for the
government to take this action. Now it should decide if
just compensation should be paid for the private property
that was taken.
II. REASONS FOR GRANTING CERTIORARI ON
QUESTION TWO
After dismissing the direct Takings claims of
shareholders as “substantively derivative,” the Federal
Circuit addressed plaintiff Andrew Barrett’s derivative
Takings claim. It by-passed the question of whether
HERA’s Succession Clause, while generally transferring
derivative claims to the FHFA, must have a conflict-of-
interest exception in circumstances where FHFA would be
called upon to sue itself. Instead, it reached out to decide
an issue not briefed before it: it held the GSEs’ lacked
any cognizable property interest in their net worth, and
therefore the derivative Takings claim had to be dismissed
on the merits. App.50a–53a.
The Federal Circuit relied on two prior Federal Circuit
decisions that had rejected arguments by regulated
financial institutions and their shareholders that placing
the institutions into conservatorship or receivership
was itself a Taking. App.51a–52a. (citing Golden Pac.
Bancorp. v. United States, 15 F.3d 1066, 1074 (Fed. Cir.
1994) and Cal. Hous. Sec., Inc. v. United States, 959 F.2d
955, 958 (Fed. Cir. 1992)).
At the end of that discussion, in footnote 14 of its
opinion, the Federal Circuit noted in passing:
Because the plaintiffs in Golden Pacific
included the bank’s shareholders (as well as the regulated entity), our reasoning here
would apply to the shareholders’ direct takings
claims—including those asserted by Fairholme
and Cacciapalle. Because we affirm dismissal of
those claims on independent grounds, we need
not rely on their lack of a cognizable property
interest to do so.
App.53a n.14.
Barrett is petitioning for review of the dismissal of
the derivative Takings claim, and the class petitioners
agree that issue should be considered in conjunction with
Question 1 here. But whatever the Court decides on the
Barrett petition, and in an abundance of caution, we ask
the Court to grant certiorari as to Question 2 – either to
decide it, or (as may be the more typical course) to vacate
and remand the issue for consideration in light of any
decision on Question 1 of this petition, any decision on
Barrett, and in light of full briefing and consideration by
the Federal Circuit going beyond its cursory reasoning
on the merits of the derivative Takings claim and its
perfunctory footnote 14.
The defendant should not be permitted to defend
the dismissal of petitioners’ multi-billion dollar Takings
claim based upon a partially reasoned footnote attached
to text that dramatically shrinks the protections of the
Takings Clause. It is one thing to hold, as Golden Pacific
and California Housing Securities both did, that it is not
a taking under the Fifth Amendment to place a financial
institution into conservatorship or receivership that is
justified based on facts and circumstances that actually
exist and that are set forth in a statute reasonably designed to protect the public from failing financial institutions. It
is quite another to hold, as the Federal Circuit did, that
because the former is not a taking, nothing that the
government does with respect to a regulated financial
institution can ever be a taking. The former proposition
is necessary to allow reasonable regulation and oversight
of financial institutions. The latter is a “Get out Jail Free”
card to the government that allows it to take anything
it wants from regulated financial institutions and their
shareholders without paying just compensation.
For example: government regulators have the power
to put Bank of America, Wells Fargo, and Citibank into
conservatorship or receivership. According to the Federal
Circuit, that means that, no matter what the facts and
circumstances are, those regulators have the power to
take 100% of all dividends those regulated banks may pay
in the future – no matter what.
This cannot be squared with the Takings Clause. This
Court must therefore grant certiorari to ensure that the
Takings Clause still exists for shareholders in regulated
financial institutions.
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted,
Hamish P.M. Hume
Counsel of Record
Samuel C. Kaplan
Boies Schiller Flexner LLP
1401 New York Avenue, NW
Washington, DC 20001
(202) 237-2727
hhume@bsfllp.com
Counsel for Joseph Cacciapalle, et al.
"Second, petitioners did not allege an “overpayment”
by the GSEs. The words “overpayment” and “overpaid”
cannot be found in petitioners’ complaint. And that is for
good reason: when the GSEs were forced by the FHFA to
agree to the Net Worth Sweep, they were not “paying” for
anything; they were simply being told to give away 100%
of their future net worth to the Treasury, so that nothing
could ever go to private shareholders such as petitioners,
no matter what. That is not an “overpayment.” It is a
direct taking of 100% of the property held by private
shareholders.
In any event, it does not matter whether the
government takes private property directly, indirectly,
or via a forced “overpayment” by a related party, so long
as the property is taken. If A owes a stream of future
payments to B, it makes no difference whether the
government passes an ordinance requiring A to pay all
future amounts to the government, or instead passes an
ordinance expressly appropriating B’s right to the future
stream of payments from A. Either way, the impact is the
same: all of the future payments that would have gone to
B are instead going to the government. Thus, either way,
B has a right to bring a claim under the Takings Clause.
We are not aware of a single decision by this Court
that could support the conclusion that a person who owns
property that was taken by the government lacks standing
to bring a Takings claim, or is somehow otherwise
precluded from bringing such a claim. It should make
no difference that the property owned is the right to
receive future dividends as a shareholder in a company.
When that property has been taken in its entirety for the
benefit of the government, the shareholder must have a right to bring a claim under the Takings Clause. Holding
otherwise is a drastic abdication of the extent to which
the Takings Clause protects the property rights owned
by shareholders. Such a significant decision should not
be made without review by this Court.
If the Federal Circuit’s decision were correct, that
would mean that the Government could promulgate a rule
requiring 100% of future dividends from any company to
be paid directly to the Treasury, and the shareholders of
that company would have no right to bring a claim for just
compensation under the Takings Clause. That cannot be
correct, and should not be allowed to stand.
B. This Court, Not The Federal Circuit, Should
Decide Whether State Law Doctrines Governing
Shareholder Fiduciary Breach Claims Should
Block A Federal Takings Claim.
Rather than analyzing whether petitioners had
properly alleged that they owned property rights that had
been appropriated by the government, the lower courts
analyzed petitioners’ right to bring a claim through the
prism of state law doctrines governing when shareholders
have a “direct” claim and when they have a “derivative”
claim on behalf of the companies in which they own stock.
App.551a–55a; App.21a–26a. Based on their analysis of
Delaware law on this subject, both courts concluded that
petitioners had only a derivative claim. Id.
This is the second time the Federal Circuit has held
that state law doctrines governing when shareholders
have “direct” versus “derivative” claims dictates whether
shareholders have standing to bring a Takings claim. See Starr Int’l Co. v. United States, 856 F.3d 953, 965–66 (Fed.
Cir. 2017). This case, however, presents the reductio ad
absurdum of Starr. In that case, the challenge was to a
taking of 79.9% of shareholders’ interest in AIG equity,
even as shareholders retained a substantial economic
stake in the corporation. This case, by contrast, involves
a taking of 100% of shareholders’ economic interests in
perpetuity, no matter how much money the companies
make.
The state law cases relied on by the Federal Circuit
do not address claims under the Takings Clause. Instead,
they typically involve claims of fiduciary breach.13 This
is an important difference. In fiduciary breach claims,
part of the analysis of whether the claim is “direct” or
“derivative” is based on whether the defendant owed a
fiduciary duty only to the company, to both the company
and its shareholders, or only to the shareholders.14 By
contrast, in a Takings case, the government always owes a
duty to pay just compensation to a person whose property
it has taken.
Thus, the question of who has standing to bring a
Takings claim should not be based upon the fiduciary
duties owed by the defendant or other considerations
relating to state common law claims; instead, it should be
based upon whether the plaintiff has pled a valid claim for the Taking of that plaintiff’s own property – i.e.,
whether the plaintiff has identified a property interest
that it owned and that the government has taken. Where
a plaintiff has such a claim, then the plaintiff should be
able to bring a claim regardless of the application of an
inapposite test for determining the proper plaintiff to
raise state common law claims.
The extreme nature of the Federal Circuit’s
decision is demonstrated by its adopting the following
characterization of Delaware law: “claims are derivative
in nature whenever the shareholders’ claims are not
completely independent from the claims of harm to
the corporation.” App.20a n.6 (emphasis added) (citing
Brookfield, 261 A.3d at 1267). In this view, shareholders
could not assert constitutional claims where there is any
overlap between the shareholder and the corporate claim,
even where the shareholders could show (as here) that the
property rights they (and they alone) clearly own were
taken. Whatever its merits in addressing the proper
plaintiff(s) for state law claims, this cannot possibly be the
test for addressing a plaintiffs right to consideration on
the merits of their own well-pled Takings claims against
the federal government. Even assuming that, in certain
instances, a successfully asserted derivative claim by
the corporation might reduce or even eliminate the just
compensation owed to a shareholder, that is a question of
remedy and merits, not a justification for barring any and
all consideration of the claim at the threshold.
The Federal Circuit did not even bother to analyze
whether petitioners had identified a property right that
they owned, that is protected by the Takings Clause,
and that the government has taken. That should be the dispositive analysis for determining whether plaintiffs
have the right to bring their own Takings claim, yet
the lower courts ignored it, just as they ignored it in
Starr. The Federal Circuit has thereby created a test for
determining when corporate shareholders have the right
to bring a Takings claim that has no support in this Court’s
jurisprudence, that has nothing to do with the Takings
Clause, and that is at odds with common sense. This Court
should not allow such precedent to go un-reviewed."
Why the 3 Judge panel was mistaken in their February 2022 ruling: "As discussed herein, the only relevant question in evaluating a shareholder’s Takings claim should be whether the
shareholder’s property has been taken. By imposing
an inapposite direct-derivative framework, the Federal
Circuit decision severely restricts the application of the
Takings Clause. Further, it does so as to a Taking that
is as extreme as a taking of shareholder property can get
– one that deprived shareholders of 100% of their interest in a corporation."
OH PLEASE TELL ME MORE!:
A. This Court, Not The Federal Circuit, Should
Decide Whether Shareholders May Bring A
Takings Claim When The Government Has
Taken The Entirety Of Their Property For Its
Own Benefit.
The Federal Circuit and the Court of Federal Claims,
the principal courts charged with adjudicating federal
Takings claims, both dismissed petitioners’ Takings claim
as a “derivative” shareholder claim without analyzing
whether petitioners had identified a property interest
that they (and they alone) directly owned and that was
taken in its entirety by the government. In so doing,
they seriously distorted the analysis that should dictate
whether a plaintiff may pursue a Takings claim. This
Court should grant certiorari to make clear that standing
to bring a Takings claim is based on direct ownership of
property that was allegedly taken, nothing else.
Petitioners in this case alleged that the Net Worth
Sweep appropriated their shareholder rights to future
dividends and other distributions, and transferred those
rights to the United States Treasury. Before the Net
Worth Sweep, petitioners owned the following property:
• The right to receive dividends in any quarter in
which a common shareholder received a dividend;
• The right to receive a dividend in any quarter in
which the Treasury received a dividend above
the 10% dividend payable on its senior preferred
stock (since the only way Treasury could receive a
dividend above that 10% amount was by exercising its warrants to acquire common stock and
receiving dividends on such stock);
• The right to priority over common shareholders,
including Treasury, in the distribution of any
liquidation proceeds, after Treasury received the
amount of its funding plus $1 billion (per GSE).
After the Net Worth Sweep, the private shareholders
no longer owned any of these rights. Instead, all of these
rights were owned by the Treasury. The necessary effect
of the Net Worth Sweep was to transfer rights from
the petitioners to the Treasury. The following chart
summarizes this appropriation of private property by
the Treasury.
Property Rights Taken By Treasury
Treasury’s Property Private Preferred
Shareholders’
Property
Before
Net
Worth
Sweep
Right to 10% dividend
on Senior Preferred if
paid in cash
Right to 79.9% of
common stock for
nominal price
Right to liquidation
preference equal
to actual funding
amount plus $1 billion
Right to dividend in
any quarter when
dividend is paid on
common stock
Right to dividend
whenever Treasury
receives dividend
above its 10% senior
preferred dividend
Right to priority
liquidation proceeds
over all common
shareholders
(including
Treasury) after
Treasury recovers
both actual funding
amount and $1
billion on its senior
preferred stock
Treasury’s Property Private Preferred
Shareholders’
Property
After
Net
Worth
Sweep
100% of all
dividends, no matter
how much they may
exceed the original
10% dividend amount
100% of all
liquidation
proceeds, no matter
how much they may
exceed Treasury’s
investment plus $1
billion
ZERO in dividends
ZERO in liquidation
proceeds
Thus, petitioners identified property that they owned,
and that the Treasury acquired through the Net Worth
Sweep. That establishes petitioners’ standing to bring a
claim under the Takings Clause. Yet the Federal Circuit
and the Court of Federal Claims held petitioners had no
right to bring a direct claim because their only possible
claim was a derivative claim on behalf of the companies;
both courts reached this conclusion without spending
any time analyzing whether petitioners had identified
a property right that they owned and that was taken.
App.550a–55a; App.21a–28a.
The only place where the Federal Circuit obliquely
recognized that petitioners owned a property right was
in distinguishing the D.C. Circuit’s holding in Perry II
that shareholders have an “obviously direct” claim for the breach of their shareholder contracts. Perry II, 864 F.3d
at 628. The Federal Circuit rejected petitioners’ argument
that their ability to vindicate their property rights should
be just as “obviously direct” as their ability to vindicate
their contractual rights, holding as follows:
The fact that shareholders possess a property
interest in their shares of the Enterprises
does not answer the question of whether they
are asserting direct or indirect harm to that
property right. Shareholders clearly allege
a corporate overpayment by the Enterprises
which, in turn, indirectly diluted the value of
their shares.
App.26a.
This mischaracterizes petitioners’ claims. First, the
Net Worth Sweep did not “indirectly dilute the value”
of petitioners’ property rights; it nullified them in their
entirety, and transferred their value to the Treasury.
Before the Net Worth Sweep, petitioners held rights that
had value because of the potential for future dividends – in
particular, they would have considerable value when and if
the Treasury ever sought to receive dividends in excess of
their 10% senior preferred dividend. After the Net Worth
Sweep, petitioners had no rights – zero. No matter how
much money the GSEs might make, 100% of it must go
to Treasury. This government action did not “indirectly
dilute the value” of petitioners’ property; it effected a total
deprivation of 100% of the value of petitioners’ property,
and thus was a categorical taking under this Court’s
decision in Lucas v. South Carolina Coastal Comm’n,
505 U.S. 1003 (1992)."
Well, theoretically possible in the remedy stage of litigation with expert testimony, but we are a long ways from that and it is entirely possible that the Supremes will follow the lower courts reasoning of "the King can do no wrong."
We'll see what develops with the current round of pending litigation cases.
OMG, Uncle Suggy is a damn pig!: "This chart shows that the total value of all cash
dividends paid to Treasury under the Net Worth Sweep
($245.9 billion) plus the net worth increases to Treasury’s
liquidation preference made in lieu of cash dividends ($78.3
billion) is equal to $324.2 billion. That is the current total,
using data available through the first quarter of 2022, of
the value transferred to Treasury under the Net Worth
Sweep regime – thus far. Had there been no Net Worth
Sweep, and had the GSEs instead paid the 10% dividend
at the 2012 level of $18.9 billion per year over the last nine
years and a quarter (FAC ¶64), their total payments to
Treasury would have been $174.8 billion (9.25 × $18.9
billion). Accordingly, one approximation of the excess
value transferred thus far to Treasury as a result of the
Net Worth Sweep is $149.4 billion ($324.2 billion received
under the Sweep minus $174.8 billion of 10% dividends
payable absent the Sweep).
But this $149.4 billion estimate actually understates
what Treasury has taken through the Net Worth Sweep,
for two reasons. First, the Net Worth Sweep remains in
effect, such that each quarter’s increase in net worth at
GSE results in an increase in the Treasury’s liquidation
preference in its senior preferred stock. Second, had it not
been for the Net Worth Sweep, the GSEs would have been
able to fully repay the amounts borrowed from Treasury,
with interest, eliminating the need to pay any ongoing
senior preferred dividend."
BAD UNCLE SUGGY! BAD!!!
Remember this?: "FHFA and Treasury statements at the time the
PSPAs were executed confirmed that private shareholders
held rights that could be valuable if and when the GSEs
returned to sustained profitability. FHFA Director
James Lockhart told investors on September 7, 2008 that
“the common and all preferred stocks will continue to
remain outstanding.” FAC ¶6. That same day, Treasury
Secretary Henry Paulson released a statement saying
the “conservatorship does not eliminate the outstanding
preferred stock, but does place the preferred shareholders
second, after the common shareholders, in absorbing
losses.” Id.
Public statements from September 7, 2008 also made
clear that the goal of the conservatorships was to return
the GSEs to sound, solvent, and profitable operations, at
which point they would exit conservatorship. On that day,
FHFA Director Lockhart stated that conservatorship
was “designed to stabilize a troubled institution with the
objective of returning the entities to normal business
operations.” FAC ¶28 (emphasis added). FHFA published
a related series of the following Questions and Answers
to explain the GSE conservatorships:
“Q: What is a conservator?”
“A: A Conservator is the person or entity
appointed to oversee the affairs of a Company
for the purpose of bringing the Company
back to financial health.”
“Q: What are the goals of this conservatorship?”
“A: The purpose of appointing the conservator
is to preserve and conserve the Company’s
assets and property and to put the company
in a sound and solvent condition.”
“Q: When will the conservatorship period end?”
“A. Upon the Director’s determination that the
Conservator’s plan to restore the [GSEs] to a
safe and solvent condition has been completed
successfully, the Director will issue an order
terminating the conservatorship.”3
On September 11, 2008, Freddie Mac issued an SEC
Form 8-K stating: “The holders of Freddie Mac’s existing
common stock and preferred stock . . . will retain all their
rights in the financial worth of those instruments, as such
worth is determined by the market.” FAC ¶34."
AND OF COURSE WHAT SHAREHOLDER COULD POSSIBLY FORGET THIS?: "5. By August 2012, the housing market had recovered,
and the GSEs were returning to profitability. FAC ¶51. In
July 2012, a Fannie Mae senior executive told the FHFA
that the next eight years were likely to be “the golden
years of GSE earnings.” FAC ¶52.
On August 17, 2012, Treasury and the FHFA executed
a Third Amendment to the PSPA. Among other things,
it changed the dividend on Treasury’s senior preferred
stock from an amount equal to 10% of the liquidation
preference (i.e., the principal amount) in the stock, to an
amount equal to 100% of the net worth of each GSE, minus
a small reserve that was set to shrink to zero by 2018 (the
“Net Worth Sweep”). FAC ¶56.4
The Third Amendment’s Net Worth Sweep eliminated
private shareholders’ ability to ever receive a dividend or any
other distribution from the GSEs. It guaranteed that 100%
of all future distributions would go to Treasury and ensured
that none would go to shareholders no matter how large the
profits generated by Fannie Mae and Freddie Mac. FAC
¶56.
As Treasury stated on the day of the announcement,
the Third Amendment was intended to ensure that “every
dollar of earnings that Fannie Mae and Freddie Mac
generate” would go solely to Treasury. FAC ¶57. In so
doing, the Net Worth Sweep eliminated the contingent
right to future dividends held by private shareholders as of
the time the conservatorship was imposed and the original
PSPAs executed, and provided that all contingent upside in
the GSEs was instead held entirely by Treasury.
The Net Worth Sweep also directly contradicted
FHFA and Treasury’s September 2008 public statements
that the goal of the conservatorship was to return the
GSEs to sound and solvent operations, and then to exit
the conservatorship. Treasury documents make clear that
the goal of the Net Worth Sweep was the opposite: “By
taking all of their profits going forward, we are making
clear that the GSEs will not ever be allowed to return
to profitable entities at the center of our housing finance
system.” FAC ¶60.
The impact of the Net Worth Sweep was immediate
and dramatic. It took effect as of January 1, 2013. During
2013, the GSEs paid Net Worth Sweep dividends to Treasury of $130 billion. Collins, 141 S. Ct. at 1774. That
was more than $110 billion larger than would have been
the case under the previous, 10% dividend. FAC ¶64. As
of the date of the amended complaint in this case (2018),
Treasury had received cash dividends under the Net
Worth Sweep that were approximately $125 billion higher
than they would have been under the 10% dividend. FAC
¶11. The public record information shows that the excess
value transferred to Treasury has continued well beyond
that amount, as summarized below.
6. In September 2019, the FHFA and Treasury
entered into letter agreements providing that from July 1,
2019 onward, no cash dividends would be paid by the GSEs
to Treasury unless and until the GSE’s capital reserves
had exceeded $25 billion (in the case of Fannie Mae) or
$20 billion (in the case of Freddie Mac). Collins, 141 S. Ct.
1774 n.8. In place of the cash dividends, these agreements
provided that Treasury’s liquidation preference in its
senior preferred stock would be increased each quarter
by the amount by which each GSE’s net worth increased
over what it was in the prior quarter, up to certain limits
reflecting capital targets. Id. While these changes allowed
the GSEs to build and retain capital, they ensured that
Treasury would own 100% of that capital by increasing
its liquidation preference by the amount of each quarterly
increase in net worth."
Go easy on Janet, she's got her hands full with Putin, China, the international 15% corporation tax, educating those in the current administration about basic economics and so on!
Has the UST even appointed anyone to work on the GSE CONservatorship fiasco?
"This petition rests upon a simple proposition: a person
that directly owns a specified property right is entitled to
bring a claim under the Takings Clause that such specified
property right has been taken by the government. It may
be that the reviewing court decides the property right
that is identified is not protected by the Takings Clause,
or that the government action at issue did not constitute
a “taking” of that property. But if a plaintiff plausibly
alleges that it owns property and that specified property
has been taken by the government, then the plaintiff has
the right to bring its own claim under the Takings Clause.
That ought to be an uncontroversial proposition. There is no case from this Court that can be read to hold
otherwise. Nevertheless, in this case, the lower courts
lost sight of this simple proposition when confronted
with a case where the plaintiffs are shareholders in
corporations who allege that their shareholder rights –
most importantly, their rights to future dividends – have
been taken. Instead of analyzing whether plaintiffs had
identified a property right that they (and they alone)
directly own, and whether they had plausibly alleged
that this property right had been taken, the lower courts
reflexively looked to Delaware state law governing when
certain kinds of shareholder claims brought under state
law are “direct” versus when they are “derivative.” That
state law doctrine deals principally with claims of fiduciary
breach, and focuses on the corporate law inquiry as to
the persons to whom the defendant owes fiduciary duties
– the corporation only, the shareholders only, or both. It
also inquires into which plaintiff is most appropriately
positioned to bring a state common law claim to ensure
all injured parties are made whole.
Those state law inquiries are irrelevant to a case
brought under the Takings Clause. Under the Takings
Clause, the only inquiry needed to determine whether a
person is a proper plaintiff is whether that person has
plausibly alleged that they (and they alone) directly owned
property that has been taken by the government. If so,
that person has a right to bring a claim under the Takings
Clause that must be evaluated on the merits.
By holding to the contrary, the Federal Circuit
drastically reduced the protections of the Takings Clause
for corporate shareholders. Since the Federal Circuit
is the exclusive court of appeals for claims seeking just
compensation under the Takings Clause, this Court should
grant certiorari to ensure that this gross distortion of the
law does not stand."
In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property. - Manifesto of the Communist Party
Karl Marx
I. R E A S O N S F O R G R A N T I N G
CERTIORARI ON QUESTION ONE . . . . . . . 18
A. This Court, Not The Federal Circuit,
Should Decide Whether Shareholders
May Bring A Takings Claim When
The Government Has Taken The
Entirety Of Their Property For Its
Own Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .19
B. This Court, Not The Federal Circuit,
Should Decide Whether State Law
Doctrines Governing Shareholder
Fiduciary Breach Claims Should Block
A Federal Takings Claim . . . . . . . . . . . . . . 25
C. This Court Should Grant Certiorari
Because The Federal Circuit’s Decision
Conflicts With This Court’s Reasoning
In Franchise Tax Board On Which
The Federal Circuit Relied . . . . . . . . . . . . . 28
D. The Federal Circuit’s Decision Fails
To Properly Apply The Takings
Clause To An Historically Egregious
Taking Of Private Property . . . . . . . . . . . . 32
Hey Gubmint, quit taking the shareholders economic rights in their property! Or should the US Citizens start calling each other, COMRADE !
QUESTIONS PRESENTED
In September 2008, the Federal Housing Finance
Agency (“FHFA”) placed Fannie Mae and Freddie
Mac into conservatorship, and on behalf of each entity
entered into a preferred stock purchase agreement
(“PSPA”) with the U.S. Treasury, under which Treasury
received (a) senior preferred stock that would receive
a 10% dividend on a principal value equal to $1 billion
plus all amounts borrowed from Treasury by Fannie or
Freddie, respectively; and (b) warrants to acquire 79.99%
of the common stock in each for a nominal price. Under
this arrangement, private shareholders in both had the
right to receive dividends if and when Treasury received
dividends in excess of its 10% senior preferred dividends
– i.e., dividends on common stock it acquired through
exercising its warrants.
In August 2012, FHFA and Treasury changed the
PSPA dividend on Treasury’s senior preferred stock from
10% of the stock’s principal value to 100% of the net worth
of Fannie Mae or Freddie Mac (minus a small reserve that
would shrink to zero by 2018), in perpetuity. Under this
arrangement, private shareholders in Fannie and Freddie
could never receive any dividends no matter how much
money they earned, as 100% of all dividends would have
to be paid to Treasury. As a result, Treasury has taken
roughly $150 billion more than it could have received under
the original 10% dividend.
1. Did the Federal Circuit err in barring as
“substantively derivative” the claims of private
shareholders of Fannie Mae and Freddie Mac for
the Taking of their shareholder rights, and the transfer of 100% of their economic interest to the
U.S. Treasury, without making a determination
as to whether the private shareholders had
identified a valid property right that they directly
owned and that the government had taken?
2. Were the rights to future dividends and other
distributions held by shareholders cognizable
property rights protected by the Takings Clause?
Thanks! "Petition for a writ of certiorari filed. (Response due September 1, 2022)"
https://www.supremecourt.gov/Search.aspx?FileName=/docket/docketfiles/html/public\22-100.html
The Net Worth Swipe will be used again and again by Uncle Suggy if left unchecked by the US Courts (a real possibility) and US businesses being offered financial assistance from the government during the next inevitable crisis will refuse to accept knowing that what happened here could happen to them.
This of course will prolong and worsen economic downturns and US businesses will lay off millions of hard working Americans causing severe economic dislocation for them.
Did the AIG fact pattern involve a situation in which AIG could definitely pay back any financial assistance received from the federal government or was it up to the federal government to decide exactly when and how the federal government would be paid back or whether it ever could be paid back at all?
Because I thought at some point it was decided that the GSES would be wound down.
Nice find! Senator Toomey is one of the few people in the US Congress that has a working understanding of just what the heck is going on here, too bad he's headed towards the exists soon and is retiring.
Thanks for sharing your time and thoughts! And thanks FOF, Trunk, and EVERYONE for contributing and hanging in there as we approach the 14TH YEAR of CONservatorship,! You never know, this could get interesting. We only need 1 or more wins but our adversary has to slam dunk the ball ALL THE TIME.
So far so good for Uncle Suggy, BUT his continuous win streak is no guarantee for current and future litigation, and so long as he perpetuates the destruction of two private corporations shareholders the greater the possibility that the shareholders will continue looking for relief in the judiciary, executive and legislative branches.
I don't think the UST/FHFA is doing anything until some of these major cases finish working their way through the judiciary, but I've been wrong before !
Mo' Don: "The Biden Administration: Will There Be More Than Benign Neglect?
It is now one and a half years into the Biden administration. So far, there has been no evident focus within Treasury or the White House on GSE reform or exiting conservatorship; instead, the very visible focus of the administration is to implement programs to make housing more affordable and eliminate racial disparities. However, with Republican-appointed Calabria continuing his five-year term (ending April 2024) as Director of the FHFA, it was clear that he, as conservator, would not be particularly aligned with these priorities and thus take little, if any, actions to support them in his directives to the GSEs. It was therefore fortuitous for the Biden administration that the Supreme Court ruled in June 2021 that the FHFA would no longer be an independent agency (for technical reasons related to its structure), allowing the President to fire Calabria and replace him with someone more supportive of its agenda. In the meantime, he appointed as the acting FHFA Director Sandra Thompson, its top civil servant; President Biden later nominated her as the permanent Director, and she has since been confirmed.
So far, the directorship of Thompson is known, in my view, for two core policy directions. First, pursuing the mission of the GSEs-including various Biden administration initiatives–but absolutely consistent with safety and soundness,34in which she has a strong background having previously worked at the FDIC for over two decades. And second, she has begun to publicly talk about taking actions to prepare the GSEs for eventual exit from conservatorship, even while the administration is not currently prioritizing such an exit.35
Recapping Part 1
Upon the two GSEs being placed into conservatorship in 2008, few expected that Freddie Mac and Fannie Mae would be able to exit conservatorship quickly and go back to the status quo ante. Yet there was also no expectation that government control would be so enduring, with its 14th anniversary in just two months and no end in sight. Instead, the length of government control was repeatedly extended as a byproduct of specific decisions made by all three presidential administrations involved. The one major exception was the Trump administration allowing the GSEs to retain their earnings in order to build capital, one of the major steps needed to put them onto the off-ramp to exit conservatorship. The question at this time is what to expect going forward: (1) the government continuing its current level of control for the foreseeable future, despite earnings being retained; or (2) getting the two GSEs fully onto the path to being reprivatized again, albeit while retaining the reforms made to them during conservatorship. That will be the subject of Part 2. "
The decision by UNELECTED federal government agency officials to Nationalize 2 of the worlds largest privately owned financial intermediaries may also violate the Major Questions Doctrine as articulated by Gorsuch last month in West Virginia v EPA:
"First, this Court has indicated that the doctrine applies
when an agency claims the power to resolve a matter of
great “political significance,” NFIB v. OSHA,"
"Second, this Court has said that an agency must point to
clear congressional authorization when it seeks to regulate
“‘a significant portion of the American economy,’” ante, at
18 (quoting Utility Air, 573 U. S., at 324), or require “bil-
lions of dollars in spending” by private persons or entities,
King v. Burwell, 576 U. S. 473, 485 (2015)."
"Third, this Court has said that the major questions doc-
trine may apply when an agency seeks to “intrud[e] into an
area that is the particular domain of state law.” Ibid. Of
course, another longstanding clear-statement rule—the
federalism canon—also applies in these situations. To pre-
serve the “proper balance between the States and the Fed-
eral Government” and enforce limits on Congress’s Com-
merce Clause power, courts must “‘be certain of Congress’s
intent’” before finding that it “legislate[d] in areas tradi-
tionally regulated by the States.” Gregory v. Ashcroft, 501
U. S. 452, 459–460 (1991). But unsurprisingly, the major
questions doctrine and the federalism canon often travel to-
gether. When an agency claims the power to regulate vast
swaths of American life, it not only risks intruding on Con-
gress’s power, it also risks intruding on powers reserved to
the States. See SWANC, 531 U. S., at 162, 174
While this list of triggers may not be exclusive, each of
the signs the Court has found significant in the past is pre-
sent here, making this a relatively easy case for the doc-
trine’s application."
https://www.supremecourt.gov/opinions/slipopinion/21
Hmmm, "Another action by Mnuchin was to disclose that the administration would consider taking a path toward ending conservatorship without Congress enacting legislation, an approach that had been developed during the Watt years as director of the FHFA, and kept almost totally confidential to avoid a negative Congressional reaction. This alternative path was known as “by administrative means”32 and it would implement GSE reform solely through a collection of amendments to the PSPA as well as regulations issued by the FHFA."
So did the Unconstitutional HERA provision REWRITTEN BY THE SCOTUS (I thought the Congress was suppose to write our laws, HeeeHeee ! ) in Collins actually create monetary damages to shareholders since Mel "they don't need no stinkin' capital"
Enquiring Minds want to know!
Yet ANOTHER SMOKING GUN: "I was told point blank by a Treasury official that this was done for consistency with the wind down policy of the administration."
Do you think Don Layton is referring to the 1,2,3, or 4th Amendment to the PSPA?
THAT IS CORRECT SIR/MADAME! HeeeHeee !
While it is still unclear how much capital they would need to pursue this path, I would say that about $150 billion represents a reasonable estimate,22 and the requirement could potentially be even modestly lower. As discussed below, even this amount is so huge that it is likely to be raised mostly by retaining earnings over many years, rather than issuing new shares into the marketplace.
https://furmancenter.org/thestoop/entry/when-will-government-control-of-freddie-mac-and-fannie-mae-end
"Under four presidential administrations, a handful of key policy decisions cumulatively extended that control far longer than anyone would have originally predicted; with its fourteenth anniversary approaching, moreover, there is arguably no end in sight."
"The PSPA, in fact, had an unusual feature that the monies invested by Treasury into the two GSEs were unable to be paid back (absent an appropriate amendment to that document to permit it). This signaled that the GSEs were never expected to go back to the status quo ante. "
"But the wind down policy did have a major impact in what became probably the most controversial GSE-related event during the Obama administration: the third amendment to the PSPA, about which there have been headlines and lawsuits ever since. As background, by mid-2012, the marketplace began to recognize that the structure of the PSPA might not, over time, have enough funding available to fully support the GSEs,17 in turn potentially leading to another loss of market confidence. To avoid this, the PSPA needed to be amended. The specific nature of the amendment that resulted (known as the third amendment) was, however, rather unusual: while it indeed eliminated the reasonable possibility of the available funding shrinking too much, it did so at the cost of guaranteeing that the two GSEs would run their capital18 down to virtually zero, regardless of what their earnings might be. I was told point blank by a Treasury official that this was done for consistency with the wind down policy of the administration.
Regardless, this meant that the GSEs, with virtually zero capital, would be wholly dependent upon the PSPA agreements to make them creditworthy issuers of their trillions of dollars of mortgage-backed securities (MBS). If the GSEs had in fact been wound down and replaced by other organizations, their having a de minimis level of capital might not have been a problem. But events transpired such that the GSEs had become even more important to the country’s housing finance system, not less–and the lack of capital extended by years any reasonable estimate of how long they would need to emerge from under government control."
"These proposals (which uniformly reflected the ideological or economic interests of the proposer) ranged from a government-owned corporate monopoly, to a cooperative owned by the lending industry, to many small GSEs, to just relying upon the private market, among others. Some showed themselves to be fatally flawed very quickly, others only after more detailed examination. As far as I could tell, none came close to being broadly accepted to operate as promised, or to be effective. More importantly, none came close to Congressional approval.14 "