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Obiterdictum.....The other big thing I see with the constitutional ruling is Calabria's position as FHFA director has lost any protection from firing.
This should light a fire under him to get things done quick if he wants to have anything to show for his work, should Trump lose the next election.....or sour on him before.
Calabria is now directly answerable to the executive branch. This means the FHFA Director's position can be more greatly influenced and manipulated to some degree by each incoming administration.
One thing I dont like about it is that this may push him into over reliance on a small number of big money players to fund the recap/make it go quicker.
The main players involved are in Treasury, WH and later the Congress. All other players now have to go through the executive and legislative branch agencies. Regardless of any lobbies approaching Calabria, Calabria will have to clear his actions with the executive branch or risk firing.
We need to spread this out over a wide swath of institutional AND retail investors to provide competition for those shares.
Yes.
The current market traders and investors on the OTC, an uplisting to a new stock exchange, the new charters for the GSEs and the creation of future competitors in the secondary mortgage market will determine the spread in the future. Since, there is no clarity for investors as to the order of what will happen first, next and so on, there still remains uncertainty as to the path the GSEs will follow in time.
#FannieGate Will Fanniegate be the undoing of any Obama legacy? How deep will it go?
That depends greatly on the spin activities of a political party or parties. Will there be a spin and counter spin put on Housing Finance Reform, Affordable Housing, the 30 year mortgage, government control the secondary mortgage along with healthcare control, etc. I do not know. Just have to wait and see.
Are there any examples of how long this will take.
It will take as long as necessary for the District Court to adjudicate the case. There is no truly average timeline. The original proceedings in the District Court took 7 months and 2 days to reach a final judgment.
Are there examples where a judgement by en banc was not adopted by the district court or decided otherwise?
In this case, the United States Court of Appeals Fifth Circuit En Banc reversed the dismissal of Count 1 made by the United States District Court for the Southern District of Texas, Houston based on the anti-injunction provision in HERA (12 U.S.C. § 4617(f)) and remanded the case back to the District Court for further proceedings (i.e. trial or summary judgment).
The Fifth Circuit En Banc basically opined that the district court's dismissal of Count 1 was in error, and therefore, reversed the dismissal. The District Court is directed to dismiss its decision and retry the case or alter its judgment. There was no Appeals Court final judgment made on Count 1. There was no vacatur of the net worth sweep. If there was a final judgment, there would be no reversal and remand. There are many types of actions that can be made by the higher courts (see: https://www.law.cornell.edu/uscode/text/28/2106)
Dismissal of Counts II and III were upheld. An entry of judgment is to be made for Count IV wherein the “for cause” removal protection for the FHFA Director found in 12 U.S.C. § 4512(b)(2) is unconstitutional.
Sources:
En Banc Appeal
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf
District Court
https://gselinks.com/Court_Filings/Collins/16-cv-03113-0001.pdf
https://gselinks.com/Court_Filings/Collins/16-cv-03113-0052.pdf
https://gselinks.com/Court_Filings/Collins/16-cv-03113-0053.pdf
So now we get back on the schedule of a court that ruled against us before, and wait to be heard again, is that correct?
Yes.
You are welcome.
Monetary compensation aside, at what point--and with what verbiage--would that law-violating authority be halted by the courts (i.e. when would the courts tell the government to immediately stop the net worth sweep)?
Decision(s) come after all preliminary proceedings and motions are completed whether it is a court trial, summary judgment or dismissal. The decisions come when they do. What will be stated depends on the case attorneys' briefs, motions, etc. and the judge and/or jury.
How can the En Banc panel rule FHFA exceeded its statutory conservator authority implementing the net worth sweep, but then that same net worth sweep not be held illegal?
It is a common procedure for an Appeals Courts to reverse a lower court's ruling while providing reasons for doing so and then to remand the allegation back to the lower court for further proceedings under the direction/guidance given in those reasonings.
Or could/would it be declared illegal once the District Court rules with the plaintiffs?
In civil cases like these, "illegal" is not the applicable term to use. "Illegal" involves criminal offenses, violations of criminal law, that lead to prison time, etc.
In civil cases like this one, it is administrative and statutory laws that are violated (i.e. APA, HERA). So, when the final adjudication occurs in District Court, "illegal" will not be used in the decision. Rather, what will be written and publicly stated is that an agency or its representatives (officers, employees, etc.) acted or failed to act appropriately in an official capacity or within the limits of statutory authority governing their behavior and actions. Relief or compensation may or may not be given.
To my knowledge, none of the existing FNMA/FMCC court cases are criminal cases. They are all civil cases seeking declaratory and injunctive relief and monetary compensation.
Hi Dax1, The en banc court's decisions do not stop or legally invalidate the net worth sweep.
There is no direction for repayment. Also, no penalties for Treasury on the horizon.
The next step for Collins et al. is back to District Court to battle over Count 1.
In Count I, Collins et al. allege, under the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(C), (D), there is the means to gain monetary relief by proving in court that FHFA exceeded its statutory conservator authority under 12 U.S.C. § 4617(b)(2)(D).
Hi mrfence,
All is well and thanks.
We still have more journey time ahead.
Enjoy the weekend!
The fundamental decisions made by majorities of US Court of Appeals Fifth Circuit En Banc in the Collins et al. vs FHFA and Treasury case are as follows:
• A majority of the en banc panel agreed with the Plaintiffs that the FHFA exceeded its statutory authority as conservator in executing the net worth sweep (pp. 27-42). The net worth sweep was found to be excessively punitive and outside the authority of the FHFA. This en banc majority reversed the motion to dismiss this count (Count 1) and remanded this count back to the District Court where a District Court trial based on facts may be conducted or a summary judgment may be granted. An en banc court majority states that "...Shareholders could theoretically obtain full relief under Count I alone,..."
• Counts II and III (see below) were affirmed and not reversed.
• A majority of the en banc found that the FHFA was unconstitutionally structured and violates the separation of powers, and therefore, reversed the Count IV judgment and remanded that claim for entry of judgment wherein the “for cause” removal protection found in 12 U.S.C. § 4512(b)(2) for the FHFA Director is unconstitutional.
• The network sweep was not legally invalidated by the US Court of Appeals Fifth Circuit en banc.
• No monetary relief was granted by the Fifth Circuit en banc decisions.
Source
IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT - No. 17-20364
PATRICK J. COLLINS; MARCUS J. LIOTTA; WILLIAM M. HITCHCOCK, Plaintiffs–Appellants, v. STEVEN T. MNUCHIN, SECRETARY, U.S. DEPARTMENT OF TREASURY; DEPARTMENT OF THE TREASURY; FEDERAL HOUSING FINANCE AGENCY; MARK A. CALABRIA, DIRECTOR OF THE FEDERAL HOUSING FINANCE AGENCY, Defendants–Appellees.
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf
PLAINTIFFS' ALLEGATIONS
• In Count I, they allege the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(C), (D), affords relief because FHFA exceeded its statutory conservator authority under 12 U.S.C. § 4617(b)(2)(D).
• In Count II, they allege the APA, 5 U.S.C. § 706(2)(C), (D), affords relief because Treasury exceeded its securities-purchase authority under 12 U.S.C. §§ 1455(l), 1719(g). Specifically, they allege that Treasury purchased securities after the sunset period, failed to make the required “[e]mergency determination[s],” and disregarded statutory “[c]onsiderations.”
• In Count III, they allege the APA, 5 U.S.C. § 706(2)(A), affords relief because Treasury’s adoption of the net worth sweep was arbitrary and capricious.
• In Count IV, they allege FHFA violates Article II, §§ 1 and 3 of the Constitution because, among other things, it is headed by a single Director removable only for cause.
Ditto to you Travel5!
Hi Travel5,
Though hope is not a word used or thought about much, tomorrow will arrive with the usual host of interesting and not so interesting planetary and world-wide events, both actual and imagined, and the many varied reactions and responses to them. Perhaps, one of the events will have something substantial to do with cleaning up the swamp mud pile just dumped unto the investors' windshields. Perhaps not.
Hi Donotunderstand,
Hi Donotunderstand,
Thank you.
The author of the sentence believes and states that the constituionality of the FHFA structure is not a significant legal argument for or against the validity of the Third Amendment and the NWS. The author states that the en banc panel could have met and made an en banc decision in five minutes.
You are welcome mike_usa.
Yes.
Hi Doc.007,
Please review FEDERAL RULES OF APPELLATE PROCEDURE WITH FIFTH CIRCUIT RULES AND INTERNAL OPERATING PROCEDURES
http://www.ca5.uscourts.gov/docs/default-source/forms-and-documents---clerks-office/rules/federalrulesofappellateprocedure.pdf
The letter to the Court can be submitted after oral arguments and before en banc decision is made.
What the en banc panel will do with the July 9, 2019 Letter is unknown.
There can only be speculations about how the Letter will be treated until the decision is made.
Hi mike_usa,
Legal counsel for FHFA and Mark Calabria requested the Court in a letter to take into consideration that the FHFA under its new leadership has reconsidered its position on the constitutional issue found in the case.
The constitutional issue is whether or not the FHFA structure as given in HERA along with its for-cause removal provision is constitutional.
The Appellants argued that the FHFA structure is unconstitutional.
The Appellees letter requests the Court to accept the new FHFA leadership reconsideration that the FHFA structure as given in HERA along with its for-cause removal provision is constitutional.
The reason for the Appellees reconsideration and change by the new leadership is not provided other than to say there is new leadership and that the specific positions and arguments made in 2018 apply and the January to January 23, 2019 arguments made to the en banc panel during the interim Director (Otting) term do not apply.
This change alters the complexion of the case by altering the en banc petition and oral arguments made by the Appellees (FHFA and Otting) on January 23, 2019. During Otting's tenure, the FHFA and Otting did not defend the constitutionality of the FHFA structure HERA's for-cause removal provision.
The Appellees attempt to bolster their arguments against the Third Amendment by reverting to the 2018 position and arguments that originally included a defense of the constitutionality of the FHFA structure HERA's for-cause removal provision.
The Court will decide what to do with the Letter to the Court.
You are welcome.
Yes, and this can continue until a decision is made.
Hi Dax1,
1. There is not much thought about this. The letter is a straightforward request to the en banc panel via the Clerk of Court to consider a new position and argument taken by the FHFA and its leadership (Mark Calabria).
In a letter dated July 9, 2019, FHFA informs the court that the new FHFA leadership (confirmed on April 4, 2019), reconsidered an issue and now asserts that the FHFA structure as given in HERA along with its for-cause removal provision is constitutional (see letter below). The FHFA requests the en banc panel to consider this change.
This position is in contradistinction to the previous position held and arguments made during the period from January to April 2019. At that time, the FHFA, under the interim Director Otting, withdrew the effort to defend the constitutionality of the FHFA's independent agency structure during en banc briefs and arguments.
During 2017 and 2018, and prior to Otting's change in FHFA's argument and position on the constitutional issue, Mel Watt's FHFA defended the FHFA structure as given in HERA along with its for-cause removal provision as constitutional.
So, the new FHFA Director has taken the same position and arguments held and made during 2017 and 2018 and requests the court to specifically follow those positions and arguments as cited in the letter.
As stated in the Appellees letter, the previous FHFA arguments made for the validity of the Third Amendment as found in the FHFA briefs, petition, and en banc argument were not altered. The new position on the constitutionality of the FHFA's independent agency structure simply reverts to the previous arguments made and positions held prior to Otting's interim leadership.
2. Yes, such a letter, citation of supplemental authorities and supplemental briefs can be submitted after oral arguments and before a decision.
Source:
Filing July 9, 2019 Letter to the Court
https://www.courtlistener.com/docket/6179579/patrick-collins-v-steven-mnuchin-secretary/
FHFA July 9, 2019 Letter to the Court
#fanniegate @MarkCalabria changed @FHFA position on constitutionality in Collins case. pic.twitter.com/rNoMHXhypv
— standfortruth (@JaredALevine) July 9, 2019
Thank you action8101.
It would appear that the difficulty is Treasury having to bring as soon as practical to the White House a completed Treasury Housing Reform Plan requested by the President.
Not being a major player in the FHFA, US Treasury or White House administration, it is impossible to directly know what reasoning those government officials have about stopping the net worth sweep without that plan. It is said by officials and reported that the GSEs will be released from the conservatorships and recapitalized. It is widely assumed that the net worth sweep will also end. How and when this will actually happen is not given with any specificity. Calabria said:
Indeed.
As you may know, reporting on this has been done in years past. However, in present time, GSE stock retail traders can be aware of the same activities that have been continuous in their midst till present. Caveat emptor.
Note on Proprietary Trading - Prop Shops for GSE Intraday and Short Traders
Proprietary trading can be defined as taking positions in equity and debt securities, their derivatives and options, and commodities to gain profits from short-term price moves and short-term arbitrage profits through short-term resales. A proprietary shop or prop shop is trading firm with traders engaging in the above activity with own capital.
If you are using a standard broker/retail trading platform with a computer with less than optimum CPU speed and without Level II data, the information below is a reminder affording protection from prop traders not having your interests at heart. Below is an excerpt from this 2014 article: https://corpgov.law.harvard.edu/2014/05/23/increased-scrutiny-of-high-frequency-trading/
There is one quote from Calabria, one video of Calabria in an interview and one news summary of what Calabria said. Any misquotes in the news report?
Hi ano,
Thank you for making the successful effort.
Hi Glenn,
There are no specifics. Only reports and talk so far like:
No worries on anonymity.
The verification is in.
Having all five pages posted is unnecessary if a shared link can be provided.
Hi Dax1,
Any decision on getting the whole RJ "report" shared?
Hi Glenn,
ipo/spo it's looking like early next year is when they start doing the capi tal raise.
What does early next year mean? Sometime between January to March or...perhaps later?
Is that when Fannie Mae and Freddie Mac will have the first day of selling new shares on the market (e.g. NYSE, NASDAQ, OTC Markets)?
Or does that mean Fannie and Freddie would have already met the requirements for and would have filed Sec Form S-3 with the Security Exchange Commission, produced and filed a completed prospectus that is declared effective by the SEC, while beginning advanced preparations for the actual sales day of the public offering like Alibaba did on September 19, 2014?
Or....
Hi Glenn,
not much here today, literally; i think everything isn't up. i would be surprised to learn if anything is up in gse land.
No up today so far as of 2:46 pm.
nothing new overall, just waiting for treasury to release it's ipo plan this month, and then establish capital requirements and other things later this year.
What sort of IPO plan? Something like Alibaba's prospectus?
https://www.sec.gov/Archives/edgar/data/1577552/000119312514347620/d709111d424b4.htm#toc
Or a plan about making an SPO plan? Or........
somewhere in there we should get an en banc ruling saying the net worth sweep is illegal, not sure what that means these days, since recapitalization basically needs to kill the net worth sweep for investors to participate anyway capital requirements and utility like restrictions on business going forward.
A decision will be made sometime.
it sure looks like the css/csp might be here to stay, how do you feel about fannie vs freddie if basically fannie is forced to hand over it's operations to freddie like this?
No feeling. If it happens, it does and the results will become apparent amidst pre- and post-move speculations.
it would seem to me that freddie is the net beneficiary, not sure what that means overall, but in a recap freddie has less jr pfd --- so maybe that would lead to fmcc being higher priced than fnma if jr pfd are heavily dilutive and fnma no longer has it's long term competitive advantage of being the better business?
what say you?
Nothing about that.
have you thought about the outstanding value of what it takes to settle the claims rolling through lamberth's court that are going to trial?
No.
Hi RCChristian,
i think en banc takes precedence over reform? en banc will change parts of reform plan?
Treasury and FHFA can voluntarily end the NWS and make the reform plan without consideration of a positive En Banc decision.
On the other hand, a positive En Banc decision ending the NWS can end the need for Treasury and FHFA consideration or effort to renegotiate the SPSPAs.
Which comes first?
A positive En Banc decision or a proactive Treasury/FHFA reform plan that ends the NWS by renegotiating/amending/voiding the SPSPAs.
Time will tell.
Hi Glenn,
Thanks. What is up?
Hi Dax,
Great work. That file is located at: http://shorturl.at/atzIM but a Raymond James Account is required for access.
1. To make the whole file available for others to read you can copy and paste page by page until the entire report is pasted in.
2. If there are too many pages to copy and paste, the file can be uploaded to a free file storage app and then provide a shared link. See: https://www.techradar.com/news/the-best-cloud-storage#best-free-cloud-storage
3. If that is too much, email the file to a friend who has a Google Drive or Dropbox or some storage account and let them provide you with a sharing link.
4. It can be sent to me to do the honors, if we can make an arrangment to do so.
The information in that report given in the message is offputting for those expecting a speedier timeline, and the 3-4 years timing before a SPO seems to be off base.
However, with the complications of the ongoing conservatorships, NWS, warrants, reported size of the SPO, investment bank interest, private placement seekers, seeking legislation for a federal backstop and new guarantors, apparent disagreement between Mnuchin and Calabria, SPSPA dealing, release from conservatorships, uplisting, the coming election, a sorely divided Congress, etc. there are a lot of monkey wrenches that are already in the works. These monkey wrenches may slow planning and the procedural execution of the plan. The speculated ideal timetable for the GSEs to become regulated and independent corporate entities is uncertain and Calabria's idea that an SPO can be completed in 2020 is optimistic.
An IPO or an SPO at $25 billion takes about 9-10 months (Alibaba) just for preparations, and more or less time depending on conditions and circumstances. Then an additional 6-7 months with a lock-up period. How long will it take for a $125-$200 billion SPO, staggered and not staggered?
Will it be 3-4 years of walking through political mud before the SPO?
Or will it be 6 months before preparations for the SPO begins? Will the SPO be completed in 2020 or 2021? Or is the timeline further on?
Hi nagoya1,
I'm trying to understadn how the egg's chicken, or the chicken's egg, or the chicken egg sandwich debate is relevent to FNMA....
Is it on the "en banc" menu du jour?
Application: Which comes first?
EN Banc decision or Reform Plan
Reform Plan or End of NWS
End of NWS or Uplist
Uplist or Recap
Recap or Release
Release or SPO
SPO or Private Placement
The Pali Canon sutta from which that saying was taken and then paraphrased.
See Bhaddekaratta Sutta, MN 131, Page 1039:
http://lirs.ru/lib/sutra/The_Middle_Length_Discourses(Majjhima_Nikaya),Nanamoli,Bodhi,1995.pdf
Go FNMA