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I won't sell under $65/share at least, maybe not even under $80/share
When FNMA doesn't get released from conservatorship due to the illegal take-over from the government, then say bye-bye to capitalisme en say welcome communism (where government can take over whichever company they prefer, take all its' money and receive dividends) AND that is indeed a big problem for the government because their credibility is at stake.
If it's not released out of conservatorship,tax payers will lose. People who want to buy houses will have to pay more intrests to the banks, housing prices will decline. One more negative maxro-economic results (more people without work) and you could get the same scenario as in 2007.
If you want that America remaines the land of hope and where dreams can come true, building a house, then FNMA should be released out of conservatorship.
Lol
The consequences of Treasury and FHFA Losing in Court Go Far Beyond Us
Have Treasury and FHFA really thought about what happens if they lose these court cases? The first major problem is that they are severely damaging investor trust by their actions in this situation. That might seem like it might not have consequences. That shareholders will be grateful whenever Treasury decides to get around to being fair. That they will accept whatever offer is thrown on the table when settlement talks happen. But what about if they don't accept the offer? What about if the evidence of wrongdoing becomes so clear cut that certain shareholder's decide to go all the way with their lawsuits?
Those 13 billion dollar big bank settlements that FHFA did without shareholder approval? Back to the drawing board on those if ill intent could be proven. Shareholder's might try to pry another 30-100 billion out of the banks by making an argument that FHFA being compromised by Treasury compromised those settlements.
Without a settlement shareholder's could also try to nullify any mortgage bond purchases done by FHFA involving the big banks that weren't at fair market value.
What about all those previous foreclosures that happened? Well if the government is found to have done a taking that means that Fannie Mae and Freddie Mac were in fact owned by the government the entire time. That could reopen all previous foreclosures at Fannie and Freddie for due process reasons. The reason being that foreclosures by the government have different due process standards than those done by private lenders.
Deloitte could very well be bankrupted from the recent lawsuit that was filed against them. The 12000 shareholder's in Fannie Mae have gotten 0 respect or consideration from the government. It has been 8 awful years of fear and unfairness. Today we are still reasonable people. We may still settle. I predict that at some point we will not be willing to settle because injustice demands justice in reasonable amounts of time. Far too long already.
Author: freefrommatrix on yahoofinance
It will soon be released out of conservatorship. And when that happens you want to have common shares. Look at Patswil's calculations stickied in yellow.
Meaning the government can takeover whichever company they want, take all their dividends. That would mean the end of capitalism and the start of communism.
Meaning that in the future when things go a litt.e bad, tax payers will have to pay money to fund FnF.
Read this article: No Capital at Fannie and Freddie is Bad for Taxpayers, Markets and America's Families
http://www.thestreet.com/story/13469349/1/no-capital-at-fannie-and-freddie-is-bad-for-taxpayers-markets-and-america-s-families.html?puc=yahoo&cm_ven=YAHOO
You're welcome
New interesting article:The Fannie-Freddie Debacle Continues
http://www.huffingtonpost.com/harlan-green/the-fannie-freddie-debacl_b_9368796.html
Finally. Settlement coming +$80/common share
I agree.
$20/share:way too low!!Read Patswil's calculation stickied in yellow.
NAACP Advocates for GSEs; Politicians Join Sentiment
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NAACP Advocates for GSEs; Politicians Join Sentiment
Ben Jealous, the former president of the National Association for the Advancement of Colored People (NAACP) gave his endorsement to Bernie Sanders. The NAACP has further expressed its approval of Sanders via the 113th & 112th Congress Civil Rights Report Card. Both scores were an 'A' or 100% for voting in support of their key issues.
The NAACP has issued multiple statements supporting the recapitalization and continued operation of the GSEs. In other words, for the GSEs to be released from the conservatorship. They have joined with the League of United Latin American Citizens (LULAC) and the National Community Reinvestment Coalition (NCRC) for a letter to President Obama. The letter calls for the GSEs to be released.
The Federal National Mortgage Association (OTCQB:FNMA), aka, Fannie Mae, and the Federal Home Loan Mortgage Corporation (OTCQB:FMCC), aka, Freddie Mac are two GSEs that give billions of dollars each quarter to the U.S. Treasury. Since they are not allowed to keep net profits while under conservatorship, the anomaly makes it difficult to tabulate typical stock metrics. Further, the mortgage finance entities are at risk of termination.
author jpd_082i5 on yahoo finance
I'll NEVER sell for $10/share,$65/share at least. But more reasonable is Patswil's calculation (see sticky post)
Nice to see the accumulated buying volume.Maybe this tells us that release from conservatorship is coming!
MORE HARD BALL: New filing in the Jacobs and Hindes case (February 29, 2016)
.
"The Delaware Shareholders encourage Judge Sleet to accept Timothy Howard's Amicus Brief and allow the facts Mr. Howard relates to illuminate the absurdity of the limitless power FHFA and Treasury believe HERA granted to them."
Case 1:15-cv-00708-GMS Document 35 Filed 02/29/16 Page 1 of 9 Page ID #: 934
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
DAVID JACOBS and GARY HINDES, on
behalf of themselves and all others similarly
situated, and derivatively on behalf of the
Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation,
Plaintiffs,
v.
THE FEDERAL HOUSING FINANCE
AGENCY, in its capacity as Conservator of
the Federal National Mortgage Association
and the Federal Home Loan Mortgage
Corporation, and THE UNITED STATES
DEPARTMENT OF THE TREASURY,
Defendants,
and THE FEDERAL NATIONAL MORTGAGE
ASSOCIATION and THE FEDERAL HOME
LOAN MORTGAGE CORPORATION,
Nominal Defendants.
.
REPLY BRIEF IN SUPPORT OF MOTION BY TIMOTHY HOWARD FOR
LEAVE TO FILE BRIEF AMICUS CURIAE IN OPPOSITION
TO DEFENDANTS’ MOTIONS TO DISMISS
It is no surprise that Defendants are desperate for the Court to decide this case on the basis of a false narrative about the “rescue” of Fannie and Freddie that Defendants have spent years promoting in both the courts and the public square. As Mr. Howard’s amicus brief makes clear, the Net Worth Sweep was the culmination of a long-running scheme by the Department of Treasury and FHFA to destroy the investments of Fannie’s and Freddie’s shareholders and to seize those Companies’ substantial profits for the exclusive benefit of the federal government. That reality places in stark relief the deeply troubling consequences of Defendants’ assertion that, in effect, the Housing and Economic Recovery Act of 2008 (“HERA”) allows them to do whatever they want with Fannie and Freddie.
But rather than actually engaging the arguments in Mr. Howard’s brief, Defendants urge the Court to ignore them on the basis of their radical reading of HERA, an outdated view of the role of amicus briefs that the Third Circuit has rejected, and various other arguments at odds with the weight of precedent. None of Defendants’ arguments is persuasive, and the Court should grant Mr. Howard leave to file his amicus brief.
I. Mr. Howard’s Amicus Brief Will Assist the Court in Deciding Issues Raised by the Motions to Dismiss.
The upshot of many of Defendants’ arguments in their motions to dismiss is that this suit cannot go forward because various provisions of HERA allow them to do anything they want with the Companies—up to and including operating the Companies in violation of their charters, seizing private shareholders’ interest in the Companies’ substantial profits for the exclusive benefit of the federal government, and exercising private shareholders’ rights even while disclaiming any obligation to consider their interests. The breathtaking scope of Defendants’ assertion of power would be problematic even if there were reason to believe that Defendants could be counted upon to treat the Companies and their shareholders with benevolence. But Mr. Howard’s amicus brief explains why that is not the case. Rather, Defendants spent years manipulating financial markets and accounting policies attempting to ensure the Companies’ ultimate demise before finally settling upon the Net Worth Sweep.
Mr. Howard’s amicus brief shows that the Court does not need to imagine hypotheticals to test the limits of the powers Defendants assert for themselves, for this very case is the reductio ad absurdum of Defendants’ reading of HERA. The Congress that enacted HERA could not have possibly intended to give Defendants unchecked authority to engage in the conduct detailed in Mr. Howard’s amicus brief, and understanding how the Companies were placed into conservatorship and accumulated the large liquidation preference on Treasury’s senior preferred stock is key to correctly deciding the issues presented in Defendants’ motions to dismiss. Defendants themselves assumed as much in their motions to dismiss by providing lengthy explanations of their own (inaccurate) account of the events that led up to the Net Worth Sweep. See Opening Brief in Support of Motion to Dismiss of the Department of the Treasury at 3–8 (Nov. 13, 2015), Doc. 20; Opening Brief in Support of Motion to Dismiss of the Department of FHFA, Fannie Mae and Freddie Mac at 5–8 (Nov. 13, 2015), Doc. 18. Mr. Howard’s brief discusses issues that are highly relevant to this case from the unique perspective of a former Fannie CFO who is intimately familiar with the Companies’ business and accounting practices. The amicus brief would be useful to the Court, and Mr. Howard should be permitted to file it.
See Opening Brief in Support of Motion to Dismiss of the Department of the Treasury at 3–8 (Nov. 13, 2015), Doc. 20; Opening Brief in Support of Motion to Dismiss of the Department of FHFA, Fannie Mae and Freddie Mac at 5–8 (Nov. 13, 2015), Doc. 18. Mr. Howard’s brief discusses issues that are highly relevant to this case from the unique perspective of a former Fannie CFO who is intimately familiar with the Companies’ business and accounting practices. The amicus brief would be useful to the Court, and Mr. Howard should be permitted to file it.
II. Defendants’ Objections to Mr. Howard’s Amicus Brief Are at Odds with Third Circuit Precedent and Numerous Other Authorities.
Unable to successfully dispute the relevance of the issues discussed in Mr. Howard’s brief, Defendants fall back on a bevy of procedural objections to the filing of his brief. None is persuasive.
First, while Defendants argue that Mr. Howard is not a proper amicus because his extensive experience as Fannie’s CFO means he is not “a disinterested nonparty,” Defendants’ Opposition to Motion by Timothy Howard for Leave to Participate Amicus Curiae at 1, 4–7 (Feb. 19, 2016), Doc. 30 (“Opp.”), they neglect to mention that the leading Third Circuit case on the standard for filing amicus briefs squarely rejected the argument that only “impartial” amicus briefs are permissible. Neonatology Assocs., P.A. v. Comm’r of Internal Revenue, 293 F.3d 128, 131 (3d Cir.2002.1 As then-Judge Alito explained, the prevailing view in the federal courts today is that amici are required to have an interest in the litigation in which they seek to participate, id. (citing, inter alia, FED. R. APP. P. 29), and “it is not easy to envisage an amicus who is ‘disinterested’ but still has an ‘interest’ in the case,” id. Furthermore, most courts reject the implication of Defendants’ argument “that a strong advocate cannot truly be the court’s friend” as “contrary to the fundamental assumption of our adversary system that strong (but fair) advocacy on behalf of opposing views promotes sound decision making.” Id. In short, Defendants’ argument that Mr. Howard should not be allowed to file his amicus brief because he cares about the public policy implications of this case is contrary to the prevailing modern practice in the federal courts. See, e.g., Shain v. Veneman, 278 F. Supp. 2d 1006, 1008 n.2 (S.D. Iowa 2003) (leave to participate as amici was granted “given the obvious interest” of amici in the litigation); Waste Mgmt. of Pennsylvania, Inc. v. City of New York, 162 F.R.D. 34, 36 (M.D. Pa. 1995) (“[B]y the nature of things an amicus is not normally impartial.”) (quoting United States v. Gotti, 755 F.Supp. 1157, 1158 (E.D.N.Y.1991)); see also 16AA CHARLES A.WRIGHT &ARTHUR R.MILLER, FEDERAL PRACTICE AND PROCEDURE § 3975 (4th ed.) (“There is nothing wrong, in current practice, with an amicus possessing an interest in the relevant issues.”).
_______________________________________________________
1 See Tenafly Eruv Ass’n, Inc. v. Borough of Tenafly, 195 F. App’x 93, 99 n.8 (3d Cir. 2006) (citing Neonatology Associates for this point); In re Nazi Era Cases Against German Defs. Litig., 153 F. App’x 819, 827 (3d Cir. 2005) (citing Neonatology Associates for Circuit law on amicus briefs).
_______________________________________________________
Most of Defendants’ authorities to the contrary are decades-old cases that reflect an outdated view of the role of amicus briefs that was under attack as early as 1963 and that Neonatology Associates rightly rejected. See Samuel Krislov, The Amicus Curiae Brief: From Friendship to Advocacy, 72 YALE L.J. 694, 703 (1963). Notably, while Defendants cite Liberty Resources Inc. v. Philadelphia Housing Authority, 395 F. Supp. 2d 206, 209 (E.D. Pa. 2005), for the proposition that an amicus must not be “partial to a particular outcome in the case,” Opp. 2, that court’s opinion makes clear that “there is no rule that amici must be totally disinterested,” 395 F. Supp. 2d at 209. Defendants also cite Judge Posner’s in chambers opinion in Ryan v. CFTC, 125 F.3d 1062 (7th Cir. 1997); see Opp. 7 n.5. But the federal courts have not heeded Judge Posner’s call for procrustean review of motions for leave to file amicus briefs, Ryan, 125 F.3d at 1063, and “there is little evidence that [Judge Posner’s] views are widely shared,” WRIGHT &MILLER § 3975; see Luther T. Munford, When Does the Curiae Need an Amicus?, 1 J. APP. PRAC. &PROCESS 279, 284 (1999) (criticizing Ryan). Indeed, in Neonatology Associates then-Judge Alito expressly rejected the views espoused by Judge Posner in Ryan. See 293 F.3d at 130, 131.
Defendants are also wrong when they argue that Mr. Howard’s participation as an amicus is improper to the extent that he seeks to introduce factual, as opposed to legal, arguments. Opp. 3. To the contrary, this Court has allowed amici to file briefs presenting relevant factual background information. United States v. Gordon, 334 F. Supp. 2d 581, 582–86 (D. Del. 2004). Permitting amici to file briefs is advisable where they “can contribute to the court’s understanding” of the issues in a case—factual as well as legal. Harris v. Pernsley, 820 F.2d 592, 603 (3d Cir. 1987); see Voices for Choices v. Illinois Bell Tel. Co., 339 F.3d 542, 545 (7th Cir. 2003) (amicus briefs are proper where they “will assist the judges by presenting ideas, arguments, theories, insights, facts, or data that are not to be found in the parties’ briefs”); Community Ass’n for Restoration of Env’t v. DeRuyter Bros. Dairy, 54 F. Supp. 2d 974, 975 (E.D. Wash. 1999) (“An amicus brief should normally be allowed when . . . the amicus has unique information . . . that can help the court beyond the help that the lawyers for the parties are able to provide.”).
Finally, Defendants miss the mark when they argue that Mr. Howard’s motion should be denied because he did not consult them before making it or waited too long. By its express terms, Local Rule 7.1.1’s consultation requirement does not apply to non-parties such as Mr. Howard and thus cannot serve as a basis to denying his motion. See D. Del. LR 7.1.1 (“Except for . . . motions brought by nonparties, every nondispositive motion shall be accompanied by an averment of counsel . . . that a reasonable effort has been made to reach agreement with the opposing party on the matters set forth in the motion.”). And as Defendants themselves acknowledge, far from any rule specifying when a motion for leave to file an amicus brief must be made, “[n]o statute, rule, or controlling case defines a federal district court’s power to grant or deny leave to file an amicus brief,” Op. 2 (quoting United States ex rel. Gudur v. Deloitte Consulting LLP, 512 F. Supp. 2d 920, 927–28 (S.D. Tex. 2007)). In the interest of avoiding unnecessary duplication, Mr. Howard waited to seek leave to file his amicus brief until after he could review Plaintiffs’ response to Defendants’ motions to dismiss. Mr. Howard’s motion for leave to file his amicus brief is procedurally proper, and the Court should reject Defendants’ arguments to the contrary.
CONCLUSION
The Court should grant Mr. Howard’s motion to file an amicus brief in opposition to Defendants’ motions to dismiss.
Respectfully submitted, ROSS ARONSTAM & MORITZ LLP
/s/ David E. Ross
David E. Ross (#5228)
100 S. West Street, Suite 400
Wilmington, DE 19801
(302) 576-1600
dross@ramllp.com
Counsel for Non-Party Timothy Howard
Dated: February 29, 2016
Author: bladedoctor01 from yahoofinance
Wow! That's GREAT!
By GRETCHEN MORGENSON
FEBRUARY 29, 2016
A nonprofit watchdog group on Monday called for an investigation of David H. Stevens, chief executive of the Mortgage Bankers Association, arguing that he may have violated ethics laws relating to his previous position as commissioner of the Federal Housing Administration.
The National Legal and Policy Center, a right-leaning ethics-in-government group, urged the United States attorney for the District of Columbia and the inspector general at the Housing and Urban Development Department to conduct an official review of Mr. Stevens’s activities while he was at HUD and after he left the agency in March 2011 to lead the mortgage association, one of the most powerful lobbying organizations in Washington.
An investigation, the center said, would determine whether Mr. Stevens had violated federal rules barring former government officials from “communicating or appearing on behalf of persons or entities with respect to matters in which the former officials ‘personally and substantially participated’ during their government service.”
The ethics group also asked the government officials to look into whether Mr. Stevens had violated the law by trying to influence matters of interest to the mortgage bankers for a brief period when he was still in the government but had accepted the lobbying post. He was the F.H.A. commissioner, a post within HUD, from mid-2009 through March 2011.
Mr. Stevens declined to comment. John T. Mechem, a spokesman for the association, replied on his behalf.
“Since ending his government service, Dave has regularly consulted with attorneys inside and outside M.B.A. to make sure that he and the association are always in full compliance with the law,” Mr. Mechem’s statement said. “Outside counsel to M.B.A. has specifically reviewed Dave’s activities on behalf of M.B.A. and its members and has confirmed that Dave has operated fully within the letter and spirit of the lobbying laws and ethics rules.”
The statement added that the “unfounded allegations are part of a concerted campaign” by those with an apparent financial incentive to discredit Mr. Stevens and his work at the lobbying group.
The request for an investigation from the National Legal and Policy Center is the second such call for scrutiny of Mr. Stevens’s activities after he left government.
In mid-December, the nonprofit Campaign for Accountability asked the Justice Department to investigate Mr. Stevens for possible violations of so-called revolving door laws.
A spokesman for the accountability group said the Justice Department had acknowledged its request in December, but that it had heard nothing since.
Mr. Stevens’s activities were the subject of a Dec. 7, 2015, article in The New York Times. It detailed behind-the-scenes efforts of former top housing officials to help large banks dismantle Fannie Mae and Freddie Mac, the mortgage finance giants, and capture greater profits in the $5.7 trillion home loan market.
In seeking an investigation, the legal and policy center said it had identified more than 25 potential ethics violations by Mr. Stevens.
Before Mr. Stevens announced that he was leaving his government post for the Mortgage Bankers Association, he was a participant in deliberations over the status of Fannie Mae and Freddie Mac, which were taken over by the United States in September 2008, just as the housing market collapse erupted into the worst economic and financial crisis since the Depression. The companies remain in conservatorship under the oversight of the Federal Housing Finance Agency.
The legal and policy center contended that as head of the association, Mr. Stevens had lobbied on some of the same issues that he had worked on as the F.H.A. commissioner. It cited correspondence he had submitted to housing agencies as they deliberated new rules for the mortgage industry.
In calling for investigations, the ethics group also noted numerous meetings Mr. Stevens had attended with top officials at HUD, the White House and the Federal Housing Finance Agency.
Mr. Stevens’s communications with federal employees on these matters may have violated ethics rules, the group said, because the government still directly oversees Fannie and Freddie, which operated before the takeover as quasi-independent government-sponsored enterprises to support the housing industry and encourage homeownership.
According to the group’s requests, the matters Mr. Stevens took up on behalf of mortgage bankers involved rules aimed at reducing the issuance of high-risk home loans. Soon after he left HUD, for example, Mr. Stevens wrote a letter to that agency and other banking regulators that was critical of a proposed rule that would require issuers of mortgage securities to hold onto at least 5 percent of any security.
The rule was intended to discourage mortgage issuers from dumping high-risk loans into pools and escaping responsibility when they failed. This practice generated billions of dollars in losses for unsuspecting investors during the credit crisis.
In April 2012, Mr. Stevens sent a private email to Richard Cordray, the head of the Consumer Financial Protection Bureau, and a colleague, discussing another proposal to reduce mortgage risks. Known as the qualified mortgage rule, it required lenders to adhere to certain standards when making a loan, like ensuring a borrower had the ability to repay.
In the email, Mr. Stevens warned Mr. Cordray that the rule, as proposed, “will likely cause significant contraction in new mortgage lending” and could hurt the overall economy.
“Look, I know I head this M.B.A.,” Mr. Stevens wrote in the email, “but I am also a 30-year veteran of this industry and someone who spent a couple of years inside working on policy as you both know.”
The consumer bureau posted Mr. Stevens’s email on its website as an ex parte communication, indicating that it had not been submitted publicly.
“Even by Washington’s current low standards,” Ken Boehm, chairman of the National Legal and Policy Center, said in a statement, “Stevens was particularly brazen in apparently ignoring the pertinent statutes and ethics regulations.”
http://mobile.nytimes.com/2016/03/01/business/ethics-group-urges-inquiry-of-mortgage-banking-lobbyist-who-led-fha.html?partner=socialflow&smid=tw-nytimesbusiness&smtyp=cur&_r=2&referer=https%3A%2F%2Ft.co%2FZR7Cuuesxx
Treasury and its Allies Imprison Fannie and Freddie with Math That Doesn’t Add Up
- February 29, 2016
It was quite a week on the question of recapping and releasing Freddie and Fannie. The main takeaway is that Treasury and its allies are more dug in than ever in opposing the end of the conservatorship.
First, it seemed too good to be true and it was. Mortgage Bankers Association President and CEO David H. Stevens had a lot of good things to say about the vital role Fannie Mae and Freddie Mac play in the housing system in a commentary published by Housing Wire last week, in which he praised Federal Housing Finance Agency Director Mel Watt for calling for an end to the conservatorship.
There is only one problem: “Unfortunately allowing them to just recapitalize is simply not a mathematical possibility.”
This conclusion is possible only because Treasury officials have tried so deviously hard to make it so. First, Stevens argued, those profits Fannie and Freddie reported two weeks ago – the new revenues for Treasury’s piggy bank – really weren’t that hefty. This claim rests on his assertion that the GSEs’ earnings are, in fact, declining due to the reduction of their investment portfolios, the end of windfalls from large legal settlements, the recouping of deferred tax assets, and the release of credit loss reserves as this credit cycle flattens out.
Let’s add that having their capital forcibly depleted for over three years under the Net Worth Sweep hasn’t helped either. The amount of money involved in these accounting practicalities pales in comparison to the $55 billion that should have been used to build up Fannie and Freddie’s capital buffers once the GSEs paid back the $187.5 billion Treasury extended as part of the bailout under the Housing and Economic Recovery Act.
Then Stevens’ analysis became even more intriguing and revealing. Things would be even worse if the Net Worth Sweep was not in place, he explained. Without the Sweep, the GSEs would have had to pay the 10% dividend that was in place under the original terms of the conservatorship. Accordingly, while Freddie paid $5.5 billion in dividends in 2015 under the sweep, it would have had to pay $7.2 billion under the 10% dividend. Similarly, while Fannie Mae paid $10.3 billion under the sweep in 2015, this was also less than the $11.6 billion they would have paid under a 10% dividend. Heads, Treasury wins – tails, Fannie and Freddie lose.
However, as Josh Rosner pointed out today in a commentary on Housing Wire that responds to Stevens, “The 10% dividend is not legally required at all – and especially not in perpetuity. The contract is nothing more than an agreement between two government agencies and could be amended at any time without congressional approval.”
This narrative about the untenable situation for Fannie and Freddie, frequently parroted by Stevens and the Wall Street Journal’s John Carney, that the GSEs are somehow better off under the sweep, completely ignores the fact that the companies paid off their loans almost $55 billion ago – at least in the world where math makes sense and officials don’t engage in politically-inspired sleights of hand. Once Fannie and Freddie returned to profitability, FHFA should have exercised its mandate to return them to “sound and solvent” condition, allowed them to retain earnings and ultimately exit conservatorship.
The math supporting the hopeless-GSE narrative gets even better – at least for Treasury. Under the terms of their conservatorship, Treasury should be charging the GSEs for the government backstop, Stevens explained. But Treasury is not charging this fee option, called the “commitment fee.” The GSEs are backed today by a line of credit of more than $250 billion from the U.S. Treasury to act as the guarantee against defaults. “Therefore, $250 billion is a commitment expense from taxpayers that would come with a charge for any truly private company,” Stevens wrote.
This is because of the first two amendments to the PSPAs, made before infamous third amendment mandated that Treasury would receive all the GSEs’ earnings in perpetuity. The first amendment to the Preferred Stock Purchase Agreement in 2009 essentially increased the credit line for each GSE from $100 billion to $200 billion, and the second amendment to the PSPA changed Treasury’s commitment from a fixed rate, $200 billion commitment for each company to a “new formulaic maximum amount.”
Thus, Treasury has simultaneously engineered a depletion of the GSEs’ capital buffers while also implementing credit terms that would make it all but impossible for Fannie and Freddie to break free of the conservatorship even if they retained their huge profits. Never mind the simple fact that the GSEs’ have not required a single draw against this line of credit since they returned to profitability, nor the fact that the only reason they would have to do so in the future is because the Treasury systematically robs them of what would otherwise be generous capital buffers. And now, according to Stevens, Fannie and Freddie should be grateful for not being charged a fee on a line of credit they do not want and should not need.
When the latest profits were announced, Treasury poured cold water on them, pointing out that the GSEs are still dependent on $258 billion credit line that remains in place. That figure, no doubt, derives from the credit lines and formulaic scheme it imposed.
Nonetheless, last week, Bank of America offered a different interpretation, suggesting that Watt’s speech could be seen as the impetus to find a way of recapitalizing and exiting the conservatorship.
“In an unusual speech, the FHFA director flagged lack of capital as the most serious risk for Fannie and Freddie,” Ralph Axel, rates strategist for Bank of America Merrill Lynch, wrote in a research note last Wednesday, as reported by Reuters. “We think this opens the door to FHFA pursuing a recapitalization plan, eventually leading to the end of the conservatorships.”
Treasury took its cue and responded the next day, insisting that the $258 billion straight jacket was for the good of the markets and recapping was not happening. DS News asked Treasury about Watt’s speech and, apparently, about Axel’s comments, and got this reply.
Taxpayers injected $188 billion into the GSEs to stabilize the housing market and lay the groundwork for our economic recovery. Director Watt’s remarks underscore the Administration’s consistent position regarding the GSEs’ conservatorship: the best long-term solution is comprehensive housing finance reform. Until then, Fannie Mae and Freddie Mac will continue to rely on the $258 billion of taxpayer provided support to sustain market confidence.
Treasury’s assertion that Fannie and Freddie continue to “rely on the $258 billion of taxpayer provided support to sustain market confidence” and Stevens’ mathematical contortions must raise suspicions that the foes of recapitalizing Fannie and Freddie are moving the goal posts just as FHFA Director Mel Watt and civil rights groups have made more urgent calls for recapitalization. It is clear that Treasury has helped construct a prison from which it hopes there will be no escape, only death for the GSEs. But the bars are not made of iron in this case – just “fuzzy” math.
Therefore, we continue to believe the warden might not get the last word."
http://investorsunite.org/treasury-and-its-allies-imprison-fannie-and-freddie-with-math-that-doesnt-add-up/
I sell half my shares ar$65/common share. I will keep the rest.
"An unfavorable ruling for shareholders would fundamentally change the structure of investing in America from this point forward, in effect legalizing the theft of minority stockholders of all corporations. This would forever have profound negative impact on anyone ever considering an investment in America going forward.
Quote:
The Delaware and Virginia courts routinely handle cases challenging corporate transactions that benefit a single, controlling stockholder at the expense of all other stockholders. Though we have never before seen a preferred stock dividend right such as the Net Worth Sweep—indeed, that fact, in and of itself, says all that needs to be said about its legality as a matter of corporate law—it nevertheless remains a structural concept that controlling stockholders of other corporations subject to Delaware and Virginia corporate law might attempt to seize upon to unfairly eliminate the economic interests of minority stockholders if its invalidity is not swiftly confirmed. Certifying the State Law Questions now to the
Delaware and Virginia Supreme Courts will allow those courts to provide guidance to directors of every Delaware and Virginia stock corporation that they may not unilaterally contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.
http://www.glenbradford.com/wp-content/uploads/2016/02/15-00708-0034.pdf "
I requote 955's post
What does that mean?
An unfavorable ruling for shareholders would fundamentally change the structure of investing in America from this point forward, in effect legalizing the theft of minority stockholders of all corporations. This would forever have profound negative impact on anyone ever considering an investment in America going forward.
In other words, if FNMA shareholder don't win, this is the end of capitalism. Great BUY IMO
Quote:
The Delaware and Virginia courts routinely handle cases challenging corporate transactions that benefit a single, controlling stockholder at the expense of all other stockholders. Though we have never before seen a preferred stock dividend right such as the Net Worth Sweep—indeed, that fact, in and of itself, says all that needs to be said about its legality as a matter of corporate law—it nevertheless remains a structural concept that controlling stockholders of other corporations subject to Delaware and Virginia corporate law might attempt to seize upon to unfairly eliminate the economic interests of minority stockholders if its invalidity is not swiftly confirmed. Certifying the State Law Questions now to the
Delaware and Virginia Supreme Courts will allow those courts to provide guidance to directors of every Delaware and Virginia stock corporation that they may not unilaterally contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.
http://www.glenbradford.com/wp-content/uploads/2016/02/15-00708-0034.pdf
FNMA:
An unfavorable ruling for shareholders would fundamentally change the structure of investing in America from this point forward, in effect legalizing the theft of minority stockholders of all corporations. This would forever have profound negative impact on anyone ever considering an investment in America going forward.
In other words, if FNMA shareholder don't win, this is the end of capitalism. Great BUY IMO
Quote:
The Delaware and Virginia courts routinely handle cases challenging corporate transactions that benefit a single, controlling stockholder at the expense of all other stockholders. Though we have never before seen a preferred stock dividend right such as the Net Worth Sweep—indeed, that fact, in and of itself, says all that needs to be said about its legality as a matter of corporate law—it nevertheless remains a structural concept that controlling stockholders of other corporations subject to Delaware and Virginia corporate law might attempt to seize upon to unfairly eliminate the economic interests of minority stockholders if its invalidity is not swiftly confirmed. Certifying the State Law Questions now to the
Delaware and Virginia Supreme Courts will allow those courts to provide guidance to directors of every Delaware and Virginia stock corporation that they may not unilaterally contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.
http://www.glenbradford.com/wp-content/uploads/2016/02/15-00708-0034.pdf
All banks listed on Wall Street will implode when FNMA doesn't get unleashed. The stakes are so high that you can even say that:
when FNMA won't be allowed to return to its' owners, that this is the end of capitalism.
Therefore: BUY as much FNMA as you can, because this is a battle we cannot lose anymore. Soon worth more at least $65/common share
$379/common share is rather much for settlement.
PLAYING HARD BALL: New filing in the US District Court for the Districk of Delaware
February 26, 2016 - Attorney Myron T. Steele is playing dough
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
Civil Action No.: 15-708-GMS
CLASS ACTION
JURY TRIAL DEMANDED
___________________________________
DAVID JACOBS and GARY HINDES, on
behalf of themselves and all others similarly
situated, and derivatively on behalf of the
Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation,
Plaintiffs,
v.
THE FEDERAL HOUSING FINANCE
AGENCY, in its capacity as Conservator of
the Federal National Mortgage Association
and the Federal Home Loan Mortgage
Corporation, and THE UNITED STATES
DEPARTMENT OF THE TREASURY,
Defendants,
and
THE FEDERAL NATIONAL MORTGAGE
ASSOCIATION and THE FEDERAL HOME
LOAN MORTGAGE CORPORATION,
Nominal Defendants.
___________________________________
REPLY IN SUPPORT OF PLAINTIFFS’ APPLICATION FOR
CERTIFICATION TO THE DELAWARE AND VIRGINIA SUPREME COURTS
OF NOVEL AND UNDECIDED ISSUES OF STATE LAW
________________________________________________________
Plaintiffs David Jacobs and Gary Hindes, on behalf of themselves and all others similarly
situated, and derivatively on behalf of the Federal National Mortgage Association (“FannieMae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac,” and, together with Fannie Mae, the “Companies”), hereby submit this reply in support of their application requesting this Court to certify novel and undecided questions of state law (the “State Law Questions”) to the Delaware and Virginia Supreme Courts (the “Certification Motion”).1
1 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Certification Motion and/or in Plaintiffs’ Brief in Opposition to Defendants’ Motions to Dismiss.
________________________________________________________
Defendants Federal Housing Finance Agency (“FHFA”), in its capacity as conservator of
the Companies, and United States Department of the Treasury (“Treasury”) oppose the
Certification Motion largely by referring to the arguments set forth in their briefing in support of their motions to dismiss. For the reasons stated in Plaintiffs’ Brief in Opposition to Defendants’ Motions to Dismiss, which Plaintiffs hereby incorporate by reference, the arguments that Defendants have raised in support of their motions to dismiss fail on their merits and do not warrant the denial or delay of the Certification Motion.
Defendants make two arguments in opposition to the Certification Motion. First, Defendants argue that the State Law Questions are not outcome determinative because Plaintiffs’ claims are precluded by federal law. Defs.’ Opp. at 2-3. Second, Defendants argue that “[t]his case does not involve novel issues of first impression likely to have broad implications beyond this case[.]” Defs.’ Opp. at 5. Both of these arguments are meritless and should be rejected.
Defendants first argue that before reaching the merits of the questions Plaintiffs seek to
have certified, the Court will be required to determine whether Plaintiffs’ claims are precluded by “(1) the jurisdiction-withdrawal provision contained in 12 U.S.C. § 4617(f), . . . (2) FHFA’s succession to all shareholder rights during conservatorship, . . . and (3) Treasury’s sovereign immunity and the intergovernmental immunity component of the Supremacy Clause.” Defs.’ Opp. at 2-3. But that is not so.2 The Supreme Court, to be sure, has held that “Article III jurisdiction is always an antecedent question” that must be addressed before the merits of a case Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101 (1998). But here, the “triad of injury in fact, causation, and redressability,” which “constitute[ ] the core of Article III’s case-or-controversy requirement,” id. at 103-04 (footnote omitted), has not and cannot seriously be contested: The Net Worth Sweep willfully, wrongfully, and inequitably destroyed Plaintiffs’ economic interest in Fannie Mae and Freddie Mac, and the relief that they seek would redress that harm. The defenses that Defendants cite do not alter this conclusion, and they need not be addressed before their defenses on the merits.
__________________________________________________
2 Even if the Court were inclined to decide these issues first, the Court still should then certify the State Law Questions to the Delaware and Virginia Supreme Courts in order to assist the Court in deciding the remaining issues presented by the motions to dismiss.
__________________________________________________
When applicable, the first provision cited by Defendants, 12 U.S.C. § 4617(f), simply
limits the relief a court may grant (“no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or receiver”); it does not oust a court of jurisdiction to hear a case altogether. “In recent years, the Supreme Court has been especially critical of courts’ ‘profligate’ and ‘less than meticulous’ use of the term” jurisdiction. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 466 (3d Cir. 2011) (quoting Arbaugh v. Y & H Corp., 546 U.S. 500, 511 (2006)). Congress must “clearly state” limitations it places on courts’ jurisdiction, Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013), and limiting the relief courts may grant generally does not suffice. Indeed, the Supreme Court has explained that it is “unreasonable to read” as jurisdictional a statute “merely specifying the remedial powers of the court.” Steel Co., 523 U.S. at 90; see also Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 561 (1968); Davis v. Passman, 442 U.S. 228, 239 n.18 (1979). Any such conclusion would be particularly unreasonable in the context of HERA, which elsewhere
expressly ousts courts of jurisdiction to hear certain claims against FHFA acting as receiver. See 12 U.S.C. § 4617(b)(11)(D). “The unambiguous jurisdictional terms of [§ 4617(b)(11)(D)] show[s] that Congress would have spoken in clearer terms if it intended [§ 4617(f)] to have similar jurisdictional force.” See Gonzalez v. Thaler, 132 S. Ct. 641, 649 (2012); see also Musacchio v. United States, 136 S. Ct. 709, 717 (2016).3 Because the § 4617(f) issue is not a jurisdictional one, the Court is free to bypass it to address other merits issues.
Even if § 4617(f) were jurisdictional (which it is not), federal courts routinely certify
questions of state law where the answer to such questions could determine federal jurisdiction. See, e.g., Leck v. Cont’l Oil Co., 892 F.2d 68 (10th Cir. 1989) (after certifying questions of state law to, and receiving answers from, the Oklahoma Supreme Court regarding jurisdictional question, reversing the district court’s dismissal of action for lack of subject matter jurisdiction). Here, the answers to the State Law Questions will demonstrate the inapplicability of § 4617(f). As explained in Plaintiffs’ Brief in Opposition to Defendants’ Motions to Dismiss (see pp. 35-37), because the Net Worth Sweep violates Delaware and Virginia corporate law, the rules of decision for purposes of the Companies’ corporate governance, FHFA exceeded and violated its statutory authority under HERA by implementing the Net Worth Sweep. Thus, if the Delaware
and Virginia Supreme Courts answer the State Law Questions in the negative (i.e., the corporate laws of Delaware and Virginia do not permit a preferred stock dividend right like the Net Worth Sweep), then § 4617(f) would have no application here.4
___________________________________________________________________________________
3 Interpreting § 4617(f) as not affecting the Court’s jurisdiction is also consistent with the Third Circuit’s treatment of FIRREA’s analogous provision, 12 U.S.C. § 1821(j). See, e.g., Gross v. Bell Sav. Bank PaSA, 974 F.2d 403, 406 n.7 (3d Cir. 1992) (court analyzed case “under § 1821(j), rather than under the jurisdictional aspects of § 1821(d)(13)(D)” (emphasis added)). 4 Section 4617(f) also cannot be read in the manner Defendants suggest because it would vest FHFA with “unreviewable power to do as it pleases.” Rechler P’ship v. Resolution Trust Corp., 1990 WL 711357, at *4 (D. N.J. Sept. 7, 1990). Fannie Mae and Freddie Mac opted to be governed by Delaware and Virginia law, respectively, for purposes of their corporate governance, and Defendants elected to apply those state laws to the PSPAs. Defendants now claim that § 4617(f) bars this Court from deciding the validity of a provision in those contracts under those state laws. That is, Defendants effectively argue that HERA permits FHFA to enter into state law contracts while violating applicable state law with impunity. That cannot be—and is not—the law. See id.
________________________________________________________
Like § 4617(f), the second provision cited by Defendants—which provides that upon
appointment as conservator FHFA “immediately succeed[ed] to . . . all rights . . . of any
stockholder . . . with respect to [Fannie Mae and Freddie Mac] and [their] assets,” 12 U.S.C. § 4617(b)(2)(A)—does not mention the Court’s subject-matter jurisdiction. Nor does it deprive Plaintiffs of Article III standing. The Net Worth Sweep effectively destroyed Plaintiffs’ stock, and there is no question that that stock survived imposition of conservatorship and FHFA’s succession to certain stockholder rights. See, e.g., Compl. 5-6; Statement of FHFA Director James B. Lockhart at News Conference Announcing Conservatorship of Fannie Mae and Freddie Mac (Sept. 7, 2008), http://goo.gl/vfGuQ7 (“[T]he common and all preferred stocks will continue to remain outstanding.”). Rather than depriving Plaintiffs of constitutional standing, § 4617(b)(2)(A) simply limits their ability to assert certain claims during conservatorship.5 This at most is akin to a question of statutory standing, and such questions need not be addressed before other merits issues. See Bowers v. Nat’l Collegiate Athletic Ass’n, 346 F.3d 402, 415 (3d Cir.
2003).
Treasury’s purported sovereign immunity from suit likewise need not be addressed
before reaching the merits.6 As an initial matter, FHFA has not invoked sovereign immunity. Therefore, regardless of whether Treasury’s immunity argument is valid (and it is not), the issues Plaintiffs seek to have certified may still be reached with respect to FHFA—and, potentially, be extended to Treasury despite the immunity assertion. See Starkey ex rel. A.B. v. Boulder County Social Services, 569 F.3d 1244, 1260-63 (10th Cir. 2009) (reaching merits of plaintiffs’ claims without deciding defendants’ immunity argument). Furthermore, it is not clear that this Court must address immunity before the merits even with respect to Treasury. Although the issue has split the circuits, the Third Circuit has held that Steel Co. does not preclude courts from bypassing issues of state sovereign immunity under the Eleventh Amendment to reach the merits. Bowers, 346 F.3d at 418. Using similar reasoning, the D.C. Circuit has held that the same is true with respect to federal sovereign immunity, see In re Sealed Case No. 99-3091, 192 F.3d 995, 1000-01 (D.C. Cir. 1999), and this Court should do the same. At this point, however, the Court need not reach the issue because, as just explained, the sovereign-immunity defense at most shields Treasury, not FHFA.
__________________________________________________________
5 As Plaintiffs have explained in their opposition to the motions to dismiss, § 4617(b)(2)(A) does not preclude the claims Plaintiffs assert here. But for the reasons explained in the text, the Court need not decide that issue before the issues raised in the Certification Motion. 6 Treasury’s “intergovernmental immunity” argument does not address jurisdiction but rather whether the Supremacy Clause precludes Plaintiffs’ claims on the merits. See Tr. MTD Br. 22. It thus clearly does not need to be addressed before any other merits argument.
___________________________________________________________
Finally, contrary to Defendants’ contentions, this Court should certify the State Law
Questions to the Delaware and Virginia Supreme Courts because the answers to these questions will have broad implications stretching far beyond this case, affecting every Delaware and Virginia stock corporation and their directors, officers, and stockholders. While Defendants attempt to portray this case as presenting a “unique fact pattern . . . unlikely to recur,” see Defs.’ Opp. at 5, that simply is not true. The Delaware and Virginia courts routinely handle cases challenging corporate transactions that benefit a single, controlling stockholder at the expense of all other stockholders. Though we have never before seen a preferred stock dividend right such as the Net Worth Sweep—indeed, that fact, in and of itself, says all that needs to be said about its legality as a matter of corporate law—it nevertheless remains a structural concept that controlling stockholders of other corporations subject to Delaware and Virginia corporate law might attempt to seize upon to unfairly eliminate the economic interests of minority stockholders if its invalidity is not swiftly confirmed. Certifying the State Law Questions now to the
Delaware and Virginia Supreme Courts will allow those courts to provide guidance to directors of every Delaware and Virginia stock corporation that they may not unilaterally contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.
The facts that Treasury is the preferred stockholder here and that the Companies are in
conservatorship do not make it unlikely that a Net Worth Sweep-like preferred stock dividend right will be seen again. Rather, that our federal government would so cavalierly impose such an illegal and inequitable preferred stock dividend provision on the Companies and their other stockholders makes it all the more likely that private, for-profit parties would do so as well absent decisions from the Delaware and Virginia Supreme Courts confirming the invalidity of such provisions under those states’ corporate laws. Indeed, the federal government’s actions here, as conservator and preferred stockholder, serve as an imprimatur for such invalid action that is not present when private parties play the same roles. If these actions are allowed to stand, private parties governed by Delaware and Virginia corporate law will copy it freely, on the
grounds that “the government did it so we can too.” Whatever moral authority the federal
government purports to bring to the situation cannot be used to violate state corporate laws that federal law does not preempt. To the contrary, the federal government, for all its public responsibilities, deserves to be held to a higher, and not a lower, standard of conduct than private parties in similar situations.
For the reasons set forth above and in the Certification Motion, the Court should grant the
Certification Motion and certify the State Law Questions to the Delaware and Virginia Supreme Courts in accordance with Del. Supr. Ct. R. 41 and Del. Const. Art. IV, § 11(8), and Va. Supr. Ct. R. 5:40(a) and Va. Const. Art. VI, § 1, respectively.
POTTER ANDERSON & CORROON LLP
By: /s/ Myron T. Steele
_____________________________________
Myron T. Steele (DE Bar No. 000002)
Michael A. Pittenger (DE Bar No. 3212)
Christopher N. Kelly (DE Bar No. 5717)
1313 North Market Street, 6th Floor
Wilmington, DE 19801
(302) 984-6000
msteele@potteranderson.com
mpittenger@potteranderson.com
ckelly@potteranderson.com
Attorneys for Plaintiffs
Dated: February 26, 2016
1216876/42717
"Written by the former Chief Justice of the Delaware Supreme Court, Myron T. Steele - this should be one of the most sensible legal documents you will ever see that says it all in plain, easy to understand English.
Can the Federal Government make (corporate) laws to override State laws?
If so what prevents the Federal Government making (corporate) laws to override all state laws?"
Copied from yahoofinance; author: bladedoctor01
MOST INTERESTING ARE THE TWO LAST PARAGRAPHS.
WE ARE WINNING, $65/common share price is probably way too low to settle for'
To those involved in court:$65/common share is the lowest shareholders will settle for.
Close at $1.60 open at $65/share
What is your take on this?
FNMA:today might be your last day to buy under $60/common share
just some months ago I have bought FNMA. But the current news, senators' opinion, opinion from The Street, Harvard article, BoA's advice... all are pointing out that Fnma will be unleashed soon.
beginning of the resurgence of FNMA. end March 1 at $1.41, halted at March 2 at $ 3.09 and reopen on March 8 at $60/com
If you want to get real rich,buy FNMA common shares right now.
I think it will take a whole week for market makers to organize the revival of fannie mae. Imagine the number of shorts, the investment firms to place a target on common shares, ...
March 2 could be the beginning of the resurgence of FNMA. end March 1 at $1.41, halted at March 2 at $ 3.09 and reopen on March 8 at $60/common share
Great find!Should get a sticky post.
Ye$$$$$
$11Bill Rev/1.16 bill shares X 17 P/E= $161.00 @TheJusticeDept
Of course this doesn’t take into consideration any subsequent PENALTIES
$40/share….perhaps after a 4/1 forward split–warrants are invalid
the biggest variable is what the P/E should be
P/E is variable---floating target===could be a lot higher--like 40
4058
Net income/outstanding shares * P/E multiple==PPS
thus 11/1.16*40===PPS of $379.00
PPS shd be $379.00 $11bill/1.16X P/E 40==$379.00
Author: Patswil
Today's article from TheStreet screams to unleash FNMA:
http://us.rd.yahoo.com/finance/external/tsmfe/SIG=145usf2bv/*http://www.thestreet.com/story/13469349/1/no-capital-at-fannie-and-freddie-is-bad-for-taxpayers-markets-and-america-s-families.html?puc=yahoo&cm_ven=YAHOO
Interesting article: http://howardonmortgagefinance.com
My estimate:FNMA will open around $60/common share, followed by a short squeeze to $90/share or higher.