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If the power the director has are Cart Blanche (independent/single director) so the current system, it must be controlled by judicial review then 4617(f) will need to go
if the powers are taken away, meaning the agency becomes executive and the powers the director has are taken away and replaced by legislation upon which he can decide what to do, 4617(f) can stay, in the current setting it needs to go
yes, very good question, the 165,910M is what Fannie paid during 2012-2019, (it also paid $20B from 2008-2011) normally in the media they combine the two(FnF), to the $301B paid, the 10% is an issue in itself, as when those will be added/deducted, the government also will have to pay the 10% from the moment the loan was paid back, as that was the deal, as treasury should receive a reasonable return for its investment, so should FnF
the $11,401M in interest treasury has to pay to Fannie will likely not result in political satisfaction as they only would have received $12,419M in interest, sure they wanted the 10%, but not the boomerang effect (each month effective Q3 2019 the treasury will need to pay $272M to Fannie starting with the $6.5B balance) So what can we say about it, if they want the $1B difference or not, it will not be a big deal, either way, we just need to wait on SCOTUS and see what is and is not legal, my guess is SCOTUS will not talk about the 10% and just leaves it open for interpretation, it also would not surprise me if we never hear from the 10% interest again, it is just too difficult
The final outcome will immediately be reflected in the share price, common and preferred as otherwise, people will buy-in on the already “known” end result, I still wonder why Fannie trades at $2.12, while just before the 5th circuit verdict, it traded @ $3.80
In order to pre-un-raffle the SCOTUS decision, let’s look at what happened and make more or less sense out of it, for that we need to drive in reverse
To exit conservatorship in the coming months, they need to restructure. Treasury holds $120,836M and a warrant for 79.9%, Fannie also has $19,130M in junior preferred outstanding, and $25,259M in stockholders’ equity, then their equity position with treasury: in the equity the government has in fannie we can instantly see the government is a majority shareholder, preferred shareholders have $19B and common shareholders have 20.1%
So The Treasury holds $120,836M in equity, this equity was build up thru the years, on Sept 6, 2008 Treasury and FHFA agreed, Fannie and Freddie would need a bailout and made the PSPA, Fannie’s board agreed to conservatorship as can been seen on page 81, and Freddie’s board also agreed what can be seen on page 77 https://cdn.pacermonitor.com/pdfserver/7XNN5UQ/103433196/OWL_CREEK_ASIA_I_LP_et_al_v_USA__cofce-18-00281__0031.1.pdf
So the FHFA duly appointed itself as conservator pursuant Section 1367(a) / (12 U.S. Code § 4617(a) https://www.law.cornell.edu/uscode/text/12/4617) because it appointed itself as conservator and it needed money as the companies were in trouble, the treasury agreed to give $1B in exchange for Senior Preferred Stock of 1M shares worth a $1.000 each, upon each draw from the treasury the SPS would increase accordingly and the end result can be seen here
https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_1.pdf
https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_2.pdf
and on the invested money, treasury wants a 10% annual interest that will come due each quarter(~1.78%) on the outstanding SPS
Then we look at the PSPA, this is a contract established to wind down the companies, while the FHFA was appointed as conservator (not receiver) never the less the FHFA-C agreed to the terms to wind them down.
Next in 2012 they engineered the 3th amendment that gave all future profits to treasury, to make sure they never would emerge from conservatorship in its prior form. Conservatorship by design should be a temporarily thing, never the less they want the conservatorship to be permanent until the entities emerged into something else, while they change the regulation at the same time, this deal also made sure all profit from the companies in the future would belong to the Treasury Forever, as they would like to wind down the companies
So the Equity they hold upto 2012 was $116,149M (+1B initial), this Equity is legal, holding that a conservator can legally duly appoint itself, without any statutory control, and implement a “wind-down” contract “the PSPA”, while at the same time it is protected under a conservatorship statute(courts cannot take action). the 3th amendment holds that the dividends fannie paid to treasury $165B during 2012-2019, ($20B 2008-2011) belong to the government because the amendment clearly tells this is the case
so to sum-up:
$117,149 Fannie received from Treasury
$165,910 Fannie paid in dividends from 2012-2019
$19,813 Fannie paid in dividends from 2008-2011
So then how do we restructure this Equity? the SCOTUS will tell us if “for cause” is legal and if the 3th is legal, so in short is $165,910 & $19,813 legal, on “for cause” Collins and Treasury agree so we know $19,813 is not legal, so it is the question if they can keep this amount, but say for now they can
Then we have the 3th amendment, this is illegal no question about it, under this agreement fannie gave $165,91M to treasury, if it is void the funds will have to come back, Collins suggest to pay down the SPS, so that would be 165,910 – 117,149 = surplus $48,761M and there would be no SPS outstanding, also when that happens the government’s stake initially stated in their 10-K as $120,836 will be zero and the shareholder’s equity will increase with this amount, meaning not $25,259 but $74,020
Then the new restructuring looks like this:
$00.000 Treasury
$74,020 Shareholder’s equity
$19,130 preferred stock
Then we have the Warrant for 79.9% of the common stock, this warrant when obtained legally by the itself appointed director who is not accountable to any of the 3 branches in the separation of powers, gave treasury a 79.9% warrant, for this to become legal, we first must wait for the un-redacted files (page 77 for Freddie and page 81 for Fannie) because the price at issuance was estimated $3.5B (estimated by fannie mae) but the boards agreed to give away the $3.5B the scope of why that happened first needs to be un-redacted, as that would breach the BOD duties http://www.treasury.gov/press-center/press-releases/Documents/warrantfnm3.pdf
Then of course with the canceling of the SPS, the PSPA is changed and by that it is fulfilled, the government states in the PSPA 6.6. “Disclaimer of Guarantee.” This Agreement and the Commitment are not intended to and shall not be deemed to constitute a guarantee by Purchaser or any other agency or instrumentality of the United States of the payment or performance of any debt security or any other obligation, indebtedness or liability of Seller of any kind or character whatsoever”
So it logically follows when the government sold its share in Fannie Mae the explicit became an implicit guarantee, when the conservatorship started they made a contract with 6.6(above) which clearly states, it does not guarantee anything, the guarantee given is a specific amount, so it does not give explicit guaranty to the then $5.2T market share, so if the (partial) government backing is absent, the implicit guarantee is back (on the now $6.4T) just the way it was before the conservatorship and nothing changed at all. The government wants to make money on the implicit guaranty they give, however, this is not possible as implicit guaranty is not a guaranty, and therefore cannot be given a price (like an insurance company you pay, that “might” insure your house, or not)
Then still a lot is unknown, but for sure we know the 3th is illegal and the PSPA is illegal because it cannot be paid down, given those 2 facts, the easiest way out is to declare the SPS paid and void the amendments and contract, But SCOTUS will let us know soon enough
Yes (b) that is what Collins is asking the court because the FHFA is illegally structured (1), could it have implemented the 3th amendment while being unconstitutional(2)
this adds other important questions and is new to the line of questioning in the case, and it is brilliant, so we basically have 4 questions now:
first the original question in Collins Claim:
(1) Whether FHFA’s structure violates the separation of powers; and
(2) Whether the courts must set aside a final agency action that FHFA took when it was unconstitutionally structured and strike down the statutory provisions that make FHFA independent.
So the questions asked are:
1) Is for cause legal (The legal structure of FHFA)
2) Is the 3rd amendment legal (Siphoning on the profits)
3) Is the 3rd amendment legal while the FHFA is illegally structured ( could it implement the 1st 2nd 3th and conservatorship itself
4) Must it strike down:
12U.S.C. § 4511(a) Establishment (independent)(executive problem)
12U.S.C. § 4512(b)(2) Term (for cause) (executive problem)
12 U.S.C. § 4516(f)(2) Not Government funds (outside the appropriations act)
12 U.S.C. § 4617(a) HERA empowered FHFA to appoint itself as the conservator (executive problem)
12 U.S.C. § 4617(f) Limitation on court action (anti-injunction clause)(executive problem)
12 U.S.C. § 4617(b)(2)(D) put in sound and solvent condition; and preserve and conserve (executive problem)
12 U.S.C. § 4617(b)(2)(A)(i) General powers (succession clause)(fiduciary problem)
Then we must start at the beginning,
1) is FHFA legal if we have “for cause” removal, the constitution says the separation of powers has 3 branches the Legislative Branch, the Executive Branch, and the Judicial Branch, it is established an agency that is independent should be headed by a board of directors, so the single FHFA director violates this, and this is recognized by both Collins and the government, so that is not an issue
2) the 3th amendment is of course not something a conservator can do and is illegal for a conservator to do, so not an issue either
3) so now it gets interesting, is the 3th illegal while the FHFA itself is illegally structured: for this to understand we must rephrase: how could an illegal structured agency(FHFA) implement “something” meaning the 1st amendment the second the third? or another rephrase: how could an illegal agency implement something, that is legally binding, while the agency itself is not legally structured so how could they have implemented anything at all (conservatorship, 1th 2nd, 3rd, 4th) that is legally binding
4) and while we are at it, must it strike down the provisions that make the conservator independent, so it will become executive and has a fiduciary duty towards shareholder, and because those provisions are absent now how could it have enacted conservatorship, as they did not have the power to do anything at all
This problem is also recognized by the government:
JUSTICE BARRETT: but let me just ask you this. If the confirmed director could have taken that action at some point in the past, why isn't that an injury?
MR. MOOPPAN: Again, it's just not a problem with the Third Amendment any different than everything else, all right? That is essentially a challenge to agency inaction, the failure to amend the contract. On that theory, all of the agreements would have to go, not just the Third Amendment, the Second Amendment, the First Amendment, the original amendment.
So now the whole basis of anything the FHFA has ever done suddenly disappeared into thin air, but the SCOTUS soon will enlighten us all
no sorry that was my copy-paste error, the 3th is 4617(f)
the court cannot take action, this is of course illegal(court should be able to control executive agency actions), as the 3th is illegal(per conservator statute), so it must be set aside because the FHFA is unconstitutionally structured, the deal was self-dealing as when question1 changes the structure of FHFA to executive, the second question automatically becomes the 3th amendment is self-dealing
1) "for cause" 12 U.S.C. § 4512(b)(2) found illegal by the 5th circuit
2) "3th amendment" claims are barred by 12 U.S.C. § 4512(b)(2) no court may take any action
the 3th is illegal because a conservator cannot give away funds that belong to the conservatee, and since it is an injury, it is a direct claim, but we soon will know if the conservator statute needs to be changed and conservators can give away all the fund of the conservatee
EN BANC was this one (the now SCOTUS CASE)
18) 16-3113 (4:16-cv-03113)( 17-20364)
Patrick J Collins v. FHFA-C, FHFA, and Treasury …………………….…Common & Preferred, Direct
Honorable: Judge Nancy F Atlas
District Court, S.D. Texas
Claim: “for cause” separation of powers §?4512(b)(2)
1) are not in accordance with and violate HERA within the meaning of 5 U.S.C. § 706(2)(C)
2) that Treasury acted arbitrarily and capriciously within the meaning of 5 U.S.C. § 706(2)(A)
3) by executing the Net Worth Sweep, and that FHFA’s structure violates the separation of powers
https://www.courtlistener.com/docket/4533994/collins-v-lew/
Court of Appeals for the Fifth Circuit:
Before Judge Stewart, Haynes and Willett
https://www.courtlistener.com/docket/6179579/patrick-collins-v-steven-mnuchin-secretary/
July 16, 2018 Conclusion 5th circuit:
We AFFIRM the district court’s order granting the Agencies’ motions to dismiss the Shareholders’ APA claims because such claims are barred by 12 U.S.C. § 4617(f).(no court may take any action)
We REVERSE the district court’s order granting the Agencies’ motion for summary judgment regarding the Shareholders’ claim that the FHFA is unconstitutionally structured in violation of Article II and the Constitution’s separation of powers, and we REMAND to the district court with instructions to enter judgment declaring the “for cause” limitation on removal of the FHFA’s Director found in 12 U.S.C. § 4512(b)(2) violates the Constitution’s separation-of-powers principles.
The 5th circuit remanded this back to Judge Nancy F Atlas in District Court, S.D. Texas
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV0.pdf
https://www.courtlistener.com/pdf/2018/07/16/patrick_collins_v._steven_mnuchin_secretar.pdf
Sept 25, 2019 Petition filed in SCOTUS see 19-422
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Cases in the U.S. Court of Federal Claims:
Cases are reassigned to Judge Stephen S. Schwartz for all further proceedings. Senior Judge Margaret M. Sweeney is no longer assigned to the cases. Jan 4, 2021
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Judicial career
She assumed senior status on October 23, 2020. President Donald Trump (R) nominated Sweeney to be the chief judge on July 12, 2018. She served in this capacity until her retirement on October 23, 2020.
Tenure: 2020 - Present
Education: Bachelor's Notre Dame of Maryland, ...
Law: Delaware Law School, 1981
https://ballotpedia.org/Margaret_M._Sweeney#:~:text=Judicial%20career,-Federal%20Claims&text=She%20assumed%20senior%20status%20on,retirement%20on%20October%2023%2C%202020.
it is the Perry case
3) (13-1025) (1:13-cv-01025-RCL), 14-5243)
Perry Capital LLC v. Jacob Lew …… Common & Preferred, Derivative
CLAIM: Derivative APA, 3th amendment
District Court, District of Columbia
Judge: Royce C. Lamberth
https://www.courtlistener.com/docket/4212073/perry-capital-llc-v-lew/
https://www.courtlistener.com/docket/3054444/perry-capital-llc-v-jacob-lew/
Court of Appeals for the D.C. Circuit
On appeal before Judge: Brown, Millett, Ginsburg
Consolidated with:
1:13-cv-01053, 14-5254(Fairholme)
1:13-cv-01439, 14-5260 (Arrowood),
1:13-cv-01288, 14-5262 (In re: Fannie Mae/Freddie Mac Senior)
Feb 21, 2017 following claims are remanded to the district court for further proceedings.
a) breach of contract and breach of the implied covenant of good faith and fair dealing regarding liquidation preferences
b) and the claim for breach of the implied covenant with respect to dividend rights, which claims we remand (to Lamberth) for further proceedings consistent with this opinion
c) it also found We hold that the stockholders’ statutory claims are barred by the Recovery Act’s strict limitation on judicial review. See 12 U.S.C. § 4617(f).
d) claims against FHFA and the Companies, some are barred because FHFA succeeded to all rights, powers, and privileges of the stockholders under the Recovery Act, id. § 4617(b)(2)(A)
https://www.govinfo.gov/content/pkg/USCOURTS-caDC-14-05243/pdf/USCOURTS-caDC-14-05243-1.pdf
July 1, 2020 complete fact discovery by January 22, 2021, trial date is set May 16, 2022
https://storage.courtlistener.com/recap/gov.uscourts.dcd.160910/gov.uscourts.dcd.160910.119.1.pdf
March 29, 2021 The Court finds that the parties have demonstrated sufficient diligent to show good cause to modify the deadline for fact discovery. Accordingly, the fact discovery deadline is EXTENDED to May 18, 2021. The motion is denied insofar as it seeks to modify any other deadlines or dates. Once the Supreme Court renders its judgment in Collins v. Yellen (No. 19-422 & 19-563), if the parties can show that Collins requires additional discovery, they may ask the Court to revisit the fact and expert discovery deadlines.IT IS SO ORDERED. Royce C.Lamberth
https://storage.courtlistener.com/recap/gov.uscourts.dcd.160910/gov.uscourts.dcd.160910.124.0.pdf
not Monday IMO, max 4 weeks, June 14 might be the day (maybe 21 but they do not want to stretch it too long as the question is very simple)
yes, Thanks!
yes That is correct Donotunderstand, see also post 585965, the Collins plaintiff holds The 3th amendment is an injury to them, and that it needs to be set aside, the “Hotel California” problem.
they want:
“Enjoining Treasury and its officers, employees, and agents to return to Fannie and Freddie all dividend payments made pursuant to the Net Worth Sweep or, alternatively, recharacterizing such payments as a pay down of the liquidation preference”
The line of questioning in Collins is new, they attached the “for cause” to the “3th”, the government gave no pay down option, as its intention was to wind down their affairs, so the liquidation end date will not happen, however subject to earlier termination is when a court of substance thinks something in the contract is illegal and then the contract will end in the past when the liquidation pref is paid back
So we have 5 options:
1) 3th voided, overcharge is, Fannie $48,7B, Freddie $33,6B (2012-2019)
2) 3th voided, overcharge is, Fannie $68,5B, Freddie $50,2B (2008-2019)
3) 3th voided, payment=paydown Fannie $24,3B, Freddie $29,7B (2012-2019) with interest
4) 3th voided, payment=paydown Fannie $45,9B, Freddie $31,8B (2012-2019) no interest
5) 3th voided, payment=paydown Fannie $160,3B, Freddie $103,2B (2008-2019) with interest
SCOTUS: “we don't do harmless error in --in structural constitutional cases”
A problem for the government will be if it charges interest (the 10% annual 2012-2019 collins (3)) they will also have to pay the 10% on all payments after 2012 to Fannie and Freddie, politically this will not be an easy one
Are Fannie and Freddie Ready for the Next Housing Crash?
PUBLISHED BY DOW JONES & COMPANY
By Mark A. Calabria
This time last year, housing industry insiders were predicting that the market would collapse under the weight of the pandemic. The opposite happened Even as the economy suffered its worst year since World War II, the housing market boomed. But that doesn’t mean all is well. Rising prices have masked but not eliminated longstanding problems and vulnerabilities at the heart of America’s housing market. Most urgently, Fannie Mae and Freddie Mac- the government-sponsored enterprises that own or guarantee roughly half the $12 trillion mortgage market—lack the capital to survive the next inevitable down turn in home prices. The good news is that unlike the crisis in 2008, should the GSEs fail again, creditors, rather than taxpayers, can absorb the losses. That’s because the Federal Housing Finance Agency, which I direct, completed a new rule last month that creates a process to end taxpayer bailouts of the GSEs once and for all By requiring the GSEs to maintain credible resolution plans known as “living wills,” the new rule will enable a failing GSE to be restructured without risk to business continuity or America’s mortgage market. Similar to the requirements put in place by the Federal Reserve Board and the Federal Deposit Insurance Corp. under the Dodd-Frank Act, the resolution plans will facilitate rapid and orderly resolution if necessary. For the first time in history, the GSEs are required to demonstrate how, in the event of insolvency, core business lines and charters would be maintained to support the housing-finance system without extraordinary government assistance. By establishing the rules of the road in an insolvency, these living wills give future investors the information they need to price risk appropriately. This is a prerequisite for the GSEs to raise private capital, which is key to the housing market's long-term stability. The GSEs are private companies chartered by Congress to promote mortgage credit access, expand affordable housing in underserved communities, and backstop the
housing market in a crisis. They have operated under temporary government control since 2008, when they were bailed out and placed into conservatorships run by FHFA. But they remain private corporations. This means their ability to survive a downturn is tied to their capital levels. When I took office two years ago, the GSEs had only $6 billion in capital backing $5.5 trillion in mortgage-credit risk. This put their leverage ratio at nearly 1,000 to 1 compared with an average of 10 to1 at america’s biggest banks. FHFA worked with the Treasury Department, the most powerful shareholder of the GSEs, to increase the earnings Fannie and Freddie could retain instead of remitting to Treasury.
A new rule requires them to make ‘living wills’ for surviving a downturn without taxpayer bailouts.
The GSEs used their new and modest capital cushions to help millions of borrowers and renters stay in their homes amid Covid-19 the enterprises also contributed a record $1 billion to government affordable-housing funds. Last month the GSEs created a new refinance option that saves lowincome borrowers thousands of dollars. But they could be doing even more to support the market today if they had more capital.
Slowly building capital through retained earnings has improved the GSEs’ leverage ratio to roughly 140 to 1 That still isn’t enough capital to take risks or survive a housing downturn. And as 2008 demonstrated, when the GSEs fail, America’s housing problems get even worse. FHFA will continue to address the obstacles to building capital, including the need to restructure the assets that Treasury acquired in exchange for its 2008 funding commitment. At the same time, FHFA will continue advocating for solutions to structural problems in the housing market that GSEs can’t solve alone. Only local governments can roll back zoning restrictions and landuse regulations that inflate the cost of new housing or stop construction. Only Congress can break up the Fannie and Freddie duopoly, which concentrates risk and blocks new entrants from delivering better prices, innovation, efficiency and stability. Even so, ensuring the GSEs are well-capitalized and ready to withstand the next downturn is essential to avoid exacerbating these problems when housing prices inevitably fall. The new resolution rule will protect taxpayers from another Fannie and Freddie failure. But it can’t protect the GSEs or the broader housing market from a crisis. Only private capital can do that. The time is long overdue to ensure the long-term stability of America’s housing market. The current boom won't last forever.
Mr. Calabria is director of the Federal Housing Finance Agency.
Before I reply to your post, I want to make sure you understand the separation of powers, I think you misinterpret the constitution/situation
The constitution https://www.usa.gov/branches-of-government has 3 branches:
1) Congress, make Law
2) Executive, the President carries out the law
3) Judicial, the Courts interprets the law
so to understand:
1) congress makes the laws, with lots of people chosen by “the people”
2) the president is chosen by “the People” and can decide
3) the courts control the law and the highest court is SCOTUS with 9 members installed by the presidents, who is chosen by “the people”
so then we have the following issue:
1) Executive Agencies are controlled by the president chosen by “the people”
2) Independent Agencies are controlled by a multimember board “the people”
3) Independent agency with a single director
So One and Two are legal, and 3 is illegal, as this agency would have more power than the president, independent with a single director is executive power, but the head cannot be removed by the president, that’s illegal, and when he is removable, it is no longer is independent
When the 3th amendment is taken away from a contract, the rest of the contract must be reconstructed and be enforced as the new contract then dictates, we just fundamentally differ in opinion and that is o.k., the Equity you suggest is indeed on paper, but those funds were already paid(that was my point), so yes my conclusion was a bit too fast and not correct, but also nowhere near your conclusion, or as you like to call it, your conclusion is False Too
Draws and forced dividends:
https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_1.pdf
https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_2.pdf
Upto Q1 2012 before the 3th amendment, fannie was forced by voodoo accounting to draw 116,149 + 1,000 initial = $117,149M , when the 3th is declared illegal (the most likely scenario) all payments from Q2 2012 upto Q3 2019 will have to be returned, this totals $164,908, the total payback of the draw would have happened in Q2 2015 after this date a total of $45,940M is transferred to treasury (`Q3 2015 to Q3 2019)
So they paid during the 3th amendment $164,908M with an outstanding draw amount of $117,149
= 164,908 – 117,149 = $47,759M + 25,259 + 5,000= $78,018M, when the 3th is illegal
Then as Conservatorship itself is also questioned in question 1) from Collins,
the executive powers might be voided, the whole PSPA might be voided, not exactly sure how this plays out with the 4th 2021 amendment, as you cannot amend something that is already gone, and then choose and pick regulation, but for sure the executive powers belong to the president only no doubt about that, so
Then extra $20B (Q4 2008 – Q4 2011) also need be added so it will be $184,72M and the draw $117,149 makes
184,72-117,149 = $67,570 M+ 25,259 + 5,000= $97,830M
Hi again Kthomp, some of the things you mention might be right by itself but not in the scope of things, there are so many things we don’t agree on, but for easy reading and time sake let's keep the points down to a couple(not meaning they cannot be discussed only not in 1 post)
2) when “for cause is changed to “at-will” the FHFA is no longer independent and becomes an executive agency, as long as the FHFA is in existence its been illegal, the thing you are missing, is probably if it is declared illegal, it was not before this date legal for some reason or only effective as of the ruling date, so the actions it took prior the ruling date are illegal too, that doesn’t mean every action need to be reversed, but by itself, all actions are void ab initio (from the beginning) otherwise stated if I steal your car, and sell it to my friend, my friend cannot keep the car when I was found guilty of stealing the car
3)This is a total misunderstanding of the separation of powers, we had lots of discussions on this one, but let me try again, there are NO, ZERO other agency with executive power that are independent
The Separation of powers:
1) Legislative Power (the power to pass laws) to Congress
2) Executive Power (the power to administer the laws) to the President
3) Judicial Power (the power to interpret and enforce the laws) to the Courts
An agency if executive, receives its power from the president, an independent agency can rule on its own, but to make sure it makes the right decisions the head needs to be a board, so not 1 person ( a single person) can decide the faith of something, a board just makes any decision more neutral, and only the president can make actions by its own, no other agency is allowed to do that, the executive agencies only can take actions on “what is the law”, and the independent agencies can do what the board decides, in FHFA’s case it is independent and headed by a single director that cannot be removed (at least not by will) this power is called executive power, and can be seen in HERA too, with the language “when the director decides” this language is a problem when SCOTUS says “for cause” is illegal, and lets face it, both plaintiff and the government agree it is illegal so SCOTUS will probably find it illegal too, so we can conclude currently there is no room in the constitution for such an agency nor is scotus willing to add a 4th branch as those powers to change the constitution are not vested in the courts
4)this is also an issue we had lengthy conversations on, but let me try again, the FHFA is independent and implemented the 3th , this 3th is giving again away the profits of its conservatee, a conservator however is not supposed to give away all profits in perpetually, it’s the fiduciary duty the conservator has, to not give away the conservatee money, so if treasury asks to give all money forever, a conservator should reject such a proposal, but since the FHFA and Treasury are both the government it is self-dealing, so because the government is giving money (forever) to the government, it is called self-dealing (which is illegal by itself)
5) see 3)
Guido it is easier to see in the annual report, take 2020 10-K fannie, go to page 82/328, or search for 95.577
after the 3,960,490 liabilities, the 120,836 liabilities are added, since they retained 25,259 the "other deficit" is 95,577
so 95,577 + 25,259 = the 120,836 and the same thing can be seen for the year 2019
then if the 120,836 is written down the 120,836 will be deducted from the liabilities and the shareholders'equity will increase with the same amount as the liabilities are deducted in this case 25,259 + 120,836 = 146,095 (+Q1 5B = ~151B) with zero "other deficit" because of the write-down
we know CET1 in Q1 should have been $140, so without the SPS the surplus can be seen as 151-140 = 11
not sure how you came to the numbers you mention, Fannie has $120.836M in its book as SPS when those are declared paid, that number will be added to the current $30B shareholders’ equity, so after SCOTUS they hold $150B in capital excluding Q2, Q3 and Q4, excluding the overpayment, excluding interest, excluding other relief
The warrant is not mentioned as it is “Computed” by Fannie and not in books (see 2008 10-k Fannie), so all websites show 1.158 outstanding while all the calculations are based on fannies 5.867 outstanding(with the 79.9% warrant)
The excellence of the questions presented leaves no room for “interpretation” or “perception” decisions beyond the constitution, that is the beauty of it.
The perception mainstream ventilated upto now is different from what actually has been going on, these are the sort of cases that will surprise everybody, but the insiders (us) already know, to see the scope just simplify the questions presented and what an eventual outcome will be
1) Question, Is a single director with executive power allowed for an independent agency that makes its own rules? No per the constitution all powers are “controlled” by another branch, this single director would be (still is) more powerful than the president,
2) Question, Because 1) is No per the constitution, the 3th amendment is void ab initio (not only the 3th as the SCOTUS judges noticed, but basically all actions the director(s) ever took). So Yes it must set aside ALL actions the director(s) ever took because those were made while being unconstitutional, and the constitution only allows actions that are constitutional otherwise they are illegal, so the 3th amendment is also void ab initio
This doesn’t mean per se the SCOTUS judges will dissolve the FHFA, but nothing good will happen for the FHFA, and dissent will be dissent from the constitution and will question the capability of understanding the scope of the matter, the government itself asked to have a judgment on the merits, and the point of “they can do whatever they want because the anti-injunction clause says so” is not in front of them
Agree Robert, also the Wheels in motion make it virtually impossible to rule against plaintiffs, even if desirable for a judge, this is the end of the FHFA’s coercive behavior, the fiduciary duties are back, and basically, all FHFA’s wishes are destroyed in perpetuity, consider it the boomerang effect
I see where you are going, Yes the FHFA after the SCOTUS ruling will be executive and need to be funded thru the appropriation act
The FHFA is independent, as established in HERA by congress, the plaintiffs question the “independent” styled agency because it is headed by a single director (the “for cause” claim), then the remedy cannot be to install a board, the courts can only rule on the question presented and that is: is a single director for an independent agency constitutional?, if yes they added a 4th branch to the constitution, if no the FHFA becomes executive and funded thru the appropriation act
A 4th branch to the constitution will never ever happen though, currently, NO agency except FHFA has a single director and is independent, meaning an agency with executive power, so it looks something like this:
Independent agency – Headed by a Board of Governors
Executive Agency - Headed by a single director
Independent agency – funded by others
Executive Agency – funded by the Government
Then the FHFA currently is thru 44 U.S.C. § 3502(5) https://www.law.cornell.edu/uscode/text/44/3502
headed by a Board of Governors, but it is headed by a single director, strange right?
Yes this might evolve as a huge problem, because it would mean all the actions taken by the single director are void ab initio
https://www.law.cornell.edu/uscode/text/44/3502
(5) the term “independent regulatory agency” means the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Product Safety Commission, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Energy Regulatory Commission, the Federal Housing Finance Agency, the Federal Maritime Commission, the Federal Trade Commission, the Interstate Commerce Commission, the Mine Enforcement Safety and Health Review Commission, the National Labor Relations Board, the Nuclear Regulatory Commission, the Occupational Safety and Health Review Commission, the Postal Regulatory Commission, the Securities and Exchange Commission, the Bureau of Consumer Financial Protection, the Office of Financial Research, Office of the Comptroller of the Currency, and any other similar agency designated by statute as a Federal independent regulatory agency or commission;
exactly, https://www.courtlistener.com/opinion/118410/whitman-v-american-trucking-assns-inc/?q=Whitman%20v.%20American%20Trucking%20Assns
if the FHFA as conservator can take actions adverse to any "normal" conservatorship, that indeed is the hiding, no one with any common sense would have imagined the role of a conservator would be to siphon off profits, let alone doing it forever, that is just not what conservators do
they say it was to prevent a downward spiral, but since 2012 the companies are profitable so the intend should have been to reverse the 3th ASAP
like Thompson says: "we didn't know the companies were going to do so well, well, now we know"
AMG Capital Management v. FTC (19-508)
"For the reasons we have just stated, that could not have been Con¬gress’ intent. “Congress . . . does not . . . hide elephants in mouseholes”
https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf
FTC Acting Chair Rebecca Kelly is also uninformed about her own statute, this sounds familiar
The FHFA for Fannie and Freddie also claims:
It MAY put in sound or solvent condition OR siphon off all the profits
It MAY operate the Agency as 4th branch of the constitution
It MAY do whatever it pleases ignoring the rights of others
Fully agree with the slam dunk 9-0 SCOTUS decision
The Constitutional issue
The Collins case in front of SCOTUS
Collins plaintiffs combined the unconstitutional with the implementation of the 3th amendment, otherwise stated, if the FHFA is unconstitutional by “for cause”, it could not have implemented the 3th amendment, the government on the other hand says, because it has the authority to regulate the companies it can make any decision it wishes, and the fact that there was “Acting director” does not change a thing, and because the president could fire the acting director “at will”, and Treasury secretary “at will”, the decision made could have been withdrawn by the president, and that did not happen, so the action is legitimate.
Now the Government starts to contradict itself
As the SCOTUS Judges recognize:
1) FHFA is an Independent agency, if the acting director is removable “at will” it is not independent
2) If FHFA is not independent, it is Executive, and the Deal would be Self-Dealing
3) The FHFA is headed by a single director while the “separation of power” only allows an Agency with a board of Governors to be independent
4) If FHFA is headed by a single director the director could not have agreed to the 3th as this action is only allowed by a board of Governors
5) The Actions of an acting director should be Void per the constitution
The government thinks 12 U.S.C. § 4512(b)(2) (For Cause) can be severed from the statute, it surely can be Severed, but it will result in an agency that is Executive and could not have placed the companies in conservatorship 12 U.S.C. § 4617(a)(2) (“the Director may appoint the Agency as conservator”), as this executive action is only allowed if the Critical capital level is below 12 U.S. Code § 4613(a)(1) (1.25%) and not a minute earlier
So now we have 2 basic problems that will both end the conservatorship:
1) Plaintiff: Structure violates the separation of power and will lead the conservatorship to be void
2) Government: “For Cause” can be severed from the statute which will lead the Conservatorship to being void
How to make sense of it all
The SCOTUS Judges in the Seila law v. CFPB lawsuit, already concluded adding a 4th branch to the separation of power is not something they are endorsing, so the FHFA most likely will become Executive again
The Collins plaintiff think FHFA is unconstitutional, and the 3th amendment should be void
The Government think FHFA is unconstitutional, while the 3th amendment is not.
Then if you really look close, question 3) and 4) from the Government are working for the benefit of the plaintiffs, then it logically follows:
1) FHFA “For cause” needs to be removed and replaced by “At will” 12 U.S.C § 4512(b)(2)
2) FHFA is Executive with fiduciary duty (no longer independent) 12 U.S.C § 4511(a)
3) The 3th is unconstitutional and “Void ab Initio” 12 U.S.C § 4617(b)(2)(J)(ii)
4) The Conservatorship is “Void ab Initio” 12 U.S.C § 4617(b)(2)(J)(ii)
Then for the judges to determine the conclusion, will only be depending on the constitutionality of the things claimed, and their understanding of the constitution, any dissent from both Petitioners and Respondents is highly unlikely, as that would be seen as not understanding the scope and surely not ruling on the merits of the case, and as the government clearly pointed out “it should be a conclusion on the Merits of the case” it will be very unlikely to have any dissent in the conclusion
(Continued on next page)
Conclusion
All in all, the Collins case is very straight forward case with very simple constitutional questions, the only reason it became more difficult is because it dragged on for too long, however this is never a reason to vacate the constitution and since both parties are looking forward to end this Constitutional Avoidance, the ruling will be a final judgment on the merits.
Questions in front of the SCOTUS
(1) Whether FHFA’s structure violates the separation of powers 12 U.S.C. § 4512(b) (2)
(2) Whether the courts must set aside a final agency action that FHFA took when it was unconstitutionally structured and strike down the statutory provisions that make
FHFA independent. (a) thru h))
a) 44 U.S.C. § 3502 (5) Term “independent agency” means the Board of Governors of the FHFA
b) 12 U.S.C. § 4511(a) Establishment
c) 12 U.S.C. § 4512(b)(2) Term (5th circuit already found it violates the separation of powers)
d) 12 U.S.C. § 4516(f)(2) Not Government funds
e) 12 U.S.C. § 4617(a) HERA empowered FHFA to appoint itself as the conservator
f) 12 U.S.C. § 4617(f) Limitation on court action (anti-injunction clause)
g) 12 U.S.C. § 4617(b)(2)(D) put in sound and solvent condition; and preserve and conserve
h) 12 U.S.C. § 4617(b)(2)(A)(i) General powers (succession clause)
Furthermore Collins identified the FHFA breached following statutory provisions by its actions:
i) 5 U.S.C. § 706(2)(C) hold unlawful and set aside agency action, findings, and conclusions found to be—in excess of statutory jurisdiction, authority, or limitations, or short of statutory right
i) 5 U.S.C. § 706(2)(A) hold unlawful and set aside agency action, findings, and conclusions found to be— arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law
(3) Whether the statute’s anti-injunction clause, which precludes courts from taking any action that would “restrain or affect the exercise of powers or functions of the Agency as a conservator,” 12 U.S.C. 4617(f), precludes a federal court from setting aside the Third Amendment.
(4) Whether the statute’s succession clause (12 U.S.C. § 4617(b)(2)(A)(i)) —under which FHFA, as conservator, inherits the shareholders’ rights to bring derivative actions on behalf of the enterprises—precludes the shareholders from challenging the Third Amendment.
According to the Government it has following U.S. Codes that allowed them to implement the NWS
a) 12 U.S.C. § 4617(f) Limitation on court action (anti-injunction clause)
b) 12 U.S.C. § 4617(b)(2)(A)(i) General powers (succession clause)
c) 12 U.S.C. § 4617(b)(2)(B) Operate the regulated entity
d) 12 U.S.C. § 4617 Authority over critically undercapitalized regulated entities
e) 12 U.S.C. § 4617(b)(2)(D) put in sound and solvent condition; and preserve and conserve
The Govt got into disobedience with the law and soon will discover it was a bridge too far
"Plaintiffs are not attempting to enforce any duty imposed
on Treasury that is specified in the PSPAs. They invoke the contracts solely to establish that Treasury is a controlling shareholder and rely on that conclusion to argue that it has a fiduciary duty based on state law. The contract, otherwise stated, is one step removed from the purported
genesis of the fiduciary duty—the application of state-law principles."
http://www.glenbradford.com/wp-content/uploads/2019/12/13-465-0449.pdf
Thanks action8101, I appreciate it!
Thanks Guido