However she reached her conclusion in her head, the precedent she used to justify it was clear. The plaintiffs were not convincing with their manifest conflict of interest argument and placed themselves at a disadvantage by filing a shareholder derivative suit.
There is no concern about whether the entities are distinct in Fairholme. One issue is whether the FHFA acted as the US government by taking orders from the US Treasury and by doing so, assuming the position of a government agency position rather than as a "corporation" as the Defendant's claim.
The derivative case decision to grant a motion to substitute most likely not be reversed with a positive outcome in Fairholme. These are two different cases with different approaches to the law. The Plaintiffs in the shareholder derivative case did not oppose legal precedent or the defendants right to ask for substitution and simply failed with the lack of merit in their arguments to convince the judge.
There is no real need for an exemption to HERA. Procedural, statutory and constitutional laws were violated. That is the basis of the non-derivative cases. Evidence in discovery is being collected to demonstrate that.
The shareholder derivative case's (Sweeney Estate) argument depended on common sense and reason that the FHFA will not attempt to sue the US Government on behalf of Fannie Mae because of a manifest conflict of interest and because the FHFA will not bite the hand that feeds it. This argument fails when it can be shown that legal precedent does not support it, that there were contractual arrangements underlying the behavior observed and that those contractual arrangements were not called into question as violation of procedural, statutory and constitutional laws.
The Plaintiffs lawyers were arguing an opinion and a perspective on a list of items that they thought demonstrated a manifest conflict of interest. That approach did not cut it with the judge and will not cut it anywhere else. Collusion between the US Treasury and FHFA and violating laws must be shown with evidence not opinion and argumentation.
FHFA can make policy, rules and regulations in accordance with the statutes of HERA 2008. By law, winding down can only occur in receivership. Reform can be done by the Conservator through altering policies, rules and regulations as allowed in HERA. Protecting the taxpayer is not a duty of the conservator. That is a duty and obligation of the Secretary of Treasury as found in Section 1117.
The defendants have made all of the arguments they are going to make. The law clearly lays out the authority, powers, duties and responsibilities of the FHFA and US Treasury. They are distinct agencies but not wholly separate as there must be interaction, mutual agreement and interdependence by and in accordance with the law.
However, the US Treasury can and did overreach and FHFA allowed and conjoined with the US Treasury so that both abandoned their statutory and fiduciary duties and to violate the law (APA, HERA, 5th Amendment) through collusion as is found in the formation and execution of the detrimental Third Amendment.
The US Treasury does not have the power or authority to wind down the GSEs and cannot directly make policy for the GSEs except as outlined and allowed in Section 1117.
APA, HERA 2008 and the US Constitution have the answers. Before reading case filings it is useful to understand what is the law and then all will become clear.
