Fannie Mae (FNMA)

[10bambam]

U.S. Treasury Spokesman Says Only Way To End Conservatorship Is Legislation
Nov. 23, 2014 1:24 PM ET
A Treasury Department spokesman on Friday said the Obama administration wouldn’t consider ending government control of mortgage-finance companies Fannie Mae and Freddie Mac without legislation.
Treasury spokesman wrote in an email, “Comprehensive housing finance reform legislation is the only way to end the conservatorship.".
THE COURT: "The Government is saying Plaintiffs lack standing, this Court lacks jurisdiction because the conservatorship is not part of the Government, it’s not a Government entity.".

Treasury Calls Shots for Frannie

Joe Light at the WSJ recently wrote up the summary of an e-mail exchange with a Treasury Department spokesman.

"The administration's position has not changed," the spokesman wrote in an email. "Comprehensive housing finance reform legislation is the only way to end the conservatorship responsibly and transition to a new system that brings stability back to the housing market while protecting taxpayers."

Treasury sweeps entire net worth of each Enterprise

This is consistent with what the Treasury has been doing all along, aka calling the shots as they relate to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). Look and see what happens when they call the shots. Judge Royce Lamberth's Memorandum Opinion summarizes this beautifully.

In simpler terms, the amendment "requires Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each Enterprise, minus a small reserve that shrinks to zero over time."

...

These dividend payments do not reduce Treasury's outstanding liquidation preferences.

...

Third, according to the press release, the net worth sweep would "make sure that every dollar of earnings that Fannie Mae and Freddie Mac generate will be used to benefit taxpayers for their investment in those firms."

Judge Sweeney is less amused

Meanwhile, over at Sweeney's court, the government seems to be taking a variety of positions.

THE COURT: And so far, I haven't gotten - I haven't received a good answer from the Government. Counsel is very able. But counsel has expressed concern of what could happen if certain documents are released, which I do not want to see happen, but counsel didn't answer to my satisfaction the discrepancy between sort of using the deliberative process as sword and shield. On one hand, FHFA is a government entity, you know, for purposes of booting the Plaintiffs out of court and not part of the Government, but for purposes of forwarding discovery, all of a sudden deliberative process is appropriate because they are part of the Government. So, it's a schizophrenic approach and I'm just waiting to hear a reasonable explanation.

FHFA Director Watt not in charge

Director Watt continues to do nothing, as Elizabeth Warren puts it best. "You've been in office for nearly a year now, and you haven't helped a single family, not even one," she said. She points this out for different reasons, but the statement is applicable here as well. This director is not calling the shots as evidenced by his statement that illustrates that Treasury is in charge.

After the hearing, Mr. Watt seemingly left the door open to the FHFA and Treasury's ending the conservatorship without Congress. "It's something that would have to be initiated by Treasury, not by me," he said.

Who is forgetting to look at the law?

The reality is that, "the Government is trying to have it both ways" as Judge Sweeney says, "I don't accept that argument." Treasury still is making public facing statements as if the Third Amendment to the SPSPA is not illegal government self-dealing, but if you're reading what I am writing it is impossible to not see that Treasury is in the drivers seat right now. Forgetting the difference between ownership and management, Reuters even takes it to the next level saying that Treasury owns the businesses on behalf of taxpayers.

I recommend taking a look at the law that applies to Treasury.

122 STAT. 2736 PUBLIC LAW 110-289-JULY 30, 2008

(7) AGENCY NOT SUBJECT TO ANY OTHER FEDERAL AGENCY.-When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency."

Meanwhile, the FHFA entered into a legal contractual agreement itself or on behalf of the Enterprises which signs away a portion of its powers to another agency. That's what the Third Amendment to the SPSPA is. Just look at who is making the decisions here. Treasury is directing. Treasury is supervising. Watt has no power. Is that not funny to you? Watt is powerless.

The watt is a derived unit of power.

There are next steps

The dialog continues to change. I'm just pointing out what everyone else is thinking. Senator Johnson, who had previously proposed legislation to wind down the businesses puts it best:

I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship.

So far, things have gone pretty much as anticipated with the exception of the Lamberth ruling, where some of the best clues are left out in the open:

Court does not seek to evaluate the merits of whether the Third Amendment is sound financial - or even moral - policy.

Judge Lamberth did not need to say that. The U.S. Treasury spokesman did not need to say anything either. I'm not saying anything either, I'm just saying, if you know what I mean. See what I did there.

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http://seekingalpha.com/article/2704865-u-s-treasury-spokesman-says-only-way-to-end-conservatorship-is-legislation