"Can Watt direct FHFA to stop opposing the lawsuits"
Not likely...he has a duty under HERA to do what is best for the GSEs. Giving into the lawsuits would likely be considered a breach of his duty.
"giving the courts a reason (or even a mandate?) to declare the NWS illegal?"
I believe the NWS is illegal because it constitutes a breach of an existing contract. First, no reasonable person would believe that the contractors of the original contract expected the 3rd Amendment vastly changing the terms. Second, terms of a contract cant be changed without additional consideration, of which there was none. Third, the NWS represents an invalid contract due to unconscionability. For these reasons, the court could rule the NWS invalid.
However, Watt can't just decide this for himself. He's a party, not the judge. And like I said, if he just decided to drop the case and give in, he would likely be found in violation of his duties under HERA.
"As a side note, Watt got appointed after the NWS was signed. If Watt believes that HERA obligates him to conserve and preserve the companies' assets and that the NWS runs counter to that, thus forcing him into an illegal act one way or the other, what is he supposed to do? "
This is a bit tricky. Honestly, I believe that when Watt gives his "legal reasoning" to Crapo as to why he thinks he can end the sweep, the statement you made above is close to what he's going to say. However...there are two major problems with this.
1. The harm that the NWS is causing to the conservation and preservation of the GSEs is subjective. Who says that the NWS is harming the GSEs? We do, obviously. Watt has. Would a reasonable person? I don't know... Corker definitely thinks its fine. lol. If Watt could PROVE that the NWS would kill the GSEs, perhaps this wouldn't be such a problem...but he can't.
2. The contract which created the NWS is governed by a separate law than the powers HERA gave to Watt. Don't forget...HERA isn't part of the Constitution. It is legislature. Therefore, HERA can't break the law! Only the Constitution is above all other laws. The NWS is governed by contract law. HERA can't direct Watt to breach a contract made in good faith. HERA COULD have directed Watt's predecessor not to create amendments to the original contract. But once the contract was made, it is a legal and binding document until the courts say otherwise.
"Mnuchin possibly has given approval, though why he won't come out and say so is a mystery."
This is who we need to give support. If Watt decides not to declare a dividend, we need Mnuchin to be on board with it.
"Next week's hearing may answer a lot of questions."
Hopefully in our favor. lol.
