See this comment from jtimothyhoward near the bottom.
From me
If we can just get 1 judge... They're all different individuals... A radical or constitutionalist. It does not matter. One ready to step outside the box and shake things up.
From Tim
"The only question is which lawsuit will finally hit on the formulation that presents these deeds in a manner that resonates with the judges hearing the case and its subsequent appeals. The more cases that are filed, the more likely it is that one of them strikes that right chord."
Full Comment
jtimothyhoward
MARCH 1, 2018 AT 10:22 PM
Modest increases in interest rates should have little discernable impact on Fannie or Freddie’s earnings. Should rates rise enough to tip the economy into recession—which I do not foresee this year—I would expect both companies’ credit losses to increase, but not by nearly enough to offset the flow of earnings from their credit guaranty and (dwindling) mortgage portfolio businesses, and cause losses.
I’ve now read the Owl Creek suit, and had both a general and a specific reaction to it.
The general reaction is that the more these new lawsuits focus on the facts—particularly the true motivation for the net worth sweep, as revealed by the admissions of Treasury officials in documents produced in discovery for the Fairholme case—the harder it is going to be for the government to continue to pretend that FHFA was simply using its “regulatory judgment” as a conservator to act in the best interest of the companies when it entered into the sweep, rather than conspiring with Treasury in a manner that was ultra vires, or clearly outside of the bounds of the HERA statute.
My specific reaction was to the power of the argument the Jones Day lawyers made in presenting Count IV: “Breach of Implied-in-Fact Contract Between the United States and the Companies.” The essence of this argument is that Fannie and Freddie, who were not in financial distress at the time Treasury and FHFA requested them to consent to conservatorship, did so with the understanding that FHFA would in fact act as a true conservator following that consent, and it did not, instead colluding with Treasury to take all of their net income in perpetuity. As stated in the complaint, “The Agency made no finding of insolvency, undercapitalization, or any other ground to impose conservatorship under § 4617(a)(3)(A)-(H) or (J)-(L)…. The Agency offered, and the boards of Fannie Mae and Freddie Mac accepted, a conservatorship that would aim to ‘preserve and conserve the [Companies’] assets and property’ and restore the Companies to a “sound and solvent condition.”
There is no question that Treasury acted with premeditation and unlawfully in seizing Fannie and Freddie, and expropriating their assets for policy and financial reasons. The only question is which lawsuit will finally hit on the formulation that presents these deeds in a manner that resonates with the judges hearing the case and its subsequent appeals. The more cases that are filed, the more likely it is that one of them strikes that right chord.
