Fannie Mae-No Politics (FNMA)

[Fully Diluted]

The Collins En Banc ruling

The Collins En Banc ruling can be summarized as follows:
16 judges have analysed 4 allegations. Thereby a number of majority opinions were formed. The result: We won 2 points, lost 2. I have listed the 4 allegations below.

Hitchkock and his 2 co-plaintiffs want to reach an end of the NWS and all 4 points pursue this goal. In addition, the plaintiffs are seeking relief and proposing 2 variants:
1. All payments in excess of the originally agreed 10% dividend to the Secretary of the Treasury will be set off against the SPS and the excess amount of $16 billion will be used as a tax benefit for future corporate profits.
2. All payments in excess of the originally agreed 10% dividend to the Treasury would be returned to F+F, in excess of $135 billion, allowing the Treasury Secretary to retain his Senior Preferred Stock (SPS).

What exactly have we won now?
All or almost nothing. That remains to be seen. Because the ruling provides that the case will be referred back to Judge Atlas' district court. She now has to judge again, on exactly those 2 points that we won. She can do that in a speedy manner or she can open a trial. The former could be completed within months, the latter could take years, but does not have to.

How is that possible? Won is won, so why go back to the lower court?
This is actually quite simple: Judge Atlas had hidden behind HERA's "Courts are not allowed to interfere in the operational affairs of the FHFA" clause and simply rejected the plaintiff's request. That, according to an En Banc majority of 9 of the 16 judges, is not correct. The plaintiffs had plausibly shown that they had a right to sue. It could not be denied because it went beyond the operational activities of the FHFA. Atlas therefore had to investigate the action in two respects:
1. Did the FHFA exceed its legislative authority when it agreed the NWS with the Secretary of the Treasury? What is the remedy? There are two underlying laws: HERA and APA.
2. An En Banc majority found that the FHFA was unconstitutionally structured because its head could not be fired by the US President without a reason under HERA law. The District Court should correct this and find a remedy for the plaintiffs.

We do not have much to hope for from point 2, since the majority of En Banc judges agreed that it would be sufficient to have HERA revised by the legislator as a remedy. There is no further compensation in this.

However, the situation is quite different with point 1: An En Banc majority writes that point 1 has the potential to satisfy all the plaintiffs' claims.
"...Shareholders could theoretically obtain full relief under Count I alone,...", page 42

As I wrote on another board, my hopes for an En Bac victory were exactly on point 1, because in HERA it is written that the main duty of the FHFA is to ensure that the companies maintain "adequate capital" to be "sound and solvent". A 100 percent capital drain is incompatible with this. And a majority of the judges now share this view. HERA is now finally seen as a whole and individual passages that were previously interpreted as allowing the NWS are now seen in context. This also leads to the fact that the "may - should" confusions are removed.

My conclusion:
We have won! It is only a question of time.
This is because the judges of the District Court do not really have a free hand. The reasoning of the En Banc judges is strong. And all judges must now deal with these arguments in all cases; especially the district judges.
For me, as well as for lawyer Thompson, it is clear: The NWS will end! The argumentation of the plaintiffs in point 1 - exceeding the authority - has now been taken over by the En Banc judges. The lower court will understand this as a judgement directive.
And ask yourselves what kind of remedy is appropriate here: If the NWS is not legal, can the Secretary of the Treasury still keep all the money? Hardly! I my view this is not possible. One of the two remedies proposed by the plaintiffs will be granted. I do not see any other solution. And both variants would be a huge success for us, whereby variant 1 would be clearly better, since one would have to pay less of the 10% dividend, and shorter.

What about the stock price?
What do you think? Victory in the medium term or have to wait again, what weighs heavier? Has everyone understood that we have won? Is Fully right on the point?
I think we have a turbulent time ahead of us.

Will there now be a settlement with the plaintiffs? Counter-question: Does it look as if anyone in the administration is in a hurry?

GLTA


PLAINTIFFS' ALLEGATIONS
• In Count I, they allege the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(C), (D), affords relief because FHFA exceeded its statutory conservator authority under 12 U.S.C. § 4617(b)(2)(D).

• In Count II, they allege the APA, 5 U.S.C. § 706(2)(C), (D), affords relief because Treasury exceeded its securities-purchase authority under 12 U.S.C. §§ 1455(l), 1719(g). Specifically, they allege that Treasury purchased securities after the sunset period, failed to make the required “[e]mergency determination[s],” and disregarded statutory “[c]onsiderations.”

• In Count III, they allege the APA, 5 U.S.C. § 706(2)(A), affords relief because Treasury’s adoption of the net worth sweep was arbitrary and capricious.

• In Count IV, they allege FHFA violates Article II, §§ 1 and 3 of the Constitution because, among other things, it is headed by a single Director removable only for cause.

http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf