The SPSPA contains 2 things a liquidation preference and a warrant, the liquidations preference initially was given on $1B ($1,000 per share) and a warrant representing 79.9% of the common stock, so treasury cannot own more than 79.9%(sure they can buy stock themselves for market value but anybody can) as the contract does not allow it to be more, the commons indeed still own 100% of the commons now, but it REPRESENTS 20.1% of the companies as per the contract the shares are given away without any consideration and most importantly without additional funds, this is not a normal procedure(lack of fiduciary duty) as you cannot ask somebody to give you a loan and ask more(The warrant) than you physically give, let alone ask for future profits, it is depraved
A junior to common conversion, does violate the constitution as the statue of FHFA is to preserve and conserve and to put in sound and solvent condition, any action outside this statue is unconstitutional, it is unheard the government does not follow its own rules
And because they did the opposite, they cannot glue pieces together that were not broken in the first place
The FHFA/FHFA-C does have fiduciary duty to shareholders as that is the consent the BOD gave to the FHFA-C, the BOD represents the shareholders and they agreed to preserve, not to give away anything, the three judges did not do anything other than declaring they lack authority, and none of the 3 judges said there was no fiduciary duty
The government cannot escape the 79.9% ownership fiduciary duty, they are the majority shareholder if the warrant is exercised or not they have the control and this control gives them the fiduciary duty
All lawsuits are built on the case to void the SPSPAs, the mayority hold the 3th amendment is illegal, but what it actually says is because the 3th amendment is illegal the contract is “VOIDABLE” this is a much more sophisticated claim then it at first sides looks, when a contract is voidable (after a ruling the 3th is illegal) the FHFA-C is obligated due to their fiduciary duty to void the contract, and if the contract is void all funds needs to be returned and the recapitalization is a fact
The 10% dividend ranks lower to the outstanding claims and I understand why no lawsuit is asking relief on it, although important and illegal(it will be very costly for treasury to return all funds with 10% premium for 12 years) I don’t see it as crucial as when the 3th amendment is ruled illegal(and it already is) but ones declared illegal the SPSPA debacle is more or less solved because the contract becomes voidable
Sweeney never said treasury was not a controlling shareholder, she can’t because treasury is the controlling shareholders please look at context again, the context of fiduciary duty to shareholders is important while the FHFA-C does not have fiduciary duty to shareholders on regulation or individual things they implemented, they DO have fiduciary duty on giving away 79.9% of the company as it lacks consent of the BOD(shareholders)
The equity raise FHFA is talking about is imo stage crafting, the lawsuits are near completion, and I understand that FHFA is not going to say, “sorry guys we are going to lose the lawsuits and FnF will instantly be capitalized” of course he says what prior administrations said and that is why they keep fighting, the point of no return was a decade ago, it would be very stupid to have a change of mind suddenly, but legally they already lost on all fronts and that is why cooper said pressure is immense
1) All lawsuit challenge the SPSPAs and the warrants, most lawsuits challenge the 3th amendment and by that the SPSPA is voidable and can only be void out of fiduciary duty
2) The 20.1% is important as the government receives 100% of all profits in perpetually and the 20.1% minority shareholders are excluded form profits, and of course the BOD did not agree on that consent to all profits to the government in perpetually
FHFA is NOT allowed to act in its own interest (I think you talk about 12 U.S.C. § 4617(b)(2)(J).) as the FHFA now has the powers of the BOD, the FHFA has 1.000’s maybe even 10.000’s of fiduciary duties to the Fannie and Freddie and Shareholders, some of the fiduciary duties are not granted as the question presented is covered or relief can be given on other grounds( for instance “HERA preempts any state law”, then HERA is unconstitutional as the law and constitution rank higher than HERA)
Then it follows the judge says FHFA-C does not have fiduciary duty, but only because it is preempted by HERA NOT because it does not have fiduciary duty, the shareholder rights are always protected, and anybody whoever does anything to shareholders will be accountable, in this case the FHFA/FHFA-C, so either shareholders have relief on HERA declared unconstitutional as the agency cannot act out of self-interest or shareholders receive relief out of the breached fiduciary duty, however both claims come from the breach of fiduciary duty
If in the future an SPO might be necessary, the court first must make a final ruling on:
1) The FHFA/FHFA-C did not breach consent on the implied-in-fact contract they had with the BOD
(already declared illegal by the 5th circuit as it was contrary to conserve and preserve U.S.C. § 4617(b)(2)(D). and because 4617 contradicts the 3th amendment)
2) The 3th amendment is legal
(already declared illegal by the 5th circuit as it was contrary to conserve and preserve U.S.C. § 4617(b)(2)(D).)
3) The warrant is legal (because of 1 and 2 above the contract is voidable and needs to be voided by Fannie and Freddie and FHFA-C)
Because of the illegal conduct FHFA-C implemented and the total unnecessary Naïve unprofessional implementation of the 3th amendment, the FHFA does not have any right to dilute shareholders, it is very difficult for a world-class regulator to do again the contrary of what is expected, indeed if the courts overrule the 5th circuit and Sweeney and the constitution and the laws are re-written so they don’t conflict, the shareholders can be diluted, but chances of that happening are nil, this is the endgame and the rulings so far have been only in favor of shareholders, there was not a single judge who said the FHFA/FHFA-C did the right thing, they only said it lacks power, Hera preempted etc. there is not a single lawsuit to date that “lost” and confirmed the FHFA/FHFA-C did the “RIGHT” thing
So for now and into the future the current common shareholders (all1.1B/0.65B) are 100% owner of the companies, that FHFA states “shareholders will be heavily diluted by the equity raise” is correct, and if you neglect the red light traffic light you might have an accident, and if you drop your glass of water on the ground it probably will break, all logical, the FHFA is telling the truth but FHFA doesn’t state anywhere it is expected as fact or even likely for that matter a raise is necessary, he only is assuming that an equity raise is needed, and he is looking at the possibilities, well we all know the possibilities and that is void the contract and return the funds, but that is nothing you can broadcast, so he is looking into it, and shareholders know why, at least I know and so do a lot of others, just a matter of perception.
Current common shareholders being diluted below 20.1% can only happen when the rulings are reversed and the constitution is re-written.
FHFA get its authority from HERA who is unconstitutional, as it can act in their OWN best interest, besides this is against all solvency laws, it also breaches regular laws like fiduciary duty, and of course the constitution, not very unimportant ones, beside HERA being unconstitutional, it can only operate what is in the best interest of the companies as that is what solvency laws says, so HERA needs to be adjusted accordingly or voided completely
1) The SPSPA voids fiduciary duty as the FHFA gave away shareholder sharerights without consideration, FnF did not receive any additional funding for the warrant
2) The board of directors cannot reestablish the shareholder property owning’s by themselves, if money is owed it needs to loan the money, ones this money is returned the loan is paid, additional freebees are not granted this isn’t pick a choose, and the fiduciary duty is breached by FHFA-C although HERA preempts fiduciary duty, the constitution does grant it, so 1 of the 2 needs to go
Currently Fairholme is questioning the SPSPA in its entirety see:
Count XI (Fannie) and XII (Freddie)
“Breach of Implied-in-Fact Contract between the United States and the Companies”
This burden cannot be overcome as A party alleging an implied-in-fact contract with the government must plead four elements:
(1) Mutuality of intent to contract,
(2) Consideration,
(3) Lack of ambiguity in offer and acceptance, and
(4) Actual authority’ of the government representative whose conduct is relied upon to bind the government.”
The FHFA has fiduciary duty to Conserve and Preserve and PUT in SOUND and SOLVENT condition, these capital words show the FHFA has fiduciary duty towards parties in conservatorship, otherwise stated how can you put in sound and solvent condition, siphoning all profits?, so although this is preempted by HERA as it can act in their own best interest the law says things are different than HERA is claiming to have authority on. But there are so many examples of contradictions in HERA, that for me it doesn’t sound like HERA can’t survive
The Citi conversion is not a properly comparison to Fannie and Freddie as it is a bank and we all know the “banks” settled for $25B of misconduct, in Fannie and Freddie however the misconduct is done by the FHFA/FHFA-C, don’t want to compare apples to oranges
The Fairholme case challenges the breach of the implied-in-fact contract(count XI and XII), this is the contract in which the BOD agrees to conservatorship, so this contract also contains the a carte blanche from the BOD(the government claims to have) and that is something all shareholders would like to see (apart from FHFA breaching its own statuary duties of course)
1) one parts illegal will make the contract voidable and out of fiduciary duty the FHFA and Fannie and Freddie will have to void it
2) none of the judges said he FHFA did not have fiduciary duty, they said HERA preempted and lack of jurisdiction, non of the judges declared it does not own fiduciary duty
The common holders have 20.1% of the company now and after a final ruling it will be 100%, above I point out to, in order to receive something it must be proven by court the FHFA did the legitimate thing and although we are talking about a world class regulator the dozens of lawsuits suggest otherwise
The FHFA is bound by the constitution, HERA obviously is outside this framework(as declared by the 5th circuit en banc ruling) then in order to proceed either HERA needs to go(altered) or the constitution, my guess is the former
Please provide detail as to why the 20.1% shareholders are not entitled to 20.1%, I did not see any argument or any basis in the previous years that convince me let alone proof, the government also has been fighting this fir years, but they lost on all counts fighting the matter (also as detail the shareholders did not loose any lawsuit because there claim was not legitimate, only on lack of standing HERA forbid etc.)
The breaching of the BOD consent is when the government bargained for the Enterprises’ boards’ consent to place the Enterprises into conservatorship
This bargain is consent and consists of a mutual intent to solve a problem that was not there (as we now know), as FHFA had a strong incentive to pursue consent because that method was less likely to lead to litigation concerning the appointment of the conservator, then to establish and make the consent final there must be agreement on specific factors, one is the conservators needs to put in sound and solvent condition, this was not necessary as the company was solvent when they entered into conservatorship, the other one preserve and converse was also breached, but that was what the FHFA*FHFA-C premised they would do out of their statuary duty towards Fannie and Freddie, as we all know the FHFA-C siphoned the profits and that is contrary to the BOD consent given to the FHFA to put them in conservatorship
The FHFA cannot establish a conversion rate you underestimate the difficulty in measuring how difficult this is, first as the world-class conservator they siphoned the profits and then they want to convert and establish a conversion rate, but say it is possible you run into following problems, probably not the only ones, but just to pick a few:
1)What is the stock price to convert from
2)What would be the current liquidation preference without a ruling
4)What actual losses occurred to prefs depending date of entry
5)What is the interest rate granted
6)What are the missed dividends
7)how to overcome the suspended dividend mode
8)how to overcome a positive pro pref plaintiff ruling
9)how to overcome a positive pre common plaintiff ruling
10)how to overcome a granted relief by court if the prefs are converted
All very very difficult to calculate and most importantly different for each individual pref holder, as some lost a lot of dividend, but if you bought after conservatorship the pref was already in suspended mode, so you are not entitled to relief, to make a long story short this matrix will be endlessly long and not workable
The FHFA is unconstitutional and receives its power from HERA, the “for cause will be changed to “at will” and all corresponding rules in HERA that give the FHFA power based on this “for cause” single director need to be deleted, and because all those lines (hundereds of them) need to be modified or completely stricken, most if not all actions will need to be reversed too, as it was not justified by law to take these measures let alone keep them in place while unlawful
The FHFA has fiduciary duty, it does not to share price, but it has among the other 10.000 fiduciary duties, they have the duty to conserve and preserve that is the statue nothing more nothing less, and that is what not happened, and because Sweeney wants to prevent double recovery they see this currently as a solution, but soon will realize that is not the case as frivolous interpretation of the law it bor something to get shareholders out of this misery(don’t forget you cannot grant count VIII and IV fiduciary duty as derivative and not have the direct claim relief on the same grounds whatever those might be, the granting of these claims grant also the direct claims as it is established there were wrongdoings, so there must be relief)
The likelihood investors will invest in such a hornet nest and blatant abuse is unlikely, the wrongdoings first need to be reversed, the funding commitment is stage crafting they never had any commitment and any problems prior to conservatorship, the SPSPA cannot stay out of fiduciary duty as it is a voidable contract after a final ruling, and the funds distributed need to be refunded, sure there is a fight but the constitution will prevail as what they did is not only very unprofessional but also very dishonest and that doesn’t sound cricket to the way our government works
