Fannie Mae-No Politics (FNMA)

[kthomp19]

You had me till this line.

I'm just pushing back against the common nonsense assumption that all of HERA being invalidated is a 100% slam dunk huge windfall for current shareholders. It could just as easily be a disaster.

Unwinding HERA would hypothetically return hundreds of billions of dollars back to the companies (after SPS payback). It could not result in retroactively placing the companies in receivership, especially if the companies are solvent.

You have the timeline mixed up. From FHFA's Table 2, much of the hundreds of billions of dollars FnF paid to Treasury happened after the NWS started in 2012, and in any case all of it happened after conservatorship started.

Returning all the money paid after 2008 doesn't mean anything when deciding whether FnF would have gone insolvent in 2008.

Another point to address is that it was Lockhart's questionable (at best) accounting decisions, made after he became conservator under HERA, that made FnF insolvent in the first place. Without HERA, Lockhart couldn't have become conservator and thus couldn't have made such accounting decisions, right?

Wrong. Before HERA was passed, Lockhart was the director of the OHFEO, FnF's regulator by law established by the Safety and Soundness Act of 1992. Check Section 1369(a)(1) and (2):

SEC. 1369. APPOINTMENT OF CONSERVATORS.
(a) APPOINTMENT-
(1) DISCRETIONARY AUTHORITY- The Director may, after providing notice under paragraph (3), appoint a conservator for an enterprise upon a determination in writing--
(A) that alternative remedies available to the Director under this title are not satisfactory; and
(B) that--
(i) the enterprise is not likely to pay its obligations in the normal course of business;
(ii) the enterprise has incurred or is reasonably likely to incur losses that would deplete substantially all of its core capital and it is unlikely that the enterprise will replenish its core capital within a reasonable period;
(iii) the enterprise has concealed or is concealing books, papers, records, or assets of the enterprise that are material to the discharge of the Director's responsibilities under this subtitle, or has refused or is refusing to submit such books, papers, records, or information regarding the affairs of the enterprise for inspection to the Director upon request; or
(iv) the enterprise has willfully violated, or is willfully violating, a final cease-and-desist order under section 1371.
(2) CONSENT OF ENTERPRISE- Notwithstanding paragraph (1), the Director may appoint a conservator for an enterprise if the enterprise, by an affirmative vote of a majority of the members of its board of directors or by an affirmative vote of a majority of its shareholders, consents to such appointment.

Both (B)(ii) and (2) would have allowed Lockhart to put FnF into conservatorship anyway, even if HERA had never existed! (B)(ii) because the accounting decisions he actually made and (2) because FnF's boards actually did consent to conservatorship. Scroll down a bit to see Section 1369A(a), which would have given Lockhart (as OHFEO director) the same powers as conservator that he had as he did as FHFA's director.

In other words, where is the indication that things would not have worked out exactly the same way if HERA had never been passed? That's the big hurdle here.

Also in the AIG case, no one was threatened with being "zeroed out," they were simply denied damages.

I brought up the AIG case because it shows a clear danger to anyone hoping to sue over a retroactive shareholder wipeout.