Fannie Mae (FNMA)

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The Reconstruction of conservatorship in Fannie Mae and Freddie Mac

What happened to Fannie and Freddie when they went into Conservatorship
And what is the problem, and why are they not released?

19 minute read

In order the make any sense of the information out there it is important to know what happened before any prediction can be made and what an eventual outcome would be, and if these outcomes make any sense, legal wise, this post starts at the beginning of the conservatorship

The Conservatorship
On Sept 6, 2008 the BOD held a duly called meeting with the FHFA, and agreed voluntary to FHFA’s conservatorship, there are no meeting minutes from the BOD and because they are absent Sweeney’s court determined the deal falls under an implied-in-fact deal,
in order for this implied-in-fact contract to be legal it must contain:
1) an unambiguous offer,
2) unambiguous acceptance,
3) mutual intent to be bound,
4) and consideration
https://www.law.cornell.edu/wex/contract_implied_in_fact

The consideration is a benefit which must be bargained for between the parties(more on that below)

On Sept 7, 2008 a day later the FHFA agreed with treasury on the SPSPA, which contained a funding commitment and a warrant, and by that, as all conservators do, it should protect the companies. That is to put in sound and solvent condition, and conserve and preserve, but does this agreement?

The agreement FHFA and Treasury established is the SPSPA (Senior Preferred Stock Purchase Agreement), among other things it contains following:

“The Board of Directors of Seller, by valid action at a duly called meeting of the Board of Directors on September 6, 2008, consented to the appointment of the Agency as conservator for purposes of Section 1367(a)(3)(I) of the FHE Act, and the Director of the Agency has appointed the Agency as Conservator for Seller pursuant to Section 1367(a)(1) of the FHE Act, and each such action has not been rescinded, revoked or modified in any respect.”
So this is the legal consideration https://www.sec.gov/Archives/edgar/data/310522/000129993308004619/exhibit1.htm

(1367 of the FHE Act = §4617) https://www.law.cornell.edu/cfr/text/17/246.8

HERA is now the law the FHFA receives it power from, and it was enacted July 30, 2008(public law 110-289 https://www.govinfo.gov/content/pkg/PLAW-110publ289/html/PLAW-110publ289.htm), This Law gives FHFA 11 legal reasons to put Fannie and Freddie into conservatorship per § 4617(a)(3) https://www.law.cornell.edu/uscode/text/12/4617
1) Assets insufficient for obligations The assets of the regulated entity are less than the obligations of the regulated entity to its creditors and others.
2) Substantial dissipation of assets or earnings due to—
(i)any violation of any provision of Federal or State law; or
(ii)any unsafe or unsound practice.
3) Unsafe or unsound condition
An unsafe or unsound condition to transact business.
4) Cease and desist orders
Any willful violation of a cease and desist order that has become final.
5) Concealment
Any concealment of the books, papers, records, or assets of the regulated entity, or any refusal to submit the books, papers, records, or affairs of the regulated entity, for inspection to any examiner or to any lawful agent of the Director.
6) Inability to meet obligations
The regulated entity is likely to be unable to pay its obligations or meet the demands of its creditors in the normal course of business.
7) Losses, The regulated entity has incurred or is likely to incur losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the regulated entity to become adequately capitalized (as defined in section 4614(a)(1) of this title).
( Fannie Mae made following statement on their Q3 statement 2008:
Current Capital Classification
On October 9, 2008, FHFA announced that it will not issue quarterly capital classifications during the conservatorship. FHFA also announced that we were classified as “undercapitalized” as of June 30, 2008 (the most recent date for which results have been published by FHFA). FHFA determined that, as of June 30, 2008, our core capital exceeded our statutory minimum capital requirement by $14.3 billion, or 43.9%, and our total capital exceeded our statutory risk-based capital requirement by $19.3 billion, or 53.1%. Under the Regulatory Reform Act, however, FHFA has the authority to make a discretionary downgrade of our capital adequacy classification should certain safety and soundness conditions arise that could impact future capital adequacy.
Accordingly, although the amount of capital we held as of June 30, 2008 was sufficient to meet our statutory and regulatory capital requirements, FHFA downgraded our capital classification to “undercapitalized”’ based on its discretionary authority provided in the Regulatory Reform Act and events that occurred subsequent to June 30, 2008. FHFA cited the following factors as supporting its decision:
a) Accelerating safety and soundness weaknesses, especially with regard to credit risk, earnings outlook and
b) Continued and substantial deterioration in equity, debt and MBS market conditions;
c) Our current and projected financial performance and condition, as reflected in our second quarter financial report and our ongoing examination by FHFA;
d) Our inability to raise capital or to issue debt according to normal practices and prices;
e) Our critical importance in supporting the country’s residential mortgage market; and
f) Concerns that a growing proportion of our statutory core capital consisted of intangible assets.
https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/ir/pdf/quarterly-annual-results/2008/q32008.pdf
(bottom of page 110)
Somehow this gives a whole different meaning to § 4617(a)(3) (Grounds for discretionary appointment of conservator or receiver) as the conservator took away the reasonable prospect for the regulated entity to become adequately capitalized
8) Violations of law Any violation of any law or regulation, or any unsafe or unsound practice or condition that is likely to—
(i)cause insolvency or substantial dissipation of assets or earnings; or
(ii)weaken the condition of the regulated entity.
(I)Consent
The regulated entity, by resolution of its board of directors or its shareholders or members, consents to the appointment.
9) Undercapitalization The regulated entity is undercapitalized or significantly undercapitalized (as defined in section 4614(a)(3) of this title), and—
(i)has no reasonable prospect of becoming adequately capitalized;
(ii)fails to become adequately capitalized, as required by—
(I)section 4615(a)(1) of this title with respect to a regulated entity; or
(II)section 4616(a)(1) of this title with respect to a significantly undercapitalized regulated entity;
(iii)fails to submit a capital restoration plan acceptable to the Agency within the time prescribed under section 4622 of this title; or
(iv)materially fails to implement a capital restoration plan submitted and accepted under section 4622 of this title.
10) Critical undercapitalization
The regulated entity is critically undercapitalized, as defined in section 4614(a)(4) of this title.
11) Money laundering
The Attorney General notifies the Director in writing that the regulated entity has been found guilty of a criminal offense under section 1956 or 1957 of title 18 or section 5322 or 5324 of title 31.

Then if none of the above 11 legal reasons to enter into conservatorship occurred at the time the boards agreed to conservatorship, what is the legal reason the FHFA entered into conservatorship?
For purposes of, “(7)the losses or likely losses” is what they say but it is proven by Blackrock and the FHFA itself this was not the case only weeks before conservatorship started (more on that below)

Now remember the current applicable rules:
1) Critical capital Level 1.25%
https://www.law.cornell.edu/uscode/text/12/4613
https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Documents/critcap6908.pdf
2) Minimum capital level 2.5%
https://www.law.cornell.edu/uscode/text/12/4612
https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Documents/2Q2008MinCap.pdf
3) Risk-based capital level 2.8%
https://www.law.cornell.edu/uscode/text/12/4611
https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Documents/2Q2008RBC.pdf
https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Pages/Capital-Requirements.aspx

The Problems:
On the legal side there are 2 basic stands:
1) FHFA in unconstitutional per the constitution
2) the 3th amendment to the SPSPA is illegal

The unconstitutional problem can be found in:
a) 44 U.S.C. § 3502 (5) Term “independent agency” means the Board of Governors of the FHFA
b) 12 U.S.C. § 4511(a) Establishment
c) 12 U.S.C. § 4512(b)(2) Term (5th circuit found it violates the separation of powers)
d) 12 U.S.C. § 4516(f)(2) Not Government funds
e) 12 U.S.C. § 4617(a) HERA empowered FHFA to appoint itself as the conservator
f) 12 U.S.C. § 4617(f) Limitation on court action (anti-injunction clause)
g) 12 U.S.C. § 4617(b)(2)A)(i)) Incidental powers (succession clause)
http://www.supremecourt.gov/DocketPDF/19/19-422/116983/20190925131502103_Collins%20Petition--PDFA.pdf

The 3th amendment problems are put forward by all plaintiffs,
This 3th amendment to the SPSPA holds:
1) “Net Worth Amount” must be paid as dividends to treasury, the capital means (i) the total
“Applicable Capital Reserve Amount” means, as of any date of determination, for each Dividend Period from January 1, 2013, through and including December 31, 2013, $3,000,000,000; and for each Dividend Period occurring within each 12-month period thereafter, $3,000,000,000 reduced by an equal amount for each such 12-month period through and including December 31, 2017, so that for each Dividend Period from January 1, 2018, the Applicable Capital Reserve Amount shall be zero.
2) 5.7. Mortgage Assets. Seller shall not own, as of any applicable date, Mortgage Assets in excess of (i) on December 31, 2012, $650 billion, or (ii) on December 31 of each year thereafter, 85.0% of the aggregate amount of Mortgage Assets that Seller was permitted to own as of December 31 of the immediately preceding calendar year; provided, that in no event shall Seller be required under this Section 5.7 to own less than $250 billion in Mortgage Assets.
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2012-8-17_SPSPA_FannieMae_Amendment3_508.pdf


Then the problems of the SPSPA in
1367(a)(3)(I) is the same as the 12 U.S. Code §?4617(a)(3)(I) as can be found in: https://www.law.cornell.edu/cfr/text/17/246.8#:~:text=section%201367%20of%20the%20federal%20housing%20Enterprises%20Financial%20Safety%20and%20Soundness%20Act%20of%201992%20(12%20U.S.C.%204617)
It says:
Consent
The regulated entity, by resolution of its board of directors or its shareholders or members, consents to the appointment.

1367(a)(1) / 12 U.S. Code §?4617(a)(1)
(a)Appointment of the Agency as conservator or receiver
(1)In general
Notwithstanding any other provision of Federal or State law, the Director may appoint the Agency as conservator or receiver for a regulated entity in the manner provided under paragraph (2) or (4). All references to the conservator or receiver under this section are references to the Agency acting as conservator or receiver.
paragraph (2) Discretionary appointment
The Agency may, at the discretion of the Director, be appointed conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity.
paragraph (4) Mandatory receivership
(A)In general The Director shall appoint the Agency as receiver for a regulated entity if the Director determines, in writing, that—

So the BOD consented to the appointment of the Agency as conservator for purposes of Section “§?4617 (a)(3)(I) which is by “resolution of its board of directors it consents to the appointment.”
And because it had legal authority under “§?4617(a)(1) the Director may appoint the Agency as conservator” it did so, but none of the eleven reasons to enter into conservatorship occurred and besides that the BOD could never have agreed to conservatorship because “12 U.S. Code §?4617(a)(6)” contains The members of the board of directors of a regulated entity shall not be liable to the shareholders” but the purpose of a BOD is to protect shareholders, so without consideration it gave away its powers while being solvent, and that is a severe breach of fiduciary duties it has toward shareholders https://www.law.cornell.edu/wex/board_of_directors#:~:text=The%20board%20has%20a%20fiduciary%20duty%20to%20act%20in%20the%20best%20interest%20of%20the%20shareholders

The Consideration is a benefit which must be bargained for between the parties
The FHFA made a deal with treasury, but was this deal in the best interest on the companies? The companies were solvent and were put into conservatorship only because the FHFA claims it had the power under HERA to do so, not because the capital was at a critical level. The SPSPA looks like another piece of regulatory framework that FHFA put in place because it wanted to overhaul the housing finance system but needed more time to accomplish an overhaul, this view is also the way Treasury looked at it in on Aug 17, 2012 https://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx#:~:text=With%20today%E2%80%99s%20announcement,%2C%20we%20are%20taking%20the%20next%20step%20toward%20responsibly%20winding%20down%20Fannie%20Mae%20and%20Freddie%20Mac

Even more deceptive The treasury states on Aug 17, 2012:
“Retained Mortgage Investment Portfolios” “Those portfolios will now be wound down at an annual rate of 15 percent – an increase from the 10 percent annual reduction required in the previous agreements. As a result of this change, the GSEs’ investment portfolios must be reduced to the $250 billion target set in the previous agreements four years earlier than previously scheduled.”
https://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx
So now it is Treasuries job to downsize the companies not Congress(legislation) or FHFA (by regulation)? It is in the sole discretion of 1 government executive agency and 1 independent agency that soon will be an executive agency too, who agreed to act outside their statute of preserve and conserve, and it is wishful for this executive agency to wind down something without any input of congress or regulation?

Also on Aug 17, 2012 FHFA and Treasury agreed to a third amendment to the SPSPA, the circular draw is the reason they implemented this 3th amendment, but this is unveiled as incorrect by Susan McFarland and the documents containing these statements remain redacted for now, and this is strange as if it is true what the government claims, it will only contribute to their thesis
http://fanniefreddiesecrets.org/wp-content/uploads/2016/05/FM_Fairholme_CFC-00003075_Redacted.pdf

The 3th amendmend Also contains:
“for each Dividend Period from January 1, 2013, through and including
December 31, 2013, $3,000,000,000; and for each Dividend Period occurring within each
12-month period thereafter, $3,000,000,000 reduced by an equal amount for each such
12-month period through and including December 31, 2017, so that for each Dividend
Period from January 1, 2018, the Applicable Capital Reserve Amount shall be zero”
https://www.sec.gov/Archives/edgar/data/310522/000119312512359930/d399489dex41.htm#:~:text=the%20Applicable%20Capital%20Reserve%20Amount%20shall%20be%20zero

The “Capital Reserve Amount shall be zero”, this is not a typo, Treasury and FHFA agreed to let the capital go to ZERO, but the FHFA was established as independent agency who has only ONE mission: “FHFA is responsible for ensuring that Fannie Mae and Freddie Mac operate in a safe and sound manner. This is done through prudential supervision and regulation.” Yet is agreed to the 3th amendment https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac#:~:text=FHFA%20is%20responsible%20for%20ensuring%20that%20Fannie%20Mae%20and%20Freddie%20Mac%20operate%20in%20a%20safe%20and%20sound%20manner

Then the following problems can be identified:
1) the BOD mutual intent to be bound(3), and consideration(4) are doubtful as the BOD had no reason to enter into conservatorship, this is expressed in Sweeney’s court among lots of others as “A Hobson’s choice -- agree or you’re out.”
2) the FHFA claims in all lawsuits it is allowed to do so because HERA gave it the authority to do so, but is HERA Legal? can it operate outside the constitution or outside a conservatorship statute?, some plaintiffs identify unconstitutional problems of Hera as:

12 U.S.C. § 4511(a) There is established the Federal Housing Finance Agency, which shall be an independent agency of the Federal Government.

12 U.S.C. § 4512(b)(2) The Director shall be appointed for a term of 5 years, unless removed before the end of such term for cause by the President.

12 U.S.C. § 4617(a)(7) Agency not subject to any other Federal agency
When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency.

12 U.S.C. § 4617(f) Clarification
No provision of law shall be construed as limiting the right or power of the Agency, or authorizing any court or agency to limit or delay in any manner, the right or power of the Agency to transfer any qualified financial contract in accordance with paragraphs (9) and (10), or to disaffirm or repudiate any such contract in accordance with subsection (d)(1).

12 U.S. Code §?4617(a)(6)
(a)Appointment of the Agency as conservator or receiver
(6)Directors not liable for acquiescing in appointment of conservator or receiver
The members of the board of directors of a regulated entity shall not be liable to the shareholders or creditors of the regulated entity for acquiescing in or consenting in good faith to the appointment of the Agency as conservator or receiver for that regulated entity.

12 U.S. Code §?4617 (J)(ii)
(J)Incidental powers The Agency may, as conservator or receiver—
(ii) take any action authorized by this section, which the Agency determines is in the best interests of the regulated entity or the Agency.

12 U.S. Code §?4516(f)(II)
(f)Treatment of assessments
(2)Not Government funds
The amounts received by the Director from any assessment under this section shall not be construed to be Government or public funds or appropriated money.

3) Then the FHFA claims under 1367(a)(3)(I) (12 U.S. Code §?4617(a)(3)(I) & 1367(a)(1) (12 U.S. Code §?4617(a)(1) is has the power to put into conservatorship, well yes, but what is the reason it did so, because now the BOD is in trouble, and because HERA contains 12 U.S. Code §?4617(a)(6) the board is not responsible, where did the fiduciary duty go?, fiduciary duties do not disappear, either way there must be someone responsible for shareholders, either FHFA or the BOD, upto now at least a mystery unsolved
4) Can Treasury demand thru the SPSPA agreement with FHFA a Retained Mortgage Investment Portfolios wind down, because this is supposed to be done by legislation and regulation, not in an temporary agreement that can be voided by the court(although HERA claims it cannot in 12 U.S.C. § 4617(f), it would be unconstitutional as it breaches the separation of powers principle per the founders of the constitution)
5) Can FHFA/Treasury demand a Zero capital per SPSPA as that would be winding down the companies(what Treasury admitted in link above) not rehabilitating them, but this is now last minute changed to 25B retained earnings for Fannie, but the FHFA also proposes a new capital rule of 243B(~145B Fannie/~98B Freddie) so why is it capping the capital to 25B/20B ? this is again against their statute(put in sound and solvent condition) and contrary to their just released capital rule, demand in one hand a large capital buffer, and forbid it on the other by the SPSPA, and of course the 25B (3B+22B) retained is not really retained as it is offset to the liquidation preference on which Fannie states following in their Q4 2019 results:
“the September 2019 letter agreement provides that, beginning on September 30, 2019, and at the end of each fiscal quarter thereafter, the liquidation preference shall be increased by an amount equal to the increase in our net worth, if any, during the immediately prior fiscal quarter, until such time as the liquidation preference has increased by $22 billion pursuant to this provision.”
https://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2019/q42019.pdf
6) Consent decree: how would it be possible to exit an agreement thru consent decree if the law(courts) finds the FHFA is not legal, how could it legally be representing Fannie and Freddie and how can 12 U.S.C. § 4617(a)(5)(A) (authorizes the enter-prises to challenge FHFA’s within 30 days), while they on the other hand say 12 U.S.C. § 4617(a)(6) (The BOD shall not be liable to the shareholders) and all because of 12 U.S.C. § 4617(a)(2) (FHFA may be appointed conservator for reorganizing, rehabilitating) while they have proven to have done the exact opposite thing as putting in sound and solvent condition and preserving and conserving in the SPSPA, another mystery unsolved https://www.law.cornell.edu/wex/consent_decree#:~:text=A%20court%20order%20to%20which%20all%20parties%20have%20agreed.
7) Dilution of shares: so are the warrant and funding agreement legal? Taking all above into account, Can FHFA by statute give away 79.9% of the company without any compensation and consideration while it protects the BOD from lawsuits on breach of fiduciary duty 12 U.S.C. § 4617(a)(6) (The BOD shall not be liable to the shareholders) and then the BOD has no saying in this and all the fiduciary duties seem to have disappeared? as the SPSPA was written because of : §?4617(a)(3)(I) (by resolution of its board of directors or its shareholders or members, consents to the appointment.) that is not an agreement that is “agree or you’re out” like Sweeney stated, and also the “for cause” problem needs to be ruled on in favor of the government(which is unlikely given the precedent is Seila) otherwise it will be 2 executive agencies versus the companies

Then because of these actions, following lawsuits are filed in the courts:
1) 19-422 Patrick J Collins v. Mnuchin .… Common & Preferred, Derivative
2) 19-563 Mnuchin v. Patrick J Collins ……. Relates to all cases
3) 13-1025 Perry Capital LLC ……………… …… Common & Preferred, Derivative
4) 13-1053 Fairholme Fund, Inc……………..……Preferred, Direct & Derivative
5) 13-1288 In re Fannie Mae/Freddie Mac .…. Common & Preferred, Class Action, Direct & Derivative, Jury Demand
6) 13-1439 Arrowood Indemnity Company ……Preferred, Direct & Derivative
7) 16-3113 Patrick J Collins ……………………….…Common & Preferred, Derivative
8) 17-497 Rop……………………………………………….Common & Preferred, Derivative
9) 18-2506 Atif F. Bhatti …………………..……………Common & Preferred, Derivative
10) 18-3478 Wazee Street Opportunities ………Common, Class action, Derivative, Jury Demand
11) 2020-1912 & 14 Fairholme Funds, Inc.………..Common & Preferred, Direct & Derivative
12) 13-496C American European Insurance.…. Preferred, Class Action, Direct
13) 13-542C Francis J. Dennis ………………….…. Preferred
14) 13-385C Washington Federal ………………... Common & Preferred, Class Action, Direct
15) 13-608C Bryndon Fisher (FNMA) .........….. Common Derivative
16) 14-152C Bruce Reid (FMCC) …………………… Common Derivative
17) 13-672C Erick Shipmon……..…………………… Common Derivative
18) 20-2020 Arrowood Indemnity Company ….. Preferred Direct
19) 14-740C Louise Rafter .........…………………. Common Direct & Derivative
20) 20-2037 Joseph Cacciapalle ………..………… Preferred, Class Action, Direct
21) 20-1934 Owl Creek Asia I L.P...........………. Preferred, Direct
22) 20-1938 Akanthos Opportunity Master Fund .. Preferred, Direct
23) 20-1954 Appaloosa Investment .........……. Preferred, Direct
24) 20-1955 CSS LLC ……………………………………. Preferred, Direct
25) 20-1936 Mason Capital L.P...........………….. Preferred, Direct
26) 18-1124C Wazee Street……………….………… Common, Class Action, Direct & Derivative
27) 18-1150C Highfields Capital………………….. Common & Preferred, Direct
28) 18-711C 683 Capital Partners………..……….. Common, Preferred, Direct
29) 18-712C Joseph S. Patt………………………..… Preferred, Direct
30) 18-1226C Perry Capital LLC……………………. Common & Preferred, Direct & Derivative
31) 18-1155C CRS Master Fund LP…..…………… Preferred, Direct
32) 18-1240C Quinn Opportunities Master LP … Preferred, Direct
33) 20-737C Joshua J. Angel v United States Treasury ….. Preferred, Direct, Class action

In these lawsuits the government (FHFA and Treasury) keep defending it legal authority to enter into conservatorship and the SPSPA, but the only defending mechanisms it comes up with are based on HERA, while HERA is a problem in itself, and contains contradicting issues like:

12 U.S.C. § 4617(b)(15)(C)(i)-(ii) FHFA may not recover the value of the SPSPA if declared illegal
12 U.S.C. § 4617(i)(12) The reversal on appeal, does not affect the validity of any debt

While . § 4617 on the other hand states

12 U.S.C. § 4617(f) Limitation on court action (anti-injunction clause)

So on one hand they say the court cannot rule and on the other hand it finds if the court rules the funds cannot be returned

Then we move onto
12 U.S.C. § 4617(b)(2)(D) The Agency may put in sound and solvent condition

While on the other hand . § 4617 contains
12 U.S.C. § 4617(b)(2)(J)(ii) may act in the best interests of the regulated entity or FHFA

It surely cannot preserve and conserve if the FHFA can act in its own best interest, the word MAY in the above 2 are outside conservator statutes, and this is confirmed by treasury in:
https://www.treasury.gov/press-center/press-releases/Documents/fhfa_consrv_faq_090708hp1128.pdf
“The purpose of appointing the Conservator is to preserve and conserve the Company’s assets and property and to put the Company in a sound and solvent condition.”

So Treasury also recognizes the “May” word is not legal, or Treasury is misleading in its statements but I don’t think that is the case here, as common sense makes it really easy determine a conservator can never act in its own best interest because that is a taking of property that belongs to the owner and not the conservator

Then Why are the Fannie and Freddie not released from conservatorship?
The problems FHFA find themselves in are several, the Fannie and Freddie conservatorship started on the wrong basis, while other companies like City and AIG also received aid from treasury, the basic fundament was different, those companies were proven insolvent and could not have survived without aid from treasury, while Fannie and Freddie at the time of conservatorship were solvent, so the contract they entered into with AIG and City was legitimate, as the company otherwise could not have been saved, it is really hard to grasp for main stream that Fannie and Freddie “volunteered”/”Coerced” to be put into conservatorship, and why there is so much disinformation, as is not clearly visible at the surface, a lot will interpreted it as the same situation as City and AIG, but the main problem is, because Fannie and Freddie volunteered, the BOD had to agree out of free will, while if the company was undercapitalized it could have put the companies in mandatory conservatorship with the backup of 4617, but that is not what happened, but sure a lot of people see it that way https://www.sec.gov/Archives/edgar/data/310522/000129993308004619/exhibit1.htm
Now the BOD represents the shareholders https://www.law.cornell.edu/wex/board_of_directors
The given fiduciary duties to shareholders, was passed on to the FHFA, but the FHFA says it can only act out of the best interest for the companies and ITSELF, but the companies did not need any money(proven regulatory) as they just completed a new round of fund raising, only after conservatorship started the problems started due to the FHFA actions, but before the companies were in trouble the FHFA already gave away 79.9% of the companies without consideration, no matter how big the problem was, the FHFA as regulator cannot act contrary to the wishes of the BOD voluntary agreement, with the backup of 4617 the BOD cannot be sued, it just doesn’t work that way. on August 22, 2008, just two weeks before the conservatorships were imposed, the FHFA sent letters to both Fannie Mae and Freddie Mac stating that the Companies were adequately capitalized. and analysis by BlackRock issued on August 25, 2008 concluded that Freddie Mac’s “long-term solvency does not appear endangered .. . even in stress case.”

Then the timeline is :
August 22, 2008 FHFA finds Fannie and Freddie adequately capitalized
August 25, 2008 Blackrock finds Fannie and Freddie adequately capitalized even in stress case
Sept 6, 2008 BOD had a Duly called meeting and agreed to conservatorship
Sept,7, 2008 FHFA enters into conservatorship and SPSPA

11 days after Blackrock and 14 days after FHFA finds the companies adequately capitalized they are put into conservatorship and none of the legal criteria to put them into conservatorship are met
https://gselinks.com/wp-content/uploads/2019/07/13-385-0077.pdf

Now in order to proof the government is right it keeps defending the circular draw principle and hides behind a 4617

12 U.S. Code §?4617(a)(6)
(a)Appointment of the Agency as conservator or receiver
(6)Directors not liable for acquiescing in appointment of conservator or receiver
The members of the board of directors of a regulated entity shall not be liable to the shareholders or creditors of the regulated entity for acquiescing in or consenting in good faith to the appointment of the Agency as conservator or receiver for that regulated entity.
https://www.law.cornell.edu/uscode/text/12/4617

Conclusion:
The FHFA made a deal with Fannie and Freddie because HERA gave the right to FHFA to do so, however none of the reasons HERA allowed FHFA to enter into conservatorship were met, and the legal terms of the implied-in-fact contract might be conflicting as Fannie and Freddie boards would breach it fiduciary duty towards shareholders and the companies, so 3) mutual intent to be bound, and 4) consideration, are to date missing, then a day later the FHFA agreed with treasury to enter into the SPSPA contract, but this contract limits the companies in operating, something a conservator cannot do especially since Fannie and Freddie were solvent at the time of conservatorship started, congress can change this by legislation, the FHFA can change this by regulation, but the FHFA-C cannot, it only can act on the powers given to the conservator and not receivership powers to wind down the company or restrict the business in any way, it only can “conserve and preserve” and put in “sound and solvent condition” that is not what the SPSPA does, it limits the companies

Then in the SPSPA they give the reason to enter into this SPSPA as being 1367(a)(3)(I)
“(I)Consent, The regulated entity, by resolution of its board of directors or its shareholders or members, consents to the appointment.”
This is not near consent, in order to establish consent you need “willfully agreeing” not an “action”, and because you have this “action”, there is consent, this is the other way around, as actions could also could be coerced, the only thru meaning of consent lays in voluntary/”willfully agreeing” to something https://www.law.cornell.edu/wex/consent#:~:text=voluntarily%20and%20willfully%20agrees%20to%20undertake%20an%20action%20, so the reason on (3) mutual intent to be bound) is missing

The 3th amendment is illegal in the bigger picture of things, as a conservator cannot do this to the conservatee

Then we have
- Collins ruling in SCOTUS (Seila as precedent and possibly California v. Texas)
- Sisti is settling before Oct 30, 2020 (if no extended time is needed)
- Interlocutory appeal in the United States Court of Appeals for the Federal Circuit
- Sweeney ruling in the court of federal claims
- Lamberth Ruling in the district court
- Patrick Joseph Schiltz ruling in Bhatti District Court, D. Minnesota
- Capital rule set by FHFA, most think the rule is way too high
- Presidential election Tuesday, November 3, 2020


Usefull links:

On Sept 7, 2008 FHFA and Treasury consented to the Senior Preferred Stock Purchase Agreements (SPSPAs) https://www.sec.gov/Archives/edgar/data/310522/000129993308004619/exhibit1.htm

FHFA what happened: https://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx

The FHFA is responsible for ensuring that Fannie Mae and Freddie Mac operate in a safe and sound manner https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac
Quote Sweeny:
“MR. LAUFGRABEN: Hopefully, we can keep this point relatively brief”
21 THE COURT: Oh, am I mistaken that members of
22 the board were not told that you either agree to the
23 conservatorship or you’ll be fired? Am I mistaken?
(document no longer online, it is available behind a paywall as document 465??? https://www.docketbird.com/court-cases/FAIRHOLME-FUNDS-INC-et-al-v-USA/cofc-1:2013-cv-00465)
Contract:
https://www.law.cornell.edu/wex/contract

Contract Implied in Fact
https://www.law.cornell.edu/wex/contract_implied_in_fact

Section 1367 of the FHE Act = Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617)https://www.law.cornell.edu/cfr/text/17/246.8

The Constitution:
https://www.law.cornell.edu/constitution-conan