Thursday, October 08, 2020 3:28:13 PM
I think the government not settling Collins prior to December 9 is a very bad sign for current shareholders because it means they aren't all that serious about getting recap and release done. The Supreme Court alone cannot fix everything.
In fact, if the December 9 oral arguments happen, meaning there has been no settlement by then, I will strongly consider selling all of my FnF shares. The original SPSPAs are in no danger at all of being overturned (see below), so if the administration, whether it is under Trump or Biden, doesn't want FnF recapped and released then it will never happen.
I didn't miss it, I just don't think it will matter. I don't see any reason to believe that the Supreme Court will take the capital rule into account at all.
Explanation of why the original SPSPAs won't be overturned
You might have missed this post of mine, in which I explained that even if all of HERA is struck down, the conservatorships and original SPSPAs would still stand. That's because the original 1992 version of the GSE Act (Safety and Soundness Act of 1992), which would retroactively become the applicable law to FnF, has clauses similar to those in HERA that would have allowed things to work out the same way even if HERA had never been passed. Specifically, the GSE Act has its own:
1) section allowing OHFEO to become conservator if the boards consent (1369(a)(2))
2) version of the succession clause (1369A(a))
3) limitation on judicial review (1369(b)(4), 1369D(d))
I have read through the relevant sections (1369, 1369A, 1369B, 1369C, 1369D) and I don't see anything there that would have stopped Lockhart and Treasury from doing exactly what they did in 2008. Conservatorship, accounting decisions, original SPSPAs, all of it.
That then means that even if all of HERA is struck down, the conservatorships and original SPSPAs would stand. In addition, all the lawsuits based on HERA would be mooted and would have to be re-filed. That would set the clock back considerably.
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