From the tone of the oral argument, it was clear the Justices considered the NWS ultra vires. Justice Breyer went so far as to prompt the solicitor to admit the USG had nationalized the GSEs rather than attempt to rehabilitate them. Likewise, Justice Kagan asked if the power of a conservator extended to the ability to sell all the company's assets for a dollar.
This line of questioning exposed is what was fatally flawed in the District Court decision. Finding that any action of a conservator can go unchallenged as long as it is taken as part of the management of the company simply ignores the basis of the conservatory's authority: fulfillment of a fiduciary duty to the corporation, and by implication, its as shareholders. A conservator authority to act unchallenged by shareholders is predicated on the idea that the conservator is taking actions necessary to nurse the ward back into sound financial footing. The duty to preserve and conserve is part of the conservator's statutory responsibility, and the en banc hammered government counsel with the simple question, "How does the conservator make the corporation sound and solvent by having the government siphon off all it's profits?" Counsel had no good answer, and tried to dodge by saying this situation was unique. That failed, as one of the 5th Circuit Judges pointed out the similarity to the S&L bailout, which didn't involve the banks giving away all their profits.
Doubtless, the Supremes read all of this before oral arguments last Dec. It seems a virtual certainty the NWS is dead. The only way to defend it is to cite the conservator's authority, while at the same time ignoring the conservator's statutory duty. The Government tried that in Dec, and the Justices weren't buying what the government counsel was selling. I expect the NWS is headed for a 9-0 smackdown.
The more difficult question is what remedy is due shareholders. Retroactivity is disfavored under the law, and in oral argument, the Justices (at least Roberts and Gorsuch) seemed chilly to any idea of such a remedy. Collins v Mnuchin wasn't brought as a 5th Amendment "takings clause" case and CJ Roberts asked why it wasn't (note to the lawyers: when you file a SC brief, cite every basis you can). This is what concerns me. Maybe the majority will opt for some sort of retroactive relief, but I'm not counting on it. If not, while the decision will give us a bump, years worth of potential relief may be lost. I suppose we'll see soon enough, and I'm hoping for the most favorable remedy. Maybe the bump turns into a buying frenzy, and if it comes, I'm thinking it might be a good idea to set a stop-limit on some shares while holding the rest. Just a few thoughts from one who is long in commons, but GLTA.
