Fannie Mae-No Politics (FNMA)

[kthomp19]

Good post, thank you for posting it.

Here, two things appear settled: removal of Director, FHFA, for cause only will be struck down, as will the Third Amendment. The logic behind each of those is fairly simple. It's the remedy that's the tough part.

Striking down the NWS on the APA claims side allows them to sidestep the remedy issue; what would be left to grant to the plaintiffs as remedy on the constitutional defect if they get the same remedy from the APA claim?

This would make me a bit uncomfortable in an overall judicial sense, but it gives the Supreme Court an out to not have to deal with a thorny issue.

I've read lots of arguments about potential conclusions on these boards, but just like the case before SCOTUS, I haven't seen anyone "show their work" and explain how the GSEs become sound and solvent by giving away everything they make in perpetuity. If anyone had such an explanation, they should have delivered it to government counsel about six months ago, because they certainly didn't have one either, and a hypothetical of what could be done ain't working either after eight years of proof to the contrary.

The government was in an indefensible position there. Mooppan said things like

The conservator acted well within its authority in deciding that the renegotiation of the enterprises' financial obligations may have been appropriate to preserve and conserve Treasury's capital commitment.

and

We are just saying that when the conservator takes action that may be appropriate and necessary to preserve and conserve assets, there's no second-guessing the business judgment.

during the oral arguments, which are just plain stupid when unpacked ("Preserve and conserve Treasury's capital commitment"? The NWS was "appropriate and necessary to preserve and conserve assets"?? Really???). It shouldn't be surprising that his case was weak. A lot of the BS arguments that got the government this far, like saying that the "may" in HERA gives FHFA as conservator the authority to ignore its conserve/preserve mandate, was abandoned in the oral arguments.

I'd love to see a SCOTUS ruling that voids the NWS and issues a declaratory judgment in which they rule the debt paid and cancel the warrants.

I was with you until the last four words. What makes you think that the Supreme Court's decision will have anything to do with the warrants? The plaintiffs encourage Treasury to exercise the warrants as part of its preferred remedy.

I expect far less, however, a voiding of the Third Amendment and a remand to fashion an appropriate remedy.

Same here.

Though this does beg the question of what the appropriate remedy would even be if the Supreme Court strikes down the NWS (or remands with instructions that don't allow for anything other than striking down the NWS) on the APA claims side of the case; that's all the plaintiffs asked for as remedy for the constitutional defect.

We'd see a bump in the SP from this alone, and it would push us further down the path to ending the conservatorship than we've been in years, so I'd take it.

I'd take it too, but I don't think the bump would be sustainable because there will still be significant uncertainty over the timing, amount, and dilutive effect of a future capital raise.