It is exciting to follow the trial. Thanks to all for posting updates. Keep in mind that this trial will bring minimal rewards if successful. The real fireworks will begin hopefully in a few months. I believe I have found the key to unlock the entire debacle. It really is so simple. The SPS with a variable liquidation preference were a new product authorized under sec 1719 (g) of the FNMA charter act. But new products offered under this section required public notice in the Federal Register, opportunity for public comment, and formal rule making. This is a requirement of the Director of FHFA at section 4541 of the safety and soundness act
“a) In general
The Director shall require each enterprise to obtain the approval of the Director for any prod- uct of the enterprise before initially offering the product.
(b) Standard for approval
In considering any request for approval of a product pursuant to subsection (a), the Director shall make a determination that—
(1) in the case of a product of the Federal National Mortgage Association, the product is authorized under paragraph (2), (3), (4), or (5) of section 1717(b) or section 1719 of this title;
(2) in the case of a product of the Federal Home Loan Mortgage Corporation, the prod- uct is authorized under paragraph (1), (4), or (5) of section 1454(a) of this title;
(3) the product is in the public interest; and
(4) the product is consistent with the safety and soundness of the enterprise or the mort- gage finance system.”
For those unfamiliar with the law, the following sections of this law detail the administrative procedures that are required of the Director to approve new products. It is black and white law. The conservatorship had no bearing on this requirement. This is the same law that required the publishing of the Capital Rule that catman created. So why didnt Director Lockhart perform his statutory duty under the law? It is the same duty that he had under the OHFEO. This is why having the head of the regulatory agency who “Steps into the shoes” of the entity he is regulating and become its conservator is a bad idea. The law as written is insanity. Director Lockhart as Conservator was required to issue a written request to Director Lockhart the regulator requesting permission to offer a new product authorized under section 1719 (g) of the charter act (Senior Preferred Shares with a variable liquidation preference tied to a commitment from Treasury of $100 billion of Appropriated Public Debt.) Director Lockhart the Regulator must then either publish the proposal and seek public Comment for 30 days and issue a final rule for the SPS, or he could issue a temporary approval under emergency circumstances and perform the rule making at a later date.
So there you have it. A blatant Administrative Procedures Act violation. Where were all the attorneys for the past 15 years? Our supposed betters. The experts class with fancy degrees? The APA violations have been staring us in the eyes out in the open since day one. In stead we have been lead down the rabbit hole with legal obfuscations of ultra vires actions of the Conservator when they could have voided the whole damn thing without ever considering the Conservator. I wish I had read this law years ago instead of just recently. Instead we are following the silly trial for the second time in Lamberths Court. And yet Hamish Hume ignored me when I offered him this statute for this trial and the Wazee case. But at least I tried.
