Fannie Mae-No Politics (FNMA)

[Ace Trader]

Collins v Treasury Hearing. This lawyer for Plantifs is a cluts ! The judges are tearing him apart !Heres the trans scrip !

https://www.youtube.com/watch?v=iDjFr6D1AUE
Transcript


0:00
the court Brian Barnes for the plaintiff's appellants granting the motion to dismiss the
0:06
district court Wade evidence made credibility determinations and Drew factual inferences in the defendant's
0:12
favor this was error neither The District Court nor this court has the authority
0:18
to impose a heightened pleading standard for presidential removal claims and under rule AIDS
0:24
liberal pleading standard the allegations in the complaint are more than enough to survive a motion to
0:31
dismiss now the Trump administration's stated policy objective with respect to Fannie
0:36
Mae and Freddie Mac was to end the conservatorships as promptly as practicable we've documented that in
0:43
statement after statement in paragraph 53 of the complaint where the Trump Administration officials say over and
0:49
over again that that was the policy of the administration and the critical point is that there was no way for the
0:57
Trump Administration to accomplish that policy objective without in some way getting rid of this liquidation
1:03
preference and let me you don't have any direct statement from the president until after he had
1:11
left office isn't that right that's that's true your honor I don't have a direct statement from the president
1:16
himself I do have a couple of things I would point to though from uh officials
1:22
who the president appointed so first we've got the the treasury Department's uh September 2019 report that
1:30
specifically contemplates the elimination of the liquidation preference either by writing it down or
1:37
by converting treasury senior preferred stock but but you're pleading was about the conservativeships not the
1:42
liquidation preferences that that's true of your honor so I don't have a statement from the well I I
1:49
think the white house uh in April of 2019 issued a directive that contemplated uh getting these companies
1:55
out of conservatorship I I'll acknowledge that that White House document doesn't specifically address
2:01
getting rid of the liquidation preference but uh the the key Point here is that there's no way to get these
2:07
companies out of conservatorship quickly as the the Trump administration's policy dictated without getting rid of that
2:15
liquidation preference and the reason why is because the company's had a huge Capital shortfall as a result of paying
2:21
enormous sums to the treasury Department under the third amendment and the
2:26
companies could not be responsibly released from conservatorship without raising substantial new capital in order
2:34
to fill that Capital deficit the only way to raise the capital that the company's needed on the timeline that
2:40
the the Trump Administration contemplated was by changing the capital structure in a way that would make the
2:46
newly issued stock attractive to investors no one's going to put more money into Fannie and Freddie when the
2:52
treasury Department has this enormous liquidation preference that makes it impossible for anyone other than the
2:58
treasury government points if that were even true inexorably which seems to be the logic
3:04
as opposed to pointing to evidence saying that's true it's just you're saying economically it would have to
3:10
have been that way we still have direct evidence that Dr Calabria who had no removal restriction
3:16
in 2019 and 2021 increased the liquidation preferences he did increase
3:22
the liquidation so how could that possibly be consistent with your Nexus to show
3:28
that the president wanted to do the opposite and only didn't because of the restriction on Dr Watts removal so a
3:34
couple of points on that your honor first the increase to the liquidation preference during that that those
3:41
interim periods while director Calabria was in office those preserved
3:47
optionality for the Trump Administration so I I will readily concede that it wasn't clear precisely how the Trump
3:53
Administration would have ultimately gotten rid of the liquidation preference so we know that they had to get rid of
3:59
it somehow just because of the economic logic of the situation but it wasn't clear whether they would eliminate the
4:05
liquidation preference by writing it down to zero or by converting treasury senior preferred stock into common stock
4:11
and if they they opted for a conversion then all things else being equal a larger liquidation preference would have
4:17
resulted in a larger amount of common stock for the treasury Department and so it made sense while they were still sort
4:25
of working through with their financial advisors like what the the most effective in an appropriate way was of
4:32
getting rid of the liquidation preference that they in the interim would increase the liquidation preference to just preserve that
4:37
optionality of as the Trump letter says trying to maximize the government's return but our Focus has to be on the in
4:45
the unconstitutional for Clause restriction and that only restricted Dr Watts Behavior
4:50
I'm sorry your honor the isn't that right and then with then then we've got a show as you told the district court
4:56
and then you told us again a briefing third element of the retrospective harm
5:01
test is but for the being thwarted by the removal restriction this specific
5:07
action benefiting your clients would have occurred the government giving up its ownership position preference
5:12
is that right I think that you're saying it's because of it's just the only way they could have privatized that's right
5:18
if the administration had another two years they would have been able to carry out this ultimate plan of recapitalizing
5:25
the companies and releasing them from conservatorship and it just as a matter of fundamental economic logic and the
5:30
reality of these financial markets there's no way to accomplish that without getting rid of this liquidation
5:35
preference then well Council uh you take issue with the option of the phrase concrete plan
5:42
uh which was not a Supreme Court term it seems to me what we're discussing now is shows potentially the validity of that
5:50
Focus you're indicating you're not sure how this could have been done I don't mischaracterize what you're saying
5:56
but but it does seem to me when we're looking for whether there was actual injury resulting from
6:01
or not being able to remove the director there needs to be an allegation a
6:08
plausible allegation that it was this is how this could have occurred uh and
6:14
there was interest shown by the listing in paragraph 53 and wherever else it is that that actually was on the
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table respectfully your honor if you look at the prayer for relief in our complaint we don't ask for an injunction that
6:27
directs the defendants to eliminate the liquidation preference in any particular way and so the one thing we know is that
6:35
if the Trump administration had been able to carry out and accomplish the ultimate goal that it had which was to
6:41
get these companies out of conservatorship that liquidation preference one way or another had to go away we're not asking this court or
6:49
ultimately the district court on remand after you know factual development to to specifically direct the defendants to
6:55
Olympia they are asking us to to hold that you have pled enough to show that
7:01
but for you all of this would have been implemented and here's and then I think
7:08
that's where the ideal concrete plan comes into play well that we're still talking around
7:14
uh that perhaps it could have been done but unless the administration unless you
7:19
can show in your pleading that the administration actually had some way to achieve that but for the two
7:25
years that they were hamstrung uh by helping to remove the director absent
7:31
some sort of plausible allegations like that you have a ways to convince me well they
7:36
they clearly had some more than one way to achieve getting rid of the liquidation preference and uh you know
7:43
it may be useful to to point to Justice kagan's concurring opinion in this case and where she talks about the need to
7:50
put plaintiffs who have been harmed by unconstitutional removal protections
7:56
into the position they would have been in absent the Constitutional violation and and Justice Kagan specifically cites
8:03
to a a case from the 1970s from the Supreme Court about racial desegregation
8:08
and in that case what the Supreme Court had done was it had upheld this restorative injunction that it didn't
8:14
just prohibit the jury segregation going forward it ordered basically the the the
8:21
city of Detroit and the state of Michigan to undertake efforts to put the
8:26
victims of this constitutional violation into the position that they would have been had there not been a constitutional
8:32
violation and and but Kagan she looked at this exact situation and said don't even need to remand because treasury
8:39
correct me if I'm wrong treasury is the one that has the preferences treasury had no removal
8:47
restriction so treasury didn't unilaterally dump them nor did they even commence negotiations with the director
8:54
so so there you'd get absolutely you'd have a complete block you wouldn't even be on remand if you take her logic
9:01
correct I don't think that's right you're out okay Justice Kagan joined the majority opinion the remedial discussion
9:07
and the majority of opinion so I think she did but didn't she say just what I've described didn't she point out that
9:13
ultimately here it's treasury that has the preference and treasury has no Article 2 infringement but they didn't
9:19
dump the stock well the the focus of Justice kagan's am
9:25
I right about that observation correct about that and what's your response to that yeah so so my response to that is that the focus of Justice kagan's
9:31
discussion there is on the initial adoption of the third amendment as opposed to the subsequent possibility of
9:38
a renegotiation between Treasury and fhfa the psbas can't be unilaterally
9:44
amended by the treasury Department but even put that to one side and it's important to recognize that in a lot of
9:50
ways our position is not that the Trump
9:55
Administration saw getting rid of the liquidation preferences and end in and of itself in other words it's not
10:01
surprising that the treasury Department didn't or wouldn't have wanted on our understanding of the Paul of the policy
10:07
of the Trump Administration to just get rid of the liquidation preference in exchange for nothing our point is that
10:13
that's a necessary step in the accomplishment of a broader policy aim that the Trump Administration if they'd
10:20
had an additional two years of control of fhfa that the treasury Department and fhfa ultimately would have been able to
10:27
accomplish we tease it out just a little bit more because it appears not only in Justice kagan's opinion but also I think
10:34
was Judge Haynes on reman where she didn't think it had to be sent back to the district court really relying on the
10:40
control of the president over Treasury uh I'm not sure how that would work but it
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sees me the argument is at least as judge higginson put it that there's no allegation of negotiations having
10:53
started by treasury who's whose authority the president had certainly
10:58
but you raised the point and I've wondered about the I didn't join Justice judge Angel's opinion because it does
11:05
seem to me that what you're talking about is a bilateral agreement that you would need approval of both I guess this
11:11
is really a question for your friends on at that other table of how that would have worked but your answer to why uh
11:17
judge Haynes was wrong why this needed needed didn't need why was she wrong the treasury itself
11:24
isn't the answer to why you were not injured so so there are two answers your honor the first is that it is a
11:31
bilateral agreement as your honor points out and the second is that uh the Trump
11:38
Administration through its control of Treasury could not unilaterally accomplish this ultimate end of getting
11:44
Fannie and Freddie out of conservatorship so this is a sequential process that the administration had to go through number one you've got to
11:50
amend the preferred stock purchase agreement so that the companies can begin to retain and build Capital number
11:56
two the fhfa which is the the agency with the relevant statutory Authority has got to issue a capital rule that
12:03
specifies how much Capital these companies need because you can't do a capital raise until you know how much
12:08
money needs to be raised through that Capital raise and then number three you've got to have Fannie and Freddie
12:14
develop a plan for how they're going to restructure their their Capital structures so it has to accomplish the
12:19
goals of the Trump administration of raising the necessary Capital while also maximizing the return for treasury these
12:26
are things that the fhfa has to do and it makes imminent sense given all of the policy disagreements that we document in
12:33
the complaint between director Watt on the one hand and the Trump Administration on the other that officials in the White House determined
12:39
that this was not a process that they could reasonably undertake while director watt was the director of fhfa
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and so again this is a this is a multi-step sequential process that the Trump
12:52
administration had to undertake it's not enough to just look in isolation at the elimination of the liquidation
12:58
preference because we're not alleging that that was the ultimate goal of the Trump Administration what we're saying
13:03
is that that is something that the the administration had to do in order to
13:08
accomplish its its ultimate goals I do want to say a word if I could about our
13:13
Appropriations Clause claim um the claim is properly before the court we were permitted to amend the
13:20
complaint on remand to add that playing the sports cases that doesn't comply with the Band-Aid rules it doesn't
13:26
Supreme Court was pretty specific about what it told the lower courts to do well
13:33
and I would point this court to it's a case we cite in our our reply brief the
13:39
um the I'm sorry the the Jones against Saint Paul fire Insurance Co case where uh
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it's essentially what happened here happened in that case where the case comes up to the fifth circuit
13:53
um this court remands the case for further proceedings The District Court permits the plaintiff to amend its
13:59
complaint to add a claim and then the Case Case comes back up and this court said that that was an appropriate it was
14:05
consistent with the Mandate rules so they're the the office of the Mandate rule is to prevent relitigation the
14:11
score's been very clear it's about preventing re-litigation of issues that have been litigated previously and
14:17
there's no allegation on the other side that this Appropriations Clause issue came up during the earlier appeal and
14:24
you know there there might have been a waiver argument that the other side could have made or an argument against us being permitted to amend the
14:31
complaint to add this claim but once the claim was in the amended complaint and the other side hadn't objected to that
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Amendment at that point it's properly a part of the case and it it it's the
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mayor spirits of that claim are properly before the court all right thank you Mr orange you save
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time for rebuttal Edinburg
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foreign
15:02
good morning you may have pleased the court I'm Rob kaderberg for fhfa fles I'm going to go first and then Mr sin's
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Dak will speak on behalf of Treasury the relief plaintiffs are seeking here is Extreme in nature legally unavailable
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and based on a speculative Theory that's outside the bounds of plausibility and it's not what the Supreme Court remanded
15:23
for judge Southwick I'd like to start by addressing the question that you posed about Justice kagan's concurring opinion
15:30
and judge haynes's dissent on the reband the point that treasury is the owner of
15:36
these preferred stock interests very much plays into the implausibility of the plaintiff's Theory because it's
15:42
completely implausible that if the president wanted these interests gone why that would not show up anywhere in
15:49
treasury's agenda for what it was trying to accomplish um we have at the point they may not
15:54
have been able to achieve it but there's no allegation they were trying to negotiate anything that's absolutely
16:00
right your honor and it is it is true as my friend says that with the specific point that Justice Kagan was making was
16:06
about the adoption of the third amendment in the first instance and they've changed their Theory very considerably since then because the
16:13
liquidation preferences that that issue is totally different from the Third Amendment which pertained to the
16:18
dividends but the rationale the reasoning of Justice hagin's opinion applies equally to this situation I'd
16:25
also like to clear up a couple points that I heard repeatedly from my friend on the other side uh the there are a
16:33
number of references in the record in the 2017-2018 time frame to exit from
16:39
conservatorship being a goal that's been a goal ever since practically the
16:45
beginning of the conservatorships because everybody believes on both sides of the aisle all the policy makers the
16:50
conservatorship is not intended to be in in state but here's the critical thing that cannot be conflated with wiping out
16:58
the liquidation preferences and I'm going to point you to something very specific in the record that will demonstrate that in its page 26 of
17:06
treasuries September 2019 reform plan it's page 1292 of the record this is a
17:12
detailed report by President Trump's Treasury Department and it's a section
17:17
that says preconditions for ending the conservatorship it lists a number of things there's six detailed bullets
17:23
those bullets presuppose the continued existence of the preferred stock purchase agreements and the preferred
17:30
stock after conservatorship was to end there's there's two bullets in
17:35
particular that are referred specifically to the pspas so you're saying there's no I didn't quite catch
17:41
where is that what are you quoting from or pointing us to uh yes judge Southwick that's page 1292 of the record and this
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is page 26 of a of a September 2019 treasury Housing Finance reform report
17:56
it was related to that was just that you're saying that the well what does the government agree that our cfsa case
18:03
is the case that articulates the three-part test to determine retrospective harm absolutely okay and
18:09
therefore and so you're primarily focusing I think on the third correct that's that's right I think they have
18:15
some issues we wanted to but the three is really prong three is really where the action is and you're saying when he
18:20
says it's inexorable it's inevitable it's just economic inevitability that if
18:25
there are statements showing a desire to privatize the only way to do it would be the liquid preference that's what you
18:31
just said the record conflicts with that is that fair to say that that's exactly right the record shows that it was very
18:37
much contemplated that the conservatorships could end yet the liquidation preferences persist another
18:43
thing that he said uh repeatedly I think I must have heard this a half a dozen times is that you would need to
18:48
eliminate the liquidation preferences in their entirety as a necessary condition
18:53
precedent to having a stock offering that is not the case either your honors and we know that because there is a
19:00
provision built into the preferred stock purchase agreements that was retained in
19:05
the Trump amendments to the pspas in September 2019 and again in January 2021
19:10
that says that at least part of the proceeds of a stock offering have to be
19:16
used to pay off the liquidation preferences now they changed it a little bit in January 2021 the the original
19:22
form of that said that all of the proceeds as much as it would take to pay
19:27
off the liquidation preferences from a stock offering had to be used to pay down the liquidation preferences and
19:33
then in January 2021 they they modified it so it was so they could keep up to 70 billion dollars but then anything after
19:40
that would have to be used to pay these down but that absolutely conflicts with what what seems like a necessary premise
19:47
for the argument on the other side that you'd have to wipe these things out in advance I would also note that the the
19:54
same treasury report I referred to a moment ago it's actually on the next page page 1293 of the record this is the
20:01
one place on in all the documentation that's referred to in the complaint that actually talks about this idea of
20:08
potentially eliminating the liquidation preferences and what it says is eliminating all or a portion of the
20:14
liquidation preference or exchanging all or a portion of that interest uh for for
20:19
Common Stocks so even even the best it gets for them in the record it's not talking about having to do all of it and
20:24
even that um that a concept that it could be all up or wall or a portion of it's it's listed as one of several items
20:32
on a menu of things that we're all going to require sort of further consideration or further study what before any of them
20:38
were actually decided upon and implemented I also want to talk a little bit about why this whole theory is goes
20:46
far beyond what the Supreme Court remanded for plaintiffs have expressed this Vision that what this remand is for
20:52
is to put them in the position that they would be in but for the unconstitutional
20:58
removal restriction and that's that's not what the Supreme Court said and I'm going to be very specific about this if
21:03
you've got a copy of the Supreme Court's opinion you might want to turn to it page or section 3C which is this
21:10
remedial discussion starts at Pages 1787 um and what they say they say the only
21:17
remaining remedial question concerns retrospective relief that's at the end
21:23
of the first paragraph of 3C so retrospective relief and then they
21:28
say on this issue the shareholders lead argument is that the third amendment must be completely undone the court went
21:34
on to reject that argument and they talk about the third amendment being adopted and implemented by officers who lacked
21:42
constitutional Authority they then go on to say this is in the next paragraph We therefore consider the
21:48
shareholders contention about remedy with respect to only the actions that
21:53
confirm directors have taken to implement the third amendment during their tenures further down in that
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paragraph in the last sentence they again talk about actions taken by the fhfa in relation to the third amendment
22:07
so that that really draws a perimeter around what the Supreme Court was expecting of this remand that
22:15
reinforest a specific language where the Supreme Court told us well why why why
22:20
they were remanding now there was there uh yes your honor so it says that does not necessarily mean that that's
22:26
referring back to the fact that the adoption the adoption wasn't Ultra virus that does not necessarily mean that the
22:31
shareholders have no entitlement to retrospective relief and I'm going to skip over a little bit of language here
22:37
as if they say it is still possible for an unconstitutional provision to inflict consensible harm the possibility that
22:44
the unconstitutional restriction on the president's power to remove a director of the fhfa could have such an effect
22:51
cannot be ruled out and then they go through a couple of hypotheticals a pub
22:56
uh content you're taking a lot of time what's your point we you're not disputing the tests we articulate in
23:02
cfsa where we say you know but for non-removal Richard cordray the
23:08
president would have acted differently are you saying are you well well your your test I think is completely in sync
23:14
with what one one of the points that I'm trying to get across which is the the way it's phrased in cfsa is that it has
23:19
to relate to an agency action here they're not even they're not challenging an action of any acting any director
23:25
confirmed director of fhfa in relation to implementing the third amendment implementing the third amendment they
23:30
told the Supreme Court this what they're complaining about that implementation to the third amendment had to do with
23:35
dividends the idea was the dividends the Treasury under the third amendment are higher the dividends that would be that
23:41
would apply absent the third amendment and that's what they're complaining about and they said well we want we want treasure to have to repay those amounts
23:49
on remand their theories shifted entirely they're no longer talking about dividends or instead talking about
23:54
liquidation preferences um and so it's totally different it's not within what the Supreme Court described but whether you look at what
24:01
what the Supreme Court explicated for the remand or this Court's test and cfsa
24:07
I think all all roads Point toward dismissal very briefly on the approach
24:12
is it necessary for your position for us to accept Keith Ellison's
24:18
contemporaneousness requirement I I would say he I don't think he applied a strict contemporaneous
24:24
requirement I mean I think the the problems here go beyond uh the lack of
24:30
contemporaneity the the the problem is that the things that the former president said in his letter completely
24:36
inconsistent with what actually happened when he had plenty of power over over both of the agencies
24:43
um briefly as to the appropriate do you agree with the contemporaneous requirement
24:49
we think the lack of the Contemporary the fact that it wasn't contemporaneous the fact that there are no statements at
24:56
the relevant time uh it certainly detracts from the plausibility of of that's one of the fact-finding concerns
25:03
that uh we heard or Alicia's in the briefing uh that the district judge may have given
25:09
lesser weight we're not supposed to weigh things in a motion to dismiss uh
25:14
so you seem to be going that way a little bit as well well I don't I don't think so your honor it said I mean the
25:21
problems with Reliance of the letter are manifold for one thing you can tell from the way it starts out that it's not
25:27
going to be on point because it asks what what would he be he says the question the Supreme Court has raised is
25:32
about what I would have been able to accomplish with respect it's not about what he would have been able to
25:38
accomplish it's whether particular actions a buy direct or what implementing the third amendment
25:44
um would have been different uh you know is made after he had left the presidency four to five years after the relevant
25:50
events and it goes into a series of disconnected statements that don't even mention the liquidation preferences and
25:56
and as I mentioned earlier my friend on the other side this notion that it's inexorable that you'd have to uh get rid
26:04
of the liquidation preferences in advance it's not borne out by the actual facts and the record and all the things
26:10
that they've pleaded into the complaint all right thank you mister
26:17
Edinburgh Mr sinsak
26:24
thank you your honor I may please the court Jerry simsdac appearing on behalf of the Treasury Department
26:29
over with respect to the plaintiff's removal Authority claim I think the most straightforward way to dispose of that
26:35
claim is the way this court did in its initial remedial opinion in the Unbound case from 2019 I think again plaintiffs
26:43
here are arguing that if not for the removal restriction the president would have dramatically reduced treasury's interest in these Enterprises as this
26:50
coordinator then as judge Haynes noted on dissent uh more recently the president-controlled treasury's
26:56
interests at all times and could have directed secretary mnuchin to to eliminate that interest or
27:01
dramatically reduce it or at a minimum to begin negotiations with fhfa to to reduce it and he did not do so
27:09
um obviously if plants also do not allege that secretary watt would have objected
27:16
that's another basis to it to it there's no reason plausibly or logically he would have done so and certainly there's
27:21
no reason to think that his own chosen director would have objected to doing that so
27:27
the fact that the president controlled treasury's interest at all times is sufficient to defeat plaintiff's claim for their particular injury I
27:33
think as this court also noted in its remedial holding and has come up already that there's an inconsistency with the
27:39
actions actually taken by uh The Chosen director fhfa director Calabria after he
27:45
was appointed you're happy to concede that even what a regulator appointed by the opposing party
27:52
would have wanted to have eventually privatized and gotten out of this business but it doesn't lead to the
27:59
suggestion that but for his removal Clause the president would have implemented that is that
28:05
well in terms of I mean I guess there's a few points there I mean if if what president Trump wanted to do was
28:10
dramatically reduce the liquidation preference for whatever his ultimate goal was director white would have been Overjoyed
28:17
I'm sure to do that because that would have freed the Enterprises of this obligation that they owed to treasury at
28:22
no cost to the Enterprises and plans don't at any point suggest he would have objected to that and there's no logical
28:28
reason why he would have um so and he did many of the steps as we point out in our brief that
28:34
Dr calabriel did he negotiated an increase in working capital for the
28:39
Enterprises he worked on regulatory reform he needed a number of these things that plaintiffs don't claim he or
28:44
argue plausibly or argue at all that he would have objected to any of these steps so even if you thought that the
28:51
fhfa director's approval was required in order to eliminate treasury's interest there's no reason to see what would have
28:58
objected to that and certainly no reason to believe that his chosen director would have would have objected to that in fact he chose indirect or as this
29:04
court pointed out did the opposite and as the district court also found I mean it goes beyond this the idea that
29:10
President Trump had committed to a plan of eliminating the liquidation preferences and supported by the
29:15
allegations that plants have made and is also not supported by the letter even even if you take that letter at face
29:21
value don't worry about the con temporary contemporaneous points that letter says
29:27
it would have sold treasury stock at a massive profit that's not consistent with sort of gratuitously giving away
29:32
their liquidation preference Derek his during his term so there are many flaws
29:39
I think the score has already identified them in again in its on mock opinion and can rely on on either of those reasons
29:45
or the reasons given by the district court to reject the claim thank you
29:51
if your honors have no further questions on that or others I'm happy to thank you Mr sister orange for a bottle
30:02
thank you your honor I just heard reference uh to the suggestion that our
30:07
view is that the government would have gratuitously given away treasury stake
30:12
uh and that's that's what we think the Trump policy was that's just a complete straw man misrepresentation of what
30:19
we're arguing what we're saying is that as a matter of fundamental economic logic and the reality of these financial
30:26
markets the only way for these companies to raise capital is to get rid of that liquidation preference that that would
30:32
have been a step in the direction of monetizing the government's interest selling off the government's interest in
30:38
these companies not and gratuitously giving away the government's interests I I also want to emphasize that we're here
30:44
on a motion to dismiss we have a District Court ruling that discounts The credibility of the Trump letter and you
30:51
know it's fine for people to have skepticism about whether what president Trump says in that letter is right or
30:56
wrong but a motion to dismiss is not the right vehicle for weighing The credibility of evidence and and that's
31:04
essentially what the district court did in dismissing our our claim well but it would be a matter of law one way or the
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other as to whether a letter that comes after the president
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has left office can even be considerate that's that that's not a fact-finding that would be
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a point of law I don't disagree with that your honor but it's important to keep in mind this
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isn't a totally unique inquiry in in the law where we have to construct you know
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a hypothetical world that we're asked but for the the legal violation what would have happened and there's no
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contemporaneousness requirement in other areas of the law where this comes up I mean you could think about the antitrust
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context where you have to ask well in the but for world where there wasn't anti-competitive Behavior you know what
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would the markets have looked like we wouldn't in that context say well we're only going to look at uh the the
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specific you know evidence that was created at the time of the anti-competitive conduct and will blind
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ourselves to testimony after the fact by somebody who says I would have done this or I would have done that if the market
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had been structured differently so too in this like a school desegregation case you wouldn't say well we're going to
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only look at narrowly at the the evidence of you know the events as they took place while the schools were
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segregated and we're not going to ask based on you know our common sense and whatever other evidence is out there
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what would have happened if there hadn't been uh segregation and what what educational levels would the victims of
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the segregation have attained so this is just not something that we see in other
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areas of law where this type of task has to be undertaken by courts because he didn't really rest as far as I could
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hear I didn't hear either the government saying well discount the letter altogether they're just saying the
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phrase make great profits doesn't get you across the Finish Line as to the specific action you wanted
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your plaintiff that's that's what I heard and to be clear president Trump said that he would have made great
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profits by selling the company's common stock that stock is worthless as a
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fundamental matter of Economics so long as this liquidation preference is there
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um let me also say as to the idea of a concrete plan there was a concrete plan to get these companies out of
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conservatorship there wasn't they hadn't worked out the details of the mechanism ultimately that they would use to
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eliminate the liquidation preference but they amended the preferred stock purchase agreements under director
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Calabria so the companies could build Capital they adopted a capital rule to clarify how much Capital the company is
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needed and they hired financial advisors to help them figure out how to restructure the company's Capital structures so that they could exit raise
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third-party capital and exit conservatorship so there were concrete actual steps that the Trump Administration took and furtherance of
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this stated policy objective and so I I think that's enough to get us where we need to be especially on a motion to
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dismiss Council for fhfa made a couple of references to the treasury Department's
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report from August of 2019 a couple of points on that first I I think Mr
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caterberg conflated the concept of the continued existence of the pspas with
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the concept of the liquidation preference still being out there and still being hundreds of billions of
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dollars and those are two separate things so we're not asking the court to throw out the preferred stock purchase
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agree it's in their entirety all we're saying is that that those liquidation preferences had had to be eliminated in
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order for the Trump Administration to get where it wanted to go Mr caterberg also quoted from a a passage in that
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report that refers to all or a portion of the liquidation preference being
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written off and and what the treasury Department was getting at there is you could do a combination of some write-off
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of liquidation preference and some uh some effort to convert a portion of
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Treasury senior preferred stock into common stock and so for all those reasons and because we're here on a
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motion to dismiss I just urged the court to reverse so if if we were a of course we'll decide what to do but if
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if we were to remand to The District Court what is the
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ultimate result that you would have the district court uh arrive at in the case so so the
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prayer for relief in the complaint asks for an injunction that directs the defendants to basically get rid of the
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liquidation preference either by converting treasury senior preferred stock into common stock or else by
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writing off the liquidation preference we think one of those two things is what would have happened had the Trump Administration controlled fhfa for
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the entirety of the four years of the administration but you know of course the the specifics
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of what the remedy should look like May ultimately depend on uh the facts that are would be developed on remand
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um you know and we're here on a motion to dismiss and um you know I think the the pleaded
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relief is is uh you know clearly what we're entitled to if we can prove the facts we've alleged all right thank you
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Mr Barnes your case is under submission last case for today Johnson versus
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Harris County