The freddie Mac charter requires that any new product as defined in the safety and soundness act receive prior approval from FHFA the regulator (including public notice and comment) before being offered for sale. The safety and soundness act does not define the word “product”. However, the safety and soundness act does say any new product authorized under the section of the charter act that includes the Treasury back stop must receive prior approval and public notice. In 2008, FnF sold to Treasury a new product called the senior preferred shares, this new never before seen financial instrument (product) had a variable liquidation preference charge attached that allowed for an infinite rate of return. These new products that were sold to Treasury under the FnF charter acts for the purpose of securing the nation’s housing finance system were not approved by the new independent federal agency (FHFA) whose job it was to regulate and ensure that FnF and its Conservator (FHFA-C) followed the law. Two questions for the board.
1) According to the Supreme Court Rules of statutory construction, if a term is not defined in a statute, then the common meaning of the term is Congress’s intention. To presuppose a different meaning would be a violation of due process. Since the term “Product” is not defined in the statute, can the term be limited to new activities (MBS) as many on this board assume? It is curious that FHFA published their final rule on new products in 2022. In the rule they say new products and activities require public notice and comment and define what new activities are considered new products, but do not define what a product is. Of course they don’t because the term product means the common definition of financial products including securities, obligations etc.
2) If a statute requires an agency to follow the Administrative Procedures Act as part of its duty, but the agency doesnt bother to do its job, what is the statute of limitations on challenging the failure to do its stated job? The APA says that the SOL is 6 years from the final agency action. There has been no agency action on the sale of the SPS. Is there a way to challenge the lack of agency action under the APA? Does the 6-year SOL apply?
AI
