"But while you may be able to justly criticize the Treasury for hypocrisy and inconsistency when it comes to federal securities laws applicable to private corporations, I am not sure that such arguments can be successfully made against agencies of the federal government."
I think the arguments that can be made have to do primarily with the takings and due processes clauses of the 5th Amendment to the US Constitutions.
"With the higher fees put in place under the conservatorship, Fannie and Freddie look really profitable, at least in a nominal sense. But if those profits are adjusted for the risk the GSEs take on housing, there are no profits."
I'd say that FnF have recovered, in terms of net investment, from the bad years. In terms of recent years, the book of business is solid and clean and the GFees are commensurate with the risks that are being taken. Of course, a systemic shock could create losses for FnF--the best way to deal with that is to prevent another financial crisis from happening in the first place.
"As a practical matter, the power of the US Treasury and ultimately Congress over the GSEs is absolute."
I don't think that is true, see the 5th Amendment.
"If, for example, Congress passed legislation tomorrow extinguishing the GSEs without any compensation to the private “shareholders” whatsoever, it is clear that there would be no legal basis for objecting to this action."
I don't think that Congress has the political will to do that.
"Neither of these entities ever had sufficient private capital to achieve the “AAA” credit standing that Fannie and Freddie commanded in the past and still command today."
Umm, S&P downgraded them to below "AAA" a while ago.
"For years the common and preferred shareholders of Fannie and Freddie benefited from the pretense that these corporations were, in fact, private for profit entities."
In fact, they were and are private for profit enterprises. Is that news to anyone? They are a somewhat unique private-public partnerships in some ways, but they are still private for profit enterprises.
"The trouble here is that the Treasury is only accountable to Congress, not to the private shareholders seeking redress in the courts. The GSEs are creatures of the federal government, not the states. They were “privatized” in name only under the Administration of Lyndon Johnson, more as an effort at fiscal window dressing than as a serious attempt to separate them from the federal government in a financial, operational or risk perspective."
Privatized in name only? What does that mean? The 10Ks were untrue?
"While private investors in the GSEs may not like the way that they have been treated since the 2008 bailout, there seems little that they can do except waste money on a lot of litigation that seems unlikely to bring relief. Federal judges do not like second guessing Congress or the Executive Branch when it comes to the exercise of basic Constitutional powers. For decades, private investors benefitted from the pseudo privatization of the GSEs and reaped enormous returns for essentially doing nothing. Now those shareholders who were too dumb to head for the door when the music stopped want to be made whole for their losses."
Somehow I think a Reagan appointed judge might not mind standing up for private investors. Also, I just want my dividends restored going forward, lol.
