Replies to post #227475 on Fannie Mae-No Politics (FNMA)

[mikoli007]

I admit ignorance when it comes to the warrants.

So how is it the gov can purchase 79.9% of a company for $46,040 dollars? I know Warren Buffet said basically that is what he would have done and he is obviously pretty savy!

[bradford86]

Regarding the process of challenging the legality of the warrants, is there a time frame or a point in time at which the window to file a law suit against the FHFA and US Treasury in the United States District Court for the District of Columbia or the US Court of Federal Claims closes?

I believe that the formal terminology would fall under statute of limitations but I do not know and I think you might.

[Odismyman86]

The AIG bailout was also secured with warrants for a 79.9% equity stake. Hank Greenberg's Starr International is suing the government in Washington DC claiming the government terms were excessive and in essence a regulatory taking of shareholder value very similar to the GSE situation. Their position is that the interest rate they were charged for the bailout money (14.5%) was significantly higher than the banks were charged through TARP, plus the government demanded the warrants. David Boies is litigating for Starr and he thinks the lawsuit is on very solid ground. AIG itself declined to participate in the litigation as it would be a PR disaster seen as biting the hand that feeds you, but I'm sure they'll benefit if the plaintiff prevails. This case will certainly set precedent for the GSE situation if it is settled first.

They also had a lawsuit in NY against then NY Fed claiming that the Fed provided a sweetheart deal to Goldman at the expense of AIG (or something to that effect). That suit was dismissed.

The following link is a brief CNBC interview with Boies regarding their position.

http://www.cnbc.com/id/100369044

[Odismyman86]

Also, thanks for the reference to the Washington Federal case... I was trying to remember which case addressed the warrants and the toxic assets placed on the GSE's books. A little light reading for tonight!!