That's an interesting read; the article cites several past instances where the gov't took over co's like FNMA, and were allowed to do all of the same things they are now.
After reading through all the legalese...this is what I see the GOV is trying to avoid.
Conservatorship FAQs
What is a conservatorship? The Federal Reserve Bank of St. Louis (and subsequently, the Federal Housing Finance Agency) defines a conservatorship as “[t]he legal process (for entities that are not eligible for Bankruptcy court reorganization) in which a person or entity is appointed to establish control and oversight of a company to put it in a sound and solvent condition. In a conservatorship, the powers of the company’s directors, officers, and shareholders are transferred to the designated conservator.” http://timeline.stlouisfed.org/pdf/CrisisGlossary.pdf
How does it compare to a receivership? A receiver is a neutral party appointed by the court to take possession of property and preserve its value for the benefit of the person or entity subsequently determined to be entitled to the property. CJS Receivership § 1. Under the Federal Deposit Insurance Act the receiver is charged by law with the duty of winding up the affairs of a bank or savings association or branch of a foreign bank. 12 U.S.C. § 1813(j)
Is a conservatorship temporary or permanent? There is no inherent duration in a conservatorship. The organic statute or order creating the conservatorship defines its goals, operations, and conditions for existence, differing from the FDIC receivership context, which does not anticipate a return to business. In this case, the Federal Housing Finance Agency has stated that the conservatorship will terminated upon successful completion of its plan to restore the companies to safe and solvent condition (“Fact Sheet – Questions and Answers on Conservatorship”. http://www.fhfa.gov/webfiles/35/FHFACONSERVQA.pdf)
How were the Federal Housing Finance Agency conservatorships established? Pursuant to authority granted under Housing and Economic Recovery Act and the Safety and Soundness Act, on September 6, 2008, the Boards of Fannie Mae and Freddie Mac both assented to the order of Federal Housing Finance Agency Director Lockhart appointing the Federal Housing Finance Agency as conservator of Fannie Mae and Freddie Mac.
Under what conditions could a conservatorship be instituted? The Housing and Economic Recovery Act prescribes that the director may appoint a conservator (or receiver) in cases of insolvency, undercapitalization, operating in an unsafe or unsound condition, concealment of books and records to regulators, inability to pay obligations or meet the demands of creditors, violations of law, consent of the Board of Directors, and others. Under the Housing and Economic Recovery Act, the Director must place the entity under receivership if the entity is insolvent for the preceding 60 days, or has not paid its obligations for the preceding 60 days.
What are the powers of the Conservator? Per Section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. § 4501, et seq., as amended) and regulations published by the Federal Housing Finance Agency (12 CFR Part 1237), the conservator has three general sets of powers: First, the Conservator (or Receiver) is the immediate successor to all rights, titles, powers, and privileges of the entity, and any stockholder, officer, or director. Second, Conservator may operate the entity – including conducting all business of the entity, taking over the assets, and operating with all the powers of the shareholders, directors, and the officers. The conservator may also collect obligations due to the entity, and contract out any function or duty of the entity. Finally, and perhaps most importantly, the Conservator may take such action as necessary to: (1) put the entity in a sound and solvent condition, and (2) carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.
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