Replies to post #199007 on Fannie Mae-No Politics (FNMA)

[mike_usa]

Andy thank you for your insight and DD.

[Jayman1980]

Good stuff.

[obiterdictum]

The word usurious was used to describe the terms and outcome of the US Treasury's and FHFA's agreement with the GSEs as being an exercise in applying an exorbitant amount or rate of interest. A moral description or judgment was not intended. The meaning and intention was specifically behavioral. Usurious was used as it is commonly defined in the American English lexicon and not as a specific legal term that defines an agreement that money lent must be returned at a greater interest than that allowed by law...

The technicalities of jurisdiction and standing are rule-governed and required content in briefs filed in the US Court of Federal Claims and the US District Court for the District of Columbia. There is no choice in the matter for the parties. Plaintiffs must plead jurisdiction, standing and relief and Defendants are required to go against those pleadings with arguments and legal precedent or to admit to the pleading. So, it begins with the Plaintiffs' pleadings. The Defendants follow with their defenses against those pleadings.The Defendants are simply taking the first line of defense against the pleadings presented that assert jurisdiction and standing in a specific takings claims against them (See RCFC Rules 8 and 12 and LCvR 16.5 ).

What jurisdictional and standing argument made by the Defendants in either court against the Plaintiffs has merit in your opinion? Please refer to the specific case so we can be on the same page.

There are different types of cases filed in different courts. The takings claim cases are in the Court of Federal Claims and the injunctive cases are in the US District Court, DC. The injunctive cases seek to vacate and set aside the third amendment. The takings cases seek just compensation for property taken. The Plaintiffs pleadings and Defendants defenses are somewhat different in each court.

Perry Capital filed an injunctive case in the US District Court but did not file a takings case. Fairholme filed both an injunctive case and takings case in two different courts. Then there are the derivative and class action cases. It would help to discuss a specific case or cases so comments made can be case specific.

In reviewing TARP recipients, there are cases where the US Treasury purchased preferred stock along with receiving warrants. This was done through the Capital Purchase Program (CPP) and these funds were not considered to be bailing out companies but helping them along in tough times. These arrangements are similar to those with the GSEs with many of the companies being federally chartered and where preferred stock was purchased at 5% dividend and received with those purchases warrants for common stock. The preferred stock was eventually paid off and the stock and warrants also were auctioned and sold. Dividends were paid on a schedule and repayments of invested amounts at one shot were allowed to be made.

Most financial institutions participating in the CPP pay Treasury a five percent dividend on preferred shares for the first five years and a nine percent rate thereafter. In addition, Treasury received warrants to purchase common shares or other securities from the banks at the time of the CPP investment. The purpose of the additional securities was to enable taxpayers to reap additional returns on their investments as banks recover.

See: http://projects.propublica.org/bailout/programs/1-capital-purchase-program
http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/bank-investment-programs/cap/Pages/default.aspx

Sources:
RULES OF THE UNITED STATES COURT OF FEDERAL CLAIMS (RCFC) http://www.uscfc.uscourts.gov/sites/default/files/court_info/20130813_rules/13.08.30%20Final%20Version%20of%20Rules.pdf

RULES OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA (LCvR )
http://www.dcd.uscourts.gov/dcd/sites/www.dcd.uscourts.gov.dcd/files/2010_MARCH_LOCAL_RULES_REVISED_July2011_July2013.pdf

[Donotunderstand]

andy - in looking for comparions

you may find it beyond hard

as you will need to combine - equity stakes the GOV got and used AND interest rates and payback terms (v using an IPO to get the payback)

So here with F and F

assuming we are talking politics and negotiation - not the rule of law

we have

10% per year
All profit third amendment
warrant available for 79%

so is it fair to pay the full 10% per year interest - each year on outstanding balance if the GOV gives up the nonsense SWEEP and agrees to not use its warrants or to use warrants to 30% them and 70% us?

The three - in negotiation - can create a lot of interesting mixes

No Sweep
10% once
All prior payment count
but yes to the 79% warrants?

and how do you put in future role of F and F into the equation

what is ok if F and F are winding down to going out of business v
what interest rate and what balance and what equity stake if F and F will continue - in some positive format

sorry but I do not see how you will be able to create apples and apples