The
GSE Week, Last Week
Hurry, before Congress returns and the place goes to Hell;
again, can we all just talk?
If not scintillating, it was interesting watching the back
and forth speculation of: 1) whether Ron Kirk who vacation golfed with the
President may have mentioned to BHO anything about the case before Judge
Margaret Sweeney and whether that—or something else, entirely, including
something wholly inconsequential—caused the White House Counsel’s office to
request access for three of its associates to the Fairholme documents.
We all are assuming that request—which has been documented
and therefore not a figment on someone’s imagination--is for the original docs
since a gaggle of them were declared too sensitive for the plaintiffs lawyers
to see absent those ugly black redaction lines marked through otherwise spoken
or written words?
Beginning
of the GSE week
Last Monday started out fairly simple, when WSJ ‘s Joe
Light reported that he asked Ron Kirk about the golf course rumor and Kirk said
he had not spoken to BHO and didn’t
even realize that his firm had a client involved in this issue.
Light described that “no” and then got hit with “tweets”
pointing out that Kirk could have chosen to
not tell Light the whole story and the former Dallas Mayor added the part about
not knowing his firm’s client concerns just to build some additional cover.
I asked Light about that and he disagreed, saying he
believed public officials just would refuse to answer the question, not answer
it in a way that forced them to fudge the truth.
Again,
as of this writing (Sunday, September 6), there has been no proof that anybody
spoke to the President nor that the WH Counsel’s interest is anything but standard
operating procedure (SOP), when the White House is involved in legal matters!
But that didn’t stop the denizens of the “Tweetosphere”
from going back and forth, occasionally, with Light in the middle, offering possibilities
of what they all hoped had happened and what could explain the WH Counsel’s movement.
Let me
repeat, this all is speculation and should be viewed as such, but with one
caveat I’ll hit later.
Middle
of the GSE week
Todd
Sullivan penned a lengthy article in ValuePlays, which took a
different approach to the White House development.
Sullivan postulated a possible
—in addition to the several others offered before—why the WH Counsel’s office
sought document access. (BTW. Wouldn’t you think if the President of the United
States wanted to see some %$&#@ paper, DoJ or Treasury just would bring it
to him?? (“President Trump” has vowed to
fix that, when he gets done with throttling—and possibly walling off, literally
and figuratively--Mexico, China, Russia, and possibly Canada!!)
The point I will underscore is IF there is something
substantive behind the Counsel Office’s request--and the “settlement talks”
Holy Grail is in sight--the “whispering class” in DC will get hold of it and
we’ll all soon know about it. Too many law firms, too many interested parties,
too many vested interests—both pro and anti-GSE--for this type of development
to stay under wraps.
Sullivan’s thought provoking article is part of that
process, just as Joe Light honest reporting is of what Ron Kirk told him when
Light asked if Kirk spoke to the President when they golfed.
End of the GSE week
A late contender for GSE
story of the week—pregnant with possibility--is the Delaware filing of a separate
GSE case, by Judge Myron Steele, former Delaware Supreme Court Justice, who
outlined similar opinions in his amicus brief filed in the US Court of Appeals
in conjunction with the Perry case and Judge Royce Lamberth’s original
dismissal of same.
Steele cuts to the chase in the amicus and points out how
Delaware law—where Fannie was chartered--forbids the use of preferred stock in
the manner Treasury employed it in the 2012 “sweep.”
If Delaware courts concur. There goes the foundation for
the government’s position on the Sweep and its preferred stock ownership.
The
invalidity of the Net Worth Sweep under Delaware law informs the federal
questions posed by Plaintiffs-Appellants in this appeal: 1. Whether the Federal
Housing Finance Agency (“FHFA”) exceeded its statutory authority as conservator
for Fannie Mae and the Federal Home Loan Mortgage Corporation (“Freddie Mac,”
and, together with Fannie Mae, the “Companies”) under the Housing and Economic
Recovery Act of 2008 (“HERA”) by assenting to the Net Worth Sweep under which
the Companies must transfer all of their net assets to the United States
Department of the Treasury (“Treasury”) and are prohibited from retaining
capital, in service of the goal of eliminating the Companies; and 2. Whether
Treasury exceeded its authority under HERA and violated the Administrative
Procedure Act (“APA”) by entering into the Net Worth Sweep in 2012, when HERA
USCA Case #14-5243 Document #1561097 Filed: 07/06/2015 Page 8 of 38 2 expressly
permitted Treasury after December 31, 2009, only “to hold [or] exercise any
rights received in connection with, or sell, any obligations or securities [it
had already] purchased,” or by imposing the Net Worth Sweep based on outdated
data without adequately examining reasonable alternatives. If the Net Worth
Sweep was illegal under the charter of the Companies, it exceeds FHFA’s
statutory authority as conservator by definition. Standing in the shoes of the
board and the stockholders, FHFA cannot exercise a corporate power that the board
and the stockholders could not themselves have exercised. See 12 U.S.C. §
4617(b)(2)(B) (granting the conservator the power to “operate the regulated
entity with all the powers of the shareholders, the directors, and the officers
of the regulated entity and conduct all business of the regulated entity”).
Similarly, if the Net Worth Sweep is an illegal term for preferred stock, the
amendment cannot possibly be regarded under Delaware law as Treasury’s exercise
of a “right received in connection with” preferred stock purchased by Treasury
before December 31, 2009. Preferred stockholders cannot have a perpetual claim
on all the residual earnings of the Companies to the exclusion of common
stockholders under Delaware law.
Status: Judge
Sweeney Punts, in the spirit of football season
Sweeney’s order, issued after Friday’s 9-4 status hearing,
appears below and it’s not startling or very satisfying.
She extends discovery to the end of this year; delays implementation of actions which clash
with unfinished discovery (think NYT
request), approves some minor others; calls for a new status meeting before
1-21-2016, yada, yada, yada.
ORDER The court conducted a status conference in the
above-captioned case on September 4, 2015 concerning several matters, including
various motions filed by the parties. As discussed during the status
conference, the court resolves the following motions as follows: 1. Plaintiffs’
oral motion during the status conference to extend jurisdictional discovery is
GRANTED. Jurisdictional discovery shall be completed by Thursday, December 31,
2015. The parties shall file a joint status report suggesting future
proceedings by no later than Thursday, January 21, 2016.
As one of my favorite DC people said, when I expressed my
exasperation with a slow legal process:
“Hey it's only the world's second largest
securities market after U.S. treasuries. What's the rush? (Additional
proof that more college degrees don't equal greater wisdom.) “
Other
GSE Items
Some
dreams do come true.
On Sept. 3, former
Fannie Chairman and CEO David O.
Maxwell and his tennis partner, Herb
Bascome of Devon, PA., won the United States 85-and-over grass court tennis championship at Longwood Cricket
Club in Chestnut Hill, MA. Along the way, the winning pair beat the first and
second seeded teams. It was a dream come true for Maxwell, a lifelong
tennis player, who has undergone two knee and a hip joint replacement surgeries
so he can continue his tennis passion.
House Draft Bill Would Recap GSEs
It’s nice that House
members can cross party lines on GSE reforms. But with no real details, yet, of
what Rep. Mick Mulvaney (R-S.C.), is
touting in his new F/F recap proposal, it’s hard to make any guesstimates about
its popularity, other than to note they aren’t too many GSE friends on
Mulvaney’s House Banking Committee.
Added interest
always is good, but the reality is no GSE legislation of any substance will
move through the Congress until 2017 at the earliest, when there is a new
President.
So, welcome
aboard Congressman Mulvaney, just remember to don your big boy pads!
Iran
Deal Now Protected for Obama
With retiring Senator Barbara Mikulski (D-Md.) announcing
she’ll support President Obama and vote to sustain his veto of any GOP effort
to derail the Iran proposal, the President appears to have won final passage.
The WH needed at least 34 committed votes (one third plus
one) votes. They got that with Mikulski. Four others since have signed on,
giving Obama 38. Approval looks like a foregone conclusion. (Although, we all
will hear more threats and partisan allegations.)
Look for other uncommitted
D’s to support or oppose the President—depending
on their narrow back home political needs--now they know their vote won’t
matter one way or the other, but the WH still will welcome those following
Mikulski’s lead.
The Senate’s
political “Bravehearts” are only those who went out early—before Mikulski’s clinching
declaration--- and vowed their support for/opposition to the Obama plan. (See
Sen. Chuck Schumer (D-NY).)
Everybody
coming later—like Virginia’s Mark Warner
(D-Va.), who hid his vote until the Iran decision appeared home free,
because of Mikulski--was game-playing and very relieved their departing Maryland
colleague rode political shotgun for them.
What
Others Are Saying
Presidential
campaign corner
Pledge:
I think Trump just clinched!
Trump signing the GOP loyalty test, IMO, likely gives him
the Republican nomination and—if that looks to become a finality--it might draw
other D’s to challenge Hillary, seeing her continued popularity challenges and
believing the national electorate won’t choose Trump, who never has held public
office. (Hey, the less experience the
better, right?)
But look at the other GOP presidential candidates and see
which one you think might qualify as “The Donald’s” best VP choice? I am sure
the GOP establishment will seek one of those for Trump’s eventual running mate.
Trump’s decision was a wise one for him and should lower
a lot of R primary election barriers, but he’s still thoroughly unpredictable
and maybe anathema to blocs of minority voters and others who care about
integrity and realize you can’t return to “Fortress America” in the internet
age.
______________________________________________
Will
Trump go after Carson?
http://www.politico.com/story/2015/09/ben-carson-surging-gop-donald-trump-213226
__________________________________________
Schmidt:
Trump emasculates Bush
____________________________________________________________
Bush:
“Moo-shi pork or combination fried rice with that contribution?”
____________________________________________________________
Cheney
Says He’s Not Endorsing Trump “Today”
Foes to
vote Trump in GOP Primary; “We’ll show you.”
______________________________________________________
Whither
thou goest, Scott Walker?
|
||||||||||||
Trump
Stomps on GOP Economy Message
“OK,
I’ll sign the pledge, but I won’t…..”
Ted
Cruz’s Father, Rafael Cruz
This former Fidel Castro supporter, self-confessed
alcoholic who abandoned his family, found Christ, and now lectures Christian
clergy, lashes out regularly against son Ted Cruz’s opponents.
Is there a “pot and kettle” analogy with Rafael Cruz? How
about the Republicans’ “11th Commandment”—don’t speak ill of another
R--a surely a religious GOP presidential parent would know and abide by it???
Save
me, please, from Pastor Cruz!!
https://thefamilyleadershipsummit.org/extended-bio-pastor-rafael-cruz/
(C’mon,
move along folks, no hypocrisy here!)
__________________________________________
Anyone
have a Rick Perry sighting lately?
He’s a short guy, glasses, very thin campaign wallet, often seen in key states
with nobody around him???
______________________________________
Palin
and Trump, a heavenly match!
Palin:
“Speak American”
http://america.aljazeera.com/articles/2015/9/6/palin-us-immigrants-should-speak-american.html
Fannie/Freddie
Corner
--Judge Myron Steele’s amicus filed in the US Court of
Appeals (Perry case)
--Media Discussion of Judge Steele’s Perry amicus brief
Negotiations to Solve GSE
Issue Near?
September 2, 2015 Alexander Rosen Business
Richard X. Bove of
Rafferty Capital Markets highlighted that Myron Steele, a retired Judge filed
an amicus brief in the Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA)
lawsuits. The pressure continues to mounts for a negotiated deal as Judge
Steele files case in Delaware. He was Chief Justice of the Supreme Court in
Delaware before he took retirement.
The details
Retired Judge Steele had
submitted amicus brief in Federal National cases making two major claims. The
first one of that the third amendment on Fannie Mae’s senior preferred stock is
not enforceable, and secondly the Amendment violates Delaware law which clearly
mentions that preferred shareholders are not eligible to get all the profits of
the mortgage company leaving no profits for common shareholders.
Now, the retired judge
has taken one step further and filed a case under his own name. Since Federal
National is a Delaware entity, if the courts in that case find for Judge
Steele, the Treasury will lose the game. The other cases will be unresolved
since Delaware has alleged that mortgage company has broken the law.
The highlights
Todd Sullivan reported
that President Barack Obama, ex-President Clinton and lawyer Mr. Ron Kirk
played golf a couple of weeks ago. He even released a picture of them on the
golf course. Mr. Kirk Has served as Mayor Dallas in the past and was also a
special trade executive appointed by the U.S. President.
He now works for a Perry
Capital law firm, which is suing the Treasury and FHFA seeking the redress of
the Federal National Third Amendment. This meeting may be a coincidence or an
indication that the White House could probably lose control of the mortgage
company.
Judge Steele
as filing attorney in Delaware Class Action
Judge
Steele’s law firm filed a class action suit in Delaware federal Court, on
behalf of plaintiffs David Jacobs and Gary Hindes, based on the federal
government’s use of preferred stock, which Steele claims in his amicus and his
clients claim in their lawsuit violates Delaware law. Plaintiffs also demand a
jury trial.
Legal sources with whom I’ve spoken this
week believe that Steele’s class action suit, i.e. Jacobs and Hindes, as well
as his amicus, present very strong arguments against the U.S. government’s
actions.
Jacobs and Hindes might have far-reaching
property rights implications. The case also could be a major test of federal limits,
because Treasury’s GSE moves could violated state laws as well.
(In an email exchange, over the weekend,
printed in IHub, Judge Steele says
he expects the Delaware federal court to take at least 6 months before moving
on the Jacobs and Hindes class action suit.)
___________________________________________________________
___________________________________________________________
Joe Colangelo says public should be concerned about GSE
plight.
__________________________________________________________
Kamal Kolacek letter to Bill Ackman, “Why Fannie and Freddie
holders deserve little compensation.”
http://seekingalpha.com/article/3492156-my-letter-to-bill-ackman-regarding-the-gses?auth_param=6fag:1aunff4:44d9a31df450d9d139ba998fcdb6d150
Latino and Black Leaders in
NYC say reviving F&F key to increased home ownership among minorities.
Maybe someone should tell that to President Obama, Secretary
Julian Castro, and FHFA Director Mel Watt, just to name a few whose ears should
get that message.
The Atlantic on Fannie
Mae’s “Home Ready” new mortgage product could address the problem mentioned in
the article above.
______________________________________________________
Barry
Zigas, my friend and former Fannie colleague, is very optimistic about the same
new Fannie low income mortgage product. (See
his blog below.)
WSJ’s John Carney says WH interest not a big
deal.
Compass
Point says no behind the scenes F&F deal
IMF Looks
Ahead Three Years
In an article written by Paul Muolo for Guy Cecala’s Inside Mortgage Finance publication, Muolo sets up the reality of GSE reform legislation for the next three years??
What We’re Hearing: The Coming Ticking Time Bomb at Fannie and
Freddie / Time for Mel Watt to Step Up to the Plate? /
By
Paul Muolo
If
you think Congress is going to pass a Fannie Mae/Freddie Mac reform bill in the next two years, you’re
dreaming. No matter how you analyze the situation, the political climate in
Washington is so toxic that there’s little politicians from the both sides of
the aisle can agree on unless it’s a dire emergency like the U.S. defaulting on
a debt payment. For now, the GSEs are “safe” as long as they keep earning
money, which looks like a given, even though they keep giving away the upside
via risk-sharing deals. But there is a wild card here and it comes in 2018 when
the allowable capital cushion at the two falls to zero. Fannie/Freddie watchers
we’ve spoken to fear that a large hedging loss caused by a sharp swing in rates
could eventually result in a net loss, which means Treasury would need to plug
the net worth hole with cash – money that comes from taxpayers…
And when that day comes, you can bet that
members of both parties will take to the floor of the House and Senate,
criticizing each other for not doing something sooner. Of course, there is a
way to avoid the zero capital cushion dilemma. Congress can pass legislation to
allow the GSEs to build capital or Federal Housing Finance Agency Director Mel
Watt can do the
same by teaming up with Treasury Secretary Jacob
Lew to do it
administratively. But will it happen?
Bank Screw Up Corner
Nomura, RBS pay FHFA $836 Mil for F&F
Senior Bank Exec Sentenced to
8 Years
http://www.allgov.com/news/controversies/top-bank-executive-sentenced-to-8-years-in-prison-for-fraud-in-tarp-bank-failure-case-150904?news=857346
___________________________________________________________
Nonsense Corner
Alexandra Petri lists parenting
styles if those of you with kids want to know where you “fit” as Mom
and Dad?
_____________________________________________________________
Maloni,
9-7-2015
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Sorry-Report that some of the links are not working; will try and fix that.
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