Wednesday, February 22, 2017

Don’t Despair; Hope for GSE Friends

Today’s rushed and out of sequence blog is dedicated to all of those anxious and unhappy F&F investors—which initially included yours truly—smacked in the chops by the Appeals Court decision and Judge Ginsburg's apparent chameleon routine, changing from an intellectually GSE friend to foe—if any jurist could be labeled as such based on his hearing comments and questions.

Apparently, Ginsburg stepped to the dark side and—as I joked with a notable conservative GSE critic—Fannie friends have video and audio of someone who looks like Ginsburg “seeking asylum at the AEI headquarters and later GMU’s Mercatus Center mumbling that he wanted to immigrate to Russia!”

No truth to the rumor Judge Ginsburg has retained Mike Flynn and Paul Manafort to manage his safe transit “over there.”

Today, why should pro GSE folks and allies feel at any optimism?

Reason #1

First, housing can't be ignored and driven by available and well-priced mortgage financing—especially when it’s inclusive of all eligible borrowers—powers something like 20% of our national GNP.

That’s still what Fannie and Freddie do and better than all others, no matter what the NAR/MBA think.

People still will want homes, but the process could be more efficient, cheaper, and timely if some of the systemic shackles were removed.

So, it’s crucial for the United States to have builders, Realtors, lenders, borrowers on the same page and pooling their efforts to satisfy the business and social needs of everyone in that homeownership chain. It also drives the carpentry, painting, roofing, electrical, home furnishings, landscaping, housing emoluments dependent industries which employ tons of Americans and tons more when times are flush. That spells JOBS.

The Trump Administration likely understands that it doesn’t have to do very much to activate that pent up housing demand also triggering the jobs it promised during the campaign.

Reviving Fannie Mae and Freddie Mac—which it has the executive authority to do—to quickly produce a “Wham, Bam, thank you President Trump and Secretary Mnuchin” financial and economic boost, that also would be a major nod for President DJT’s “forgotten people” if they take some wraps off the GSEs.

Reason #2

The Appeals Court decision was “&^%#@* up!” May sound like a loser’s lament, but you don’t have to be a lawyer to see it.

(Read Judge Brown’s minority views to see why the above statement is accurate.)$file/14-5243-1662090.pdf

It was if the two majority judges (Millet and Ginsburg) made up their minds that the GSEs were the “Devil” (see Maloni’s inside the beltway “GSE Shit Wall” beliefs), and then looked for arguments to support that.

As my friend and superb lawyer Gwenn Hibbs pointed out, this decision had far reaching implications beyond the GSES and should make any investor think about buying into any financial services company if federal financial regulators truly have the latitude Lamberth and the Appeals court gave them to injure shareholders and take actions without any judicial review.

Ironically, President Trump’s immigration travel bans gets initially rejected by federal courts, but the Treasury/FHFA can do whatever it wants to Fannie and Freddie without any judicial review suggested/screamed the Appeals Court yesterday.

I suspect plaintiffs will seek a Supreme Court review unless there is an agreement between the Administration and investors within the next few weeks.

Reason #3

The remaining court cases, including the major one in Judge Margaret Sweeney’s Court of Claims, plus a few lesser ones, now are clearly in the hands of Trump executives in Treasury and the Department of Justice.

Judge Sweeney is going to rule on the 2012 Treasury “sweep,” and she potentially also holds Fannie’s and Freddie’s future in her judicial hands.

There are 11,000 orphan documents in Sweeney’s court still are seeking a “Daddy.” Will those Papas be Jack Lew/Eric Holder or Steve Mnuchin/Jeff Sessions?

Again, if the Trump Administration wants to saddle itself with Obama errors and mistakes, all it has to do is emulate the BHO stance on these matters and stonewall and obstruct.
If it doesn’t, it should distinguish itself and do something different.

Reason #4

Obviously related—and while I don’t know exactly who is friends with whom or who owns what--but if all of the rumors about major GSE investors having ties to DJT, Steve Mnuchin, John Paulson, Gary Cohn, Carl Icahn, etc. are accurate, I would think that this Administration would try mightily to do well for the American people--and good for their friends--by carrying through on Mnuchin’s desire to get the GSEs out of the government and back into private control, capitalized appropriately.

The well-schooled on mortgage finance and securities issues Treasury Secretary Mnuchin says he wants to get the GSEs out of government management and into private ownership doing what they have done best---and, time for a commercial--arguably better than all the rest of the big banks and amalgamated Frankenstein parts their opponents would wish in the GSEs place.

Give the GSE stallion its lead Mr. President and ride it to economic, social, and political success.

Yippee Kiyay, Mr. President, ride that horse!!!

Maloni, 2-22-2017


Ron Haight said...

Thankyou, Bill, for another great post shining a positive outlook through the dark cloud brought down by the appeals court. Reading the transcript of the judges comments way back when the case was argued it sounded too much like the judges drank the kool-aid from the "common wisdom" pitcher carefully generated and promoted by the powers that be or the co-conspirators in the attempted gse coup. If it does get to scotus I can't imagine such a blatant violation of the constitution will be allowed to stand. With truth and practical consideration finally gaining momentum the wind is at our backs and longs(suffering) investors such as myself (a poor farmer, not a hedge fund manager btw) may yet be able to enjoy retirement a little bit better.
All the best, my friend!

Anonymous said...

Bill , since you have been so many years inside the belt and so many people appreciate you, I think you can find out better that anyone else what are the ties between Ginsburg and the gang at AEI. Get on the phone , my friend, and call buddies and find out when was the last time they saw Ginsburg and the gang dining or golfing or meeting together

Emmily said...

Bill, you are great and powerful. :-)

Bill Maloni said...


Thanks for being a farmer and I truly mean that.

As I told my GSE Google-site buddy, Mr. Fiddlesticks, a decision supporting the GSEs seems embedded somewhere in all of this crap. It's just a matter, now, of time.

Actually, Mr. F suggested another legal option, an "en banc" appeal, where plaintiffs ask the entire appeals court (9 judges?) to review a decision. Not sure of the mechanics or wisdom but has to be requested quickly.

If it helps you, I hope the rains heavily water your farmland.



Everybody knows everybody else in this town. So, I am sure Ginsburg and the better know fellow travelers have crossed paths, at church or synagogue, shared dinner tables, conference events, and possibly family social events.

Washington is all about relationships and favor trading.

But, most of that should balance out. Plus let's root for Sweeney and the Admin, letting plaintiffs lawyers decide what if any appeal they'll seek.


Emmily, you are wise and beautiful. Your words are the fresh breath of Spring!!

Anonymous said...


Thanks for your opinion article.

It is concerning to see how three constitutional branches of Gov and many more extra constitutional independent agencies of Gov work to screw the common people and subvert constitutional protection for people from the tyrant Gov agencies and officials.

There should be constitutional ban on such extra constitutional independent agencies of Gov. Hope SCOTUS will revisit this topic and ban all extra constitutional independent agencies of Gov with no exceptions. If needed special courts should be created to handle such matters instead of political bodies (even though many times courts themselves act like political bodies). No one should be exempt from checks and balances or exempt from oversight from all the three branches of Gov.

There are basically many problems with Appeals Court ruling.

1. The ruling is based only on law and not based on any facts or motives.
So the ruling should have come out long time back instead of taking 10 months.
Justice delayed is justice denied. The long delay has harmed the plaintiffs irreparably.

2. The opinions expressed during oral arguments completely differ from the one expressed in
ruling. Why even waste taxpayers money with oral arguments and filing unnecessary supplements?

3. The opinion expressed by Judge Brown totally contradicts with that expressed by the majority of Judges. There are very few points on which all three Judges agree.

4. Prior involvement of Judges with private associations that have opposed/lobbied against GSEs, and prior close association of Judges with people opposed/lobbied against GSEs.
Judges should have disclosed these facts and offered to recuse from the panel.

Anonymous said...

5. Judges rule that facts and motives are not relevant in this case.
But Judges conveniently ignore facts and motives favorable to plaintiffs but use misleading facts and misleading motives (disseminated by the defendants and FnF opponents) favorable to defendants as proper context for their decisions.

Bill Maloni said...

Anon1 and Anon2--

I am combining my response to you because, essentially, the same rule is at work.

As a country, we delude ourselves about being a nation of laws. Yes, we have laws and we have courts and judges but--as we'eve seen recently with the GSE cases-- despite "the facts" a lot of judges don't agree with us (here's hoping Judge Sweeney isn't one of them) and there appears to be a lot of lemming judges following the leader off the cliff, i.e. reaching the same flawed conclusions which many of us think doesn't comport with the Constitution, HERA, or plain common sense.

(How can Judge Brown see one scenario and Millet and Ginsburg the complete opposite? Hmmmm?)

So, we are left with deep pockets plaintiffs, hopefully pushing this "en banc" the entire Appeals Court to review Millet/Ginsburg or to the Supreme Court of the United STates, which history has shown is not guaranteed either to hear the case or render a thoughtful decision.

I would be lying to you if I suggested this situation will get better under President Trump. I worry that the poor, minorities, and have nots may get no justice, which to me means civil strife and urban warfare.

Maybe I am being too dramatic, but I don't think so.

It's like DJT's relationships with Russia. To whom do you turn if someone has the proof of illegal and years old business ties and deals--when the POTUS says he has none?

To whom do GSE friends turn if they believe they have proof of judicial ignorance turning a blind eye to "takings" prohibited by the Fifth Amendment?

The House, the Senate, Jeff Sessions, the FBI???

Think Banana Republic or worse, as our national Treasury gets tapped by the already monied interests with nobody saying/doing squat about it.

Travis said...

I wanted to add one other positive I think came out of the decision. Maybe I misread something but since part of the decision was to remand certain points to the lower court, and I think an administrative record asked for, does that not mean the plaintiffs get time to gather much more evidence that we almost are sure will be especially damming to the Treasury and the whole net worth sweep? That seems to me to be absolutely a golden win.

The "hail Mary" did not happen all at once, hence the stock price decline but shareholders actually did win more than they realize at least in my opinion. There still will be massive pressure on the Treasury to get this done with before all the smoking guns come out. In other words, Treasury won in court in the short term, but massively lost on the long term as now it all come out into the open.

Where am I wrong?

Anonymous said...

Bill, Thanks.

Both the parties are very much complicit in this.
That is why people elected DJT (even though many do not consider him as Republican) ignoring all the established candidates from both the parties. DJT does claim to be a moralist or a ideologue. DJT is trying to change the things like the way new CEO would do for a non-a performing company.

HRC would have continued the same failed polices of previous many administrations (Dems/Reps) prolonging the pain and sufferings of most people. (BTW I voted for BHO). After becoming POTUS, BHO lost touch with economic reality. FnF shareholders and private companies are far safer under current administration.

Officials and Judges need to interpret the laws as they are written rather than change the meaning of words and language to suit their liking. If they do not like the laws they should change it through proper process.

Anonymous said...

DJT does not claim to be a moralist or a ideologue

Anonymous said...

Appeals court ruled against request more administrative records.

Bill Maloni said...

Travis--Again I am not a lawyer, but the Appeals judges--and to a lesser extent Lamberth-- had access to records (although Lamberth was given some phoney info about GSEs financial stability)--and they reached the same conclusion about HERA giving Treasury/FHFA carte blanche to kill the twins.

That mindset I attribute to the F&F opponents and the "GSE Shit Wall" they've built largely, but not exclusively, inside the Beltway, making it easier for the government's lawyers.

On paper, in the Lamberth case, they only are two additional legal review possibilities, with several previous ones (looking at other GSE cases) decided int he negative for GSE interests.

It's as if facts don't matter, but "alternative facts" do.



DJT was correct in calling DC a "swamp."

In the GSEs case, DJT and Steve Mnuchin now have a chance to affirm his claim to fixing matters and, as I continue to point out, cement his political strength with middle and lower income people who would most directly benefit form a F&F resurrection. And then there are the accompanying jobs and tax revenue that accelerated housing development will generate.

But, I am afraid that Tuesday's decision pushes it all to the back burner and way down the Admin's priority list, unfortunately.


Anons 2 and 3--

I'll leave what you said stand.