Recent Updates from the Investors Unite Blog
Fast and Curious: The Futility of Hiding What is Known
Monday, January 25th, 2016
Why would the Obama Administration push so hard to conceal documents related to the conservatorship of Fannie Mae and Freddie Mac when the intention of the Administration to go against the law and wind the GSEs down rather than restore them to solvency is already so well known?
That is the question that must be asked again with last week’s ruling by a federal judge in the ongoing battle over Fast and Furious, a government gun smuggling surveillance operation that allegedly allowed thousands of weapons to end up in Mexico and ultimately used against U.S. agents.
In essence, in the tug of war between Congress and the White House, U.S. District Court Judge Amy Berman Jackson ruled that presidents can use executive privilege to preserve candor in the decision making process but they’d better be sure that whatever they are trying to keep private hasn’t already leaked out. In this case, the Justice Department’s public disclosures largely negate the assertion of executive privilege by the White House.
“The Department itself has already publicly revealed the sum and substance of the very material it is now seeking to withhold,” Judge Jackson wrote. “Since any harm that would flow from the disclosures sought here would be merely incremental, the records must be produced.”
In the case of the lawsuits against the government’s actions in the conservatorship of Fannie Mae and Freddie Mac, specifically the Third Amendment Sweep, shareholders contend that the Treasury Department acted illegally. The Housing and Economic Recovery Act required the Federal Housing Finance Agency, as conservator, to restore the GSEs to a “safe and solvent” position and to “preserve and conserve” their assets so they could resume their function in the housing finance market.
Treasury Department officials have long since abandoned trying to make the case that they have been trying to conserve the assets of Fannie and Freddie. In fact, there has been a high degree of candor that top Administration officials decided years ago that Fannie and Freddie had to go and their capital was providing the Treasury with some badly-needed revenue. For the supposed good of the taxpayer, Administration officials have practically boasted that the decision was made to keep them building up capital.
So the question is why the Administration remains so obstinate in releasing information about the deliberations and communications within Executive branch agencies some of which go back nearly eight years?
Where is the harm in explaining the rationale for a policy the Administration has vigorously defended? How would the health of the economy or even just the mortgage finance market in 2016 be adversely affected by a glimpse into the assumptions that led up to the Sweep in 2012 and the determination that an alternative model to the GSEs was needed?
Presidents are usually hesitant to invoke executive privilege because it prompts immediate public questions about what officials are trying to hide. As a rule, in cases where sensitive national security matters are at stake, the public might be more receptive to the assertion that secrecy is needed. In cases where criminal conduct is alleged, there is less receptivity to efforts to shield the truth. But in cases where the routine business of making policy is deemed off-limits, there is justifiable skepticism. It sets a terrible precedent for future deliberations and disclosure of public information.
Tuesday’s ruling in the Fast and Furious case underscores that, even in matters where national security questions are at stake, disclosure is generally the best policy. Maybe that is why the Justice Department has already made public the very information the Administration wants to keep under wraps.
If the Administration is transparent enough to want to deny Fannie and Freddie capital and replace them with something else, then why does it continue to stonewall in shareholder lawsuits on why and how officials arrived at this conclusion?
At the start of his term, President Obama vowed openness and transparency. In almost a year, a new president will be sworn in. It is important that this Administration will not bequeath expanded use of executive privilege to the next Administration.
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Below Schedules are Subject to Change without notice.
Revised Perry Appeals Court briefing schedule:
Appellees’ Brief Filed on December 21, 2015
Appellants’ Reply Brief filed on February 2, 2016
Deferred Appendix on or before February 16, 2016
Final Briefs on or before March 8, 2016
Oral Argument on April 15, 2016
Jacobs and Hindes Delaware Case Schedule:
Plaintiffs’ briefs completed January 15, 2016
Filing from January 15, 2016
Myron Steele on behalf of Jacobs and Hindes case, click here to view.
Myron Steele request to certify Questions for Supreme Court Ruling, click here to view.
1. Does Delaware law permit preferred stock of a corporation to have a cumulative dividend right equal to the entire net worth of the corporation, payable quarterly in perpetuity, as provided in Section 2 of Fannie Mae’s Amended and Restated Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, dated September 27, 2012 (which is attached hereto as Exhibit A)?
2. Does Virginia law permit preferred stock of a corporation to have a cumulative dividend right equal to the entire net worth of the corporation, payable quarterly in perpetuity, as provided in Section 2 of Freddie Mac’s Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (Par Value $1.00 Per Share), dated September 27, 2012 (which is attached hereto as Exhibit B)?
Tim Howard, Fannie Mae’s former CFO, wants to file an Amicus Brief
Defendants’ reply briefs in support of their Motion to Dismiss due on or before February 16, 2016.
Defendants’ response to the Application for Certification due on or before February 16, 2016.
Plaintiff’s reply in support of the Application for Certification due on or before February 26, 2016
Revised Fairholme Funds Sweeney Case Schedule:
Plaintiffs’ filed a Motion to Compel on November 23, 2015.
Plaintiffs’ Jurisdictional Discovery Extended. Estimated End Date March 31, 2016.
Depositions completed on January 14 and 20, 2016. Subject to Extension.
Defendant’s response to plaintiffs’ Motion to Compel completed under sealed on January 21, 2016.
A joint status report completed on January 28, 2016.
Plaintiffs’ reply to Defendant’s Motion to Compel response completed under sealed on February 1, 2016.
*****Fairholme Sweeney Case Schedule Update*****
Schedule for consolidated briefing of motions to dismiss the complaints in this case and the related actions.
1. Plaintiffs in this and the related cases may file amended complaint(s) no later than 45 days after the Court’s resolution of plaintiffs’ pending Motion to Compel (ECF No. 270) unless the Court should permit further discovery by the plaintiffs.
2. Defendant will file an Omnibus Motion to Dismiss seeking dismissal of this and all related actions before this Court no later than 120 days after the expiration of the period for filing the amended complaint(s);
3. Plaintiffs in this case will file their response to Defendant’s Omnibus Motion to Dismiss no later than 90 days following the filing of the Omnibus Motion to Dismiss, and plaintiffs in each of the related cases will be permitted to file their own separate response to Defendant’s motion also within 90 days following the filing of the Omnibus Motion to Dismiss;
4. Defendant will file a reply in support of its Omnibus Motion to Dismiss no later than 90 days following the filing of response(s) to the Omnibus Motion to Dismiss in this and related cases.
Assuming discovery draws to a close on Mar. 31, 2016, the “estimated timetable” would be:
- Plaintiff Amended Complaints around May 15, 2016;
- Defendant Omnibus Motion to Dismiss around Sept. 12, 2016;
- Plaintiff Responses to the Omnibus Motion to Dismiss around Dec. 11, 2016;
- Defendant Reply in support of Omnibus Motion to Dismiss around Mar. 11, 2017;
- Judge Sweeney’s decision on Omnibus Motion to Dismiss some time thereafter.