More On Golf, Settlement And The WSJ On Fannie Mae, Freddie Mac by Todd Sullivan, ValuePlays
I’ve refrained from commenting on the WSJ’s coverage of Fannie Mae and Freddie Mac saga for quite some time (since last December I believe) because, well, at this point they are simply trolling. But, since this piece is so disingenuous and patently false in some aspects, I feel obliged to chime in. I have reprinted the whole thing so as to not be accused of cherry picking snippets to make a point and will interject my thoughts as we go through it.
From the WSJ:
Rallies based on rumors all too often end in tears.
That is almost certain to be the outcome of a rapid rise in shares of Fannie Mae and Freddie Mac, which have gained 15% since last Wednesday. This has followed reportsfiled by investors in the two mortgage giants.
So far so good, nothing abjectly offensive there…..except they have a seemingly certain ability to predict the future.
The thin reed on which such speculation rests: a request by the government that three attorneys working in the Office of the White House Counsel be permitted to access information covered by a protective order issued by the U.S. Court of Claims.
That is one of the courts where under which both companies agreed to pay nearly all of their profits to the government. At least have .
The government’s motion didn’t explain why it was filed. In the absence of information, some investors and analysts have surmised the White House is moving toward a settlement.
Ok….some parsing. First it is nice for the WSJ to finally recognize the litigation before Judge Sweeney. Up until this point they have essentially ignored it and as I have speculated that decision comes from the top. Now the folks at the “opinion” part of the Journal will deny that but from top to bottom the paper has been anti-shareholder/plaintiff. Actions speak louder than words…..we are probably up to 30-40 articles in the WSJ from various authors about this and not one has even remotely come close to saying “shareholders have a point”. I find it hard to believe that is some random occurence.
That makes little sense. If the Obama administration had decided to settle, negotiations of such a settlement would certainly be handled by Justice Department lawyers already involved in the case. No need to bring in the White House.
Again, this is factually inaccurate and not the first time they’ve been so. Here is the thing, the heads of Treasury, FHFA and Justice all operate under the White House. The President appoints them and can ask that they step down at anytime. At the end of the day the administration sets the agenda for those entities. The notion that Justice would make a unilateral decision and exclude lawyers for Treasury and FHFA which are also involved here and then do so without giving the White House an opinion is inconceivable.
So why has the White House Counsel become involved? Simple: It is standard practice for White House lawyers to review information in litigation that references the White House, a White House spokesperson told The Wall Street Journal. But because of the protective order in this case, the government was required to ask the court’s permission to share information with the White House, the spokesperson said.
That certainly is one possibility. Here is another, please read it. What scenario you believe?
1- Perry’s lawyers (Gibson, Dunn) get access to protected information on 8/11, on 8/15 a senior partner in that firm (and Obama friend) play golf and have dinner in Martha’s Vineyard and then on 8/21 the White House decides to finally check out what is going on in this now over 2-year-old case and requests the same access. My theory is that Gibson, Dunn lawyers told Kirk that he may want his friend (the President) to have his staff look over the documents. Now this can be done 100% legally and without disclosing any protected information. A simple “I do not know what is in those docs but I’ve been told your people need to see them” would get the job done.
Now of course the WSJ will tell us “this is normal” for the White House to request access. Well, then, why didn’t the White house request this access when Fairholme released their 2014 annual report in January that disclosed White Staffers involved in emails about the Net worth Sweep? Why did they wait 8 months to request access and ONLY did so after Kirk’s firm obtained access and saw what was in the documents? Anyone? Anyone? Bueller?
2- All this is a really, really, really, really odd coincidence?
The government has scored victories , giving it little motivation to seek a truce now. This recent rally appears to be based on nothing more than wishful thinking.
This is typically half true. Yes, they scored a victory before Judge Lamberth (that decision is now under appeal and has developed an interesting twist) and Pratt in Iowa. But, we must look at why they scored them. Judges are loath to conduct simultaneous litigations which is essentially what would have happened. Seeing Sweeney had granted discovery and said, “plaintiffs will have their day in court” Lamberth punted and dismissed his case (knowing full well it would be appealed) and then Pratt simply followed Lamberth. Now, rather than have similar litigation is three courts where precedents and ruling may conflict, it is happening in one court. They’ve scored no victories before Sweeney.
So what about the Sweeney court? The one the WSJ seems to want to not talk about? How is Sweeney leaning? Should we have her tell us herself?
I know you’re going to say that the Court has no ability to have any — to, in any way, impact FHFA, and I disagree with that. I don’t believe that is a blanket insulation.
Now the rest
THE COURT: Yes, I don’t agree. I know you’re going to say that the Court has no ability to have any — to, in any way, impact FHFA, and I disagree with that. I don’t believe that is a blanket insulation. If FHFA enters into contracts and there’s a dispute and there’s a breach of contract — and the agency breaches the contract, I don’t think they can invoke that — the agency can invoke that provision to insulate itself. And, also, I think here — I’m not trying to control the conservatorship, I’m not trying to influence it in any way, I’m just trying to allow citizens to have every opportunity to meet the jurisdictional hurdle that the Plaintiff — excuse me, that the Government has asserted. The Government has said that the conservators are not part of the United States and, therefore, the Defendant is not implicated here. Now, on the other hand, by requesting these documents, the Government is saying, no, I’m sorry, you’re not entitled to any of these documents because the conservators are part of the United States. So, it’s a government entity and, therefore, you’re asking for deliberative process documents. So, it seems to me the Government is trying to have it both ways and, so, I don’t accept that argument. And as I said, you know, I understand and can appreciate the bar of –or the — not the bar,