Fannie Mae – Fast And Curious: The Futility Of Hiding What Is Known by Investors Unite
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 Mae and Freddie Mac. In fact, there has been a high degree of candor that top Administration officials decided years ago that Fannie Mae and Freddie Mac 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 Mae and Freddie Mac 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.
More from Investors Unite
- Different Day, Same Confusion
- The Shareholder Lawsuit Remains Strong
- Investors Unite Launches an Interactive Timeline on the Conservatorship
- Are You Smarter Than A 5th Grader? Ed DeMarco Hopes You Aren’t
- More Questions, Fewer Answers from Treasury on Sweep Legal Saga