Fannie Mae, Freddie Mac Court Hearings – Transcript

Fannie Mae, Freddie Mac Court Hearings – Transcript
By User:AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Below are some snippets from the recent hearing on Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA).  At the end is the entire transcript.  Sweeney is clearly leaning towards the plaintiff’s arguments in discovery.   What I expect is that discovery will be granted on a wider range of topics than the gov’t wants but that it will be range bound, initially. As discovery is done and as additional issues arise, I see Sweeney then broadening the scope of discovery. As she said, she is going to “do it in waves”.

Play Quizzes 4

If you read the below and read the transcript, she clearly is not buying the governments effort to claim they are not acting as the gov’t in this case but then turning around and claiming they are the gov’t so as to not have to release documents. She is determined to see that “the Plaintiffs will have the ability to make the best case they can to establish the Court’s jurisdiction.”

Ms. Hosford on Fannie Mae’s potential disclosure of internal discussions

Ms. Hosford is for defendants and Mr. Cooper for plaintiffs:

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MS. HOSFORD: First, potential disclosure of internal discussions about the future of the conservatorships would, to quote Director Watt’s declaration, “have extraordinarily deleterious consequences on the conservator’s conduct to be ongoing in future operations of the conservatorships.”

That’s –

THE COURT: Let me ask you this, if there’s a protective order in place which provides for the sealing of all such documents, how is the conservator harmed? There will be no release of documents.

MS. HOSFORD: First, Section 4617(f), which is part of the Housing and Economic Recovery Act of 2008 –

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, but the — that Congress intended that courts do not meddle in the business of the conservators.

That’s not my goal or desire. I have enough on my plate without trying to run the conservatorships. But I do want the Plaintiffs to have an opportunity to meet the jurisdictional challenge that’s been raised by the Government.

THE COURT: And so far, I haven’t gotten — I haven’t received a good answer from the Government. Counsel is very able. But counsel has expressed concern of what could happen if certain documents are released, which I do not want to see happen, but counsel didn’t answer to my satisfaction the discrepancy between sort of using the deliberative process as sword and shield. On one hand, FHFA is a government entity, you know, for purposes of booting the Plaintiffs out of court and not part of the Government, but for purposes of forwarding discovery, all of a sudden deliberative process is appropriate because they are part of the Government.

So, it’s a schizophrenic approach and I’m just waiting to hear a reasonable explanation.


THE COURT: Thank you. And it looks like there’s one more note coming from Mr. Drisser (phonetic).

I will say this, given everything that’s been said today — of course I haven’t heard any evidence as yet, but just based upon counsel’s arguments, what I’ve heard so far tends to suggest that FHFA is — I don’t want to say joined at the hip with Treasury — but it doesn’t sound like they’re necessarily an independent entity that’s just not — has no connection to the Government. But having said that, I’m keenly sensitive to the deliberative part, because that would, then, clearly bring into play legitimately the deliberative process.

And I am very sensitive to the terrible ramifications that will flow from the disclosure of sensitive documents. So, I’m very sensitive to that, and that’s because I, again, just from the arguments that have been made, it certainly tends to suggest that — haven’t taken evidence yet — but that FHFA is, in fact — could be construed as a Executive agency for purposes of making the United States liable — if, in fact, a taking has occurred.

But, you know, I haven’t made a decision on that. I’m just saying based upon counsel’s — Government counsel’s arguments that have been tremendous advocacy on the part of the Government, but, again, if you’re saying that FHFA is dealing directly and is taking guidance from or working hand and glove with Treasury, that — and they’re helping –assisting with setting policy, that tends to show that they are, in fact, an entity of the United States.

Below is a link to the hearing transcript

6:19 Hearing

Fannie Mae Hearing Transcript via  ValuePlays

Updated on

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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  1. I am happy to see some media attention here. Amazing how Fox, CNN, and MSNBC choose to ignore the government’s attempt to cannibalize Fannie Mae and Freddie Mac to appease select banking interests. The biggest financial scam in recent times. Thank you Valuewalk

  2. What the honorable Judge Sweeney just described is called Fascism – : a way of organizing a society in which a government ruled by a dictator controls the lives of the people and in which people are not allowed to disagree with the government: very harsh control or authority – merriam-webster(dot)com

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