Powerful Senate Judiciary Chairman to Feds: Tell Me Why, Exactly, Are You Exerting Executive Privilege Over Fannie Mae And Freddie Mac and Profit Sweep Documents? by Investors Unite

It’s well-known among federal agencies that when Iowa Sen. Charles Grassley puts them in his sights for some malfeasance, they are in for a bad time of it. He is relentless. He is tenacious. And he just sent letters to Attorney General Eric Holder and Treasury Secretary Jack Lew demanding to know why the government invoked executive privilege in refusing to turn over documents regarding the Third Amendment Sweep.

Sen. Grassley is the very powerful Chairman of the Senate Judiciary Committee, and in his letters, he wastes no time is making clear the answers he wants:

“Fannie Mae and Freddie Mac shareholders sued in July 2013. According to the New York Times, in the course of litigation, the DOJ has imposed broad assertions of privilege on 669 documents it may otherwise be required to produce. Of these documents, executive privilege is listed as the reason for withholding 45 of them.

“… The taxpayer has a right to know what has transpired. But, instead of transparency, there appears to be an invocation of executive privilege. If true, this is cause for concern.

“Accordingly, please provide the following:

“1. Has the President personally invoked executive privilege over documents related to the Fannie Mae, Freddie Mac and Treasury Third Amendment agreement? If so, when? If not, why are DOJ attorneys citing that privilege as a reason to withhold those documents?

“2. Does the Third Amendment cause a breach of any of FHFA’s statutory duties to ensure that each regulated entity operates in a safe and sound manner? Please explain.

“3. During the negotiation of the Third Amendment between Treasury and FHFA, did DOJ communicate with any of the entities involved regarding its legality? If so, please describe those communications in detail.

“4. Under what legal authority was the Third Amendment authorized?

“5. Prior to litigation, did DOJ discuss with Treasury and/or FHFA the need to assert privileges, including executive privilege, over certain documents?”

Sen. Grassley notes that he expects the answers by April 20. Sen. Grassley is very careful to do a full examination of the issues so that once he does get involved he is on solid footing in demanding answers and diligent in his follow-up.

Here’s what New York Times reporter Gretchen Morgenson, herself showing the doggedness that is a hallmark of the Times’ reporters, wrote in her article about Sen Grassley’s letter:

“The government’s decision to divert all of Fannie Mae’s and Freddie Mac’s earnings was unexpected when it was announced. As conservator, F.H.F.A. was supposed to oversee the companies with an eye to stabilizing them and conserving their assets. Redirecting their profits to the Treasury has prevented the companies from building up a larger capital cushion to absorb future losses, should they arise.

“The shares of both companies have continued to trade publicly since they entered conservatorship. As the companies recovered and their earnings ballooned, some shareholders contended that sweeping the profits into the Treasury was an improper taking by the government of private property. Several shareholders sued the government. The Obama administration has responded by fighting document requests and demanding an unusual degree of confidentiality over material relating to the decision.

“In one such case, lawyers for the Justice Department defending against a lawsuit brought by Fairholme Fund, a mutual fund company and a Fannie Mae and Freddie Mac shareholder, have made extensive claims of privilege on documents surrounding the profit sweep.

“Logs filed in the case in mid-January listed 231 Treasury documents in which the government cited various privileges. Presidential privilege was cited in 38 of those items and in seven documents involving F.H.F.A., the conservator.”

We know we’re not the only ones looking forward to seeing the government’s response to Sen. Grassley. As is also well-known among the agencies, those who ignore his request do so at their own peril. We’re glad to see such a forthright and powerful Senator stand up for shareholder and taxpayer rights.

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