Richard X. Bove, Vice President Equity Research at Rafferty Capital Markets, highlights Retired Judge Myron Steele filling an amicus brief in the Fannie Mae lawsuits.
Pressure continues to build for a negotiated settlement. Retired Judge Myron Steele files suit in Delaware. President Obama golfs with Ron Kirk, a key hedge fund counsel.
Judge Myron Steele was Chief Justice of the Delaware Supreme Court prior to his retirement. He had filed an amicus brief in the Fannie Mae lawsuits making two key claims. The first is that the 3rd Amendment on the company’s senior preferred stock is unenforceable. Second argues that the Amendment breaches Delaware law which explicitly states that preferred shareholders cannot take all the profits of a company leaving nothing for common shareholders.
Judge Steele has now gone one step further. He has filed a lawsuit under his own name in the Delaware court making the same arguments. Since Fannie Mae is a Delaware Corporation, if the courts in that state find for Judge Steele, the game is over for the Treasury. The other lawsuits will be moot since Delaware has claimed that Fannie Mae has broken the law.
Fannie Mae: President Obama golfing with Ron Kirk
Todd Sullivan reported in Value Plays that President Obama played golf with ex-President Clinton and lawyer Ron Kirk a couple of weeks ago. Mr. Sullivan also published a photo of the threesome on the golf course.
Ron Kirk was mayor of Dallas and a special trade representative appointed by President Obama. Mr. Kirk now works for Gibson, Dunn, and Crutcher Perry Capital’s law firm. Perry is suing the FHFA and the Treasury seeking the redress of the Fannie Mae Third Amendment.
Mr. Kirk also had dinner with the President as one of a group of eight people including ex-Attorney General Eric Holder. Six days following the golf outing, the White House filed suit to get the Discovery documents in the Lamberth Appeal case.
The timing may be a coincidence or it may suggest that the White House could possibly lose control of Fannie Mae. If the Delaware courts find that the Treasury has broken the law, then it must pay back all of the excess funds that it has taken from Fannie Mae.
Also, if the courts find against the FHFA and the Treasury, the President could possibly lose the right to make a unilateral decision as to how Fannie Mae should be run. The advisors might be telling him this.
If so, negotiations to solve the Fannie Mae issue may be near.