Fannie Mae (FNMA) and Freddie Mac (FMCC) Court Cases: Perry Capital v. Lew

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Updated with tweet at bottom with Filing Issued Today, 6/21/2016, after publishing

There are plenty of cases which are ongoing with regard to Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA), and Federal Home Loan Mortgage Corp (OTCMKTS:FMCC). In the coming days, we’ll take a brief look at some of the important ones and where they are at. This will provide some information into the ongoing battles.

Perry v Jacob J. Lew, et al., 

Initial Complaint: https://timhoward717.files.wordpress.com/2014/06/perry-capital-original-complaint-2.pdf

Hedge Fund Perry Capital LLC initially filed the case in the United States District Court in the District of Columbia challenging the decision of the U.S Treasury Department and Federal Housing Finance Agency (FHFA) with regard to the profit sweep. The lawsuit states that the government violated terms of the 2008 bailout agreement.

According to the lawsuit, the Treasury department did not have the authority with respect to dividend sweep for purchase of new securities at the beginning of 2010 as per HERA. The FHFA also failed to conserve assets of Fannie Mae (FNMA) and Freddie Mac (FMCC) as a conservator.

Initial Case with Judge Lamberth in US District Court for the District of Columbia

The case was initially heard by Judge Lamberth. Judge Lamberth granted the governments motion to dismiss dealing the plantiffs a large blow and sending shares plummeting on September 30, 2014. While the decision was negative for shareholders, Judge Lamberth provided some opening for the plaintiffs stating that he believed that takings were not ripe. He also questioned the Housing and Economic Recovery Act of 2008 (“HERA”) and asked whether it was unconstitutional, despite ruling for the government.

Lamberth motion to dismiss: http://gselinks.com/Court_Filings/Perry/13-cv-01025-0051.pdf

Appeal in United States Court of Appeals for District of Columbia Circuit

Perry Capital chose to appeal. The appeal case was assigned to Judges Brown, Ginsburg, and Millet in the United States Court of Appeals for the District of Columbia Circuit.

Read: How Federal Housing Finance Agency (FHFA) and Treasury Violated Insolvency Principles In Case of FNMA and FMCC?

Judges Brown and Ginsburg have a reputation for disliking delegation of Congressional powers to administrative agencies. The appeal underwent oral arguments on April 15th, 2016. There was initial optimism from oral arguments based on the Judge’s questioning. However, initial optimism based on assessment of Judge’s questioning can be deceiving as they often can play devils advocate, and motives of questioning can be misunderstood.

Recent Read: Government Misleads with Strange Math on Returns in Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA), and Federal Home Loan Mortgage Corp (OTCMKTS:FMCC)

Current Status

The case has had oral arguments and is currently awaiting a decision from the three Judge Panel on the United States Court of Appeals for the District of Columbia Circuit. There are many possible ways this could shake out including the Judges deciding to reverse, vacate, remand for trail, or uphold.  Much has happened since Judge Lamberth dismissed without even an administrative record. The Judges could easily remand the case back to Lamberth for more fact finding.

A decision in this case could come at any time.

Update After Publish:

This clearly indicates the Judges are looking for more information which will push back the timeline and means a decision is no longer eminent, but additional filings will be considered. The Judges are being very thorough here and considering as many angles as possible.

Additional catch up:

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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  • Speedjcp

    government fraud! illegal net worth sweep, private property without compensation.

  • Tony

    Agree on the judges being thorough, It asks about sovereign immunity, But being that its already been ruled FHFA was acting as a conservator in the shoes of FnF, than they are the fiduciary to the companies and Sovereign immunity doesnt apply here. IF they were the regulator that Could apply, but that in itself is a conflicting interest.. So being that thats already been ruled, the companies are looking good!

    • steve vrionis

      I am no lawyer but it seems possible they are asking because of how it pertains to damages. The Federal Tort Law seems to limit the kinds of damages, eg no punitive…

      It would be significantly more positive for damages then if they had an angle besides that like that the FHFA was not acting as the government (which the government has insisted upon before).

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