Two letters to the editor today taking on John Carneys recent Fannie Freddie hatchet piece in the WSJ promising. Before we get into them, I have to comment first on the peculiar headline that preceded the letters. “The legal question with the Treasure, Fannie and Freddie involves the rule of law and a willingness to honor contracts.”
The legal question with the treasure? It’s nice to see the WSJ not only recognizing the value of Fannie and Freddie referring to them as “treasure” was quite a switch for them.
Now for the letters, The first of which was delivered by Richard Epstein. I highly suggest our readers read the other articles he has written. He is one of the only sources that has proven to have a very keen grasp of the truth regarding our cause.
“Regarding the article “White Flag for Fannie Investors” (Heard on the Street, Aug. 12), the title should be “Time for the U.S. Government to Surrender.” I disagree with the thrust of the article, which is that the decline in the last quarter’s payout from Fannie Mae FNMA -0.52% and Freddie Mac FMCC -0.52% has shrunk the difference between the 10% dividend payable under the 2008 Senior Preferred Stock Purchase Agreement and the larger sums owing under the dividend sweep required by the 2012 Third Amendment.
First, one-quarter doesn’t resolve the valuation issue. It is the long-term prospects that determine how much money is at stake. Second, if that financial difference turns out to be as small as the article suggests, the government has no need to put forward a blizzard of dubious objections to excuse the Federal Housing Finance Agency from its clear statutory mandate, as conservator, to facilitate the orderly resumption of private market funding or capital market access for Fannie and Freddie. The government should surrender not because the stakes are low, but because it is wrong on the merits. The legal question involves the rule of law and the willingness to honor contracts. Get that right and the money can take care of itself.” Richard A. Epstein
The second is by Ken Blackwell our readers will remember we recently featured Ken in another piece when he became one of the first conservatives in the country to honor his principals and standup against the governments brazen theft of Fannie and Freddies profits. He does so again here. Ken like all conservatives disagrees with Fannie and Freddies business model, but he does the right thing by standing up for the rule of law.
“In 2008, the Treasury lured private investors into Fannie and Freddie, at an extremely risky moment, with the promise of a return if the entities returned to profitability. Once they started to generate a profit, the Treasury, with the stroke of a pen, changed the rules of the game and decided that all profits should go to the government’s coffers. Such a theft of private property sends the wrong message to potential investors. If the government can turn around and deny companies the right to benefit from the risk they took, then who will invest in housing finance? This sends a terrible message to investors throughout the entire economy at a time when we are trying to move beyond a weak recovery.
The debate shouldn’t be about the size of those profits, but about the very principles at stake which underline our economy—protection of property rights, keeping our word to investors and not changing the rules in the middle of the game.” Ken Blackwell
In response to Carneys now infamously bizarre article I just want to clarify for our readers that when the sweep is overturned it will lead to the immediate collapse of the governments entire house of cards that they have built surrounding Fannie and Freddie. Judge Sweeney has already showed her hand by focusing on the fact that the conservatorship must end. Carney exhibited the utmost worst style of Journalism where one ignores the truth to promote their own failed agenda.But then again isn’t that a requirement to work for Murdoch’s Journal? It is also important to note that no writers at the Journal have written anything that does anything, but co-signs our governments brazen theft.
Now as enjoyable as it is dismantling our attackers feeble and misguided lies I think it’s time we get back on the offensive.You rarely score points on defense. I want to call attention to an interesting development that has slipped through the cracks. It was vigorously reported that Goldman Sachs was nearing a settlement with the U.S. government just as Bank of America did today. Well surprise, Goldman did not settle but chose instead to continue on towards a jury trial.This is putting a real damper on the governments attempt to sweep the whole matter regarding the big banks dumping toxic MBS onto Fannie and Freddie under the carpet. Remember the government stated in its suits that a number of banks including Goldman misrepresented more than $180 billion in toxic subprime MBS that played a huge role in sending Fannie and Freddie into conservatorship. The government now has the impossibly awkward job of both falsely portraying Fannie and Freddie as the villains of the financial crisis and truthfully as the victims. Now we all know that Goldman is guilty but what an impeccable twist of fate. We will be following this case close as it is sure to surprise. Keep the faith