Todays article regarding Fannie Mae by John Carney in the WSJ is quite possibly one of the most bizarre and misleading pieces of “financial journalism” I have ever seen. This story began Friday when John Carney gleefully reported Friday evening on Twitter about a ruling in a Fannie Mae derivatives case that he claimed posed dire implications for the Fairholme lawsuit. We immediately analyzed the ruling and concluded Johns claims were laughable.We let our readers know that there was absolutely no connection between the derivatives case and ours. Trey Garrison got hold of Johns bogus claims and published a piece Monday morning once again claiming dire implications for Fairholmes lawsuit. Trey retracted his article after speaking to Tim Pagliara from Investors Unite. Trey learned “Friday’s ruling by Judge Jackson is irrelevant to the core claims in other shareholder lawsuits — namely, that Treasury violated HERA by wiping out shareholders with a net worth sweep,” Pagliara said. “Shareholders will prevail in court because Treasury exceeded its statutory authority by enacting the sweep.”
John also had a conversation on Twitter with a corporate lawyer who informed him “No connection. This case is a narrow ruling on a contract. If Treasury directed FHFA to enter the sweep, that’s different.”
In spite of all the evidence to the contrary, John forged on, and the Wall Street Journal once again abandoned all journalistic integrity and published Johns failed theory Monday afternoon.
John states, “That is where Friday’s decision by Judge Amy Berman Jackson of the federal district court in Washington becomes relevant. She ruled the Treasury and FHFA weren’t so closely interconnected to allow the plaintiff, an investor, to overcome the general rule that only the conservator can sue on behalf of Fannie Mae. The lawsuits filed by Fairholme, Perry and Pershing may turn on a similar issue: claims the FHFA lacked independence when it made the profit-sweep deal and that Treasury was essentially directing the actions of the FHFA. If judges in those cases also take Judge Jackson’s position, the government will have an easier time defending the terms of the 2012 deal.”
John seems to suspend all reason in making this bizarre conclusion.First of all the FHFA has been granted permission to substitute for Fannie in numerous other derivatives suits for similar reasons, this was in no way a landmark decision. John is correct when he states that Fairholme: “claims the FHFA lacked independence when it made the profit-sweep deal and that Treasury was essentially directing the actions of the FHFA.” But to make the outrageous claim that this ruling has any bearing on that is the height of journalistic deception.
Now why would John pursue such an obviously false and absurd claim? My first assumption as many would guess was that it was just another reckless attempt to blindly back the U.S. government and bash the shareholders as both he and the Wall Street Journal have so often done. But I sensed this time it was different. This time I felt there may be additional motives. John believe it or not has been a strong advocate in repealing insider trading laws. John actually believes that insider trading is good. One of his heroes is none other than convicted felon and securities fraud king Mike Milken. Why would one risk the damage that such a flawed article could do to their reputation as a journalist? John you wouldn’t possibly stand to gain by causing the share price of Fannie and Freddie to drop would you? I spoke with someone who has extensive experience in the prosecution of securities fraud, and they agreed that for a financial journalist/corporate lawyer to publish such an obvious false claim raises some very serious questions.They noted that it was not just that he published it but it was how he presented it. He knows that the majority of Fannie shareholders can not grasp the complicated and overlapping legalities very well. He twisted the innocent truth in the ruling in such a way that it would create maximum panic in average investors.
In closing I just want to say that I think John will really enjoy my next major post, it concerns something he seems very concerned about. It has to do with to just what degree was treasury calling the shots at the FHFA.John your concerns are very well founded. Keep the Faith!