I want to share a nice breakdown provided to us on the Perry Injunction decision. This was done by Gary Eckman, who hosts http://fanniemaeshareholder.blogspot.com . Gary and I spoke prior to me coming to DC, and he agreed to cover our blog for a few days. Gary thank you so much you out did yourself with this analysis.

“Throwing out the case: Perry Injunction 38% drop in price

First How the conservatorship came to be:

12 U.S. Code § 4617 – Authority over critically undercapitalized regulated entities
(I) Consent
The regulated entity, by resolution of its board of directors or its shareholders or members, consents to the appointment.
The FHFA and treasury went to the boards of Fannie and Freddie and gave them freedom from prosecution and with threats demanded they comply with CONSENT. Demand of consent is DURESS.
Legal definition of duress:
Unlawful pressure exerted upon a person to coerce that person to perform an act that he or she ordinarily would not perform.
Duress also encompasses the same harm, threats, or restraint exercised upon the affected individual’s spouse, child, or parent.
Duress is distinguishable from Undue Influence, a concept employed in the law of wills, in that the latter term involves awrongdoer who is a fiduciary, one who occupies a position of trust and confidence in regard to the testator, the creator of thewill.
Duress also exists where a person is coerced by the wrongful conduct or threat of another to enter into a contract undercircumstances that deprive the individual of his or her volition.
As a defense to a civil action, the federal Rules of Civil Procedure require that duress be pleaded affirmatively.
Except with respect to Homicide, a person who is compelled to commit a crime by an unlawful threat from another person toinjure him, her, or a third person, will generally not be held responsible for its commission.

To start the entire conservatorship should be challenged on this alone.!!!!!!!

(2) Discretionary appointment
The Agency may, at the discretion of the Director, be appointed conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity.
May again is mandatory. Choice conservator OR receiver. Has to pick one.
Then choose to reorganize, rehabilitate OR wind up. OR is important to the phrasing.
Wind up goes strictly with receiver as stated by the OR in the first choice.
(D) Receivership terminates conservatorship
The appointment of the Agency as receiver of a regulated entity under this section shall immediately terminate any conservatorship established for the regulated entity under this chapter.
The FHFA cannot be both. It is either conservator or receiver.
The FHFA chose conservator as we are not in receivership. As the FHFA has said.
(D) Powers as conservator
The Agency may, as conservator, take such action as may be—
(i) necessary to put the regulated entity in a sound and solvent condition; and
(ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.

The Term MAY
Legal definition:
the word “may” must be read in context to determine if it means an act is optional or mandatory
May in HERA is used as a mandatory when read. The Agency May…..

(D) Limitation on judicial review
Except as otherwise provided in this subsection, no court shall have jurisdiction over—
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets or charter of any regulated entity for which the Agency has been appointed receiver; or
(ii) any claim relating to any act or omission of such regulated entity or the Agency as receiver.
Only applies to Receivers NOT conservators. No where in HERA is the conservator protected from judicial review.
(E) Disposition of assets
In exercising any right, power, privilege, or authority as conservator or receiver in connection with any sale or disposition of assets of a regulated entity for which the Agency has been appointed conservator or receiver, the Agency shall conduct its operations in a manner which—
(i) maximizes the net present value return from the sale or disposition of such assets;
(ii) minimizes the amount of any loss realized in the resolution of cases; and
(iii) ensures adequate competition and fair and consistent treatment of offerors.

FHFA is clearly not doing this as CASH is an asset. The Agency Shall means it HAS to do.

n. a guardian and protector appointed by a judge to protect and manage the financial affairs and/or the person’s daily life. The conservator may be only of the “estate” (meaning financial affairs) The conservator is required to make regular accountings which must be approved by the court. The conservator may be removed by order of the court if no longer needed, upon the petition of the conservatee or for failure to perform his/her duties.
The conservatee is the shareholders or the corporation.

(f) Limitation on court action
Except as provided in this section or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver.

This is a big one, NO Court MAY restrain the conservator.

Unless he is NOT within his statutory rights as conservator. May is questionable in the above (f) limitation. May could be an option. The Legislative branch cannot Add (f) to every law and make it not open to the courts. There are 3 branches of government, All are equal and cannot be written out of existence by the legislative branch. This (f) is unconstitutional in itself. Lamberth points to this on his dismissal. He is a judge, His job is to interpret the law according to the constitution of the United States. Including the laws validness.

Preferred senior stock agreement was enacted by FHFA and Treasury it was the FIRST agreement known as the PSPA. This is when the 80% warrants were given away along with the first 1 billion dollars in liquidation preference for each corporation.

This entitled Treasury to dividends equivalent to 10% of Treasury’s existing liquidation preference, paid quarterly


Now to LAMBERTH and his ruling to dismiss the case against the FHFA and treasury.
One by One.

Page 10
“Federal courts are of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994). Under Rule 12(b)(1), the plaintiffs bear the burden of demonstrating
that subject matter jurisdiction exists.

Perry must prove the case is under the jurisdiction of the District Court (fed)

rule 12(b)(1) and 12(b)(6)
a party may assert the following defenses by motion:
(1) lack of subject-matter jurisdiction;
(6) failure to state a claim upon which relief can be granted

A. HERA Bars the Plaintiffs’ Prayers for Declaratory, Injunctive, and Other
Equitable Relief against FHFA and Treasury
By this Court’s calculation, twenty-four of the thirty-one substantive prayers for relief10
requested by the plaintiffs across their five complaints seek declaratory, injunctive, or other
equitable relief against FHFA or Treasury. See also FHFA Mot. at 22 n.13. Such relief runs up
against HERA’s anti-injunction provision, which declares that “no court may take any action to
restrain or affect the exercise of powers or functions of [FHFA] as a conservator or a receiver.”

12 U.S.C. § 4617(f).

I explained all this above. We know this is not true and this is not what HERA says, This is also where the court needs to step in and say: Im the court, equal. No law can be written to eliminate the court.

While case law adjudicating HERA-related disputes is generally sparse, “[c]ourts
interpreting the scope of [§] 4617(f) have relied on decisions addressing the nearly identical
jurisdictional bar applicable to the Federal Deposit Insurance Corporation (‘FDIC’)

conservatorships contained in 12 U.S.C. § 1821(j).”1

So i went and got it!

(j) Limitation on court action
Except as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or functions of the Corporation as a conservator or a receiver.
vs HERA:
(f) Limitation on court action
Except as provided in this section or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver.
Notice the FDIC has an exception and is not nearly Identical!!!
Thus, the question for this Court is whether
the plaintiffs sufficiently plead that FHFA acted beyond the scope of its statutory “powers or
functions . . . as a conservator” when the agency executed the Third Amendment to the PSPAs
with Treasury.
12 U.S.C. § 4617(f) (emphasis added). Consequently, it does
appear that § 4617(f) bars all declaratory, injunctive, or other equitable relief stemming from
claims of arbitrary and capricious decisionmaking.
Again I state MAY is up for debate and since unlike FDIC there is no exception, Therefore Unconstitutional under 3 equal branches of government. Also unconstitutional under what would appear to be a forth branch of government with No check and balance by Judicial System.
Thus, the two counts in each of the Perry, Fairholme, and Arrowood Complaints, and related prayers for relief,that claim APA violations for arbitrary and capricious conduct by both Treasury and FHFA are hereby dismissed pursuant to Rule 12(b)(1).
12b1 is used. for tossing out first count. Lack of jurisdiction for the court.
This means the court thinks it cannot continue with trial based on HERA 4617(f) No court MAY take action. again MAY has to be read in Entirety to determine if MAY is a question. Let alone the constitutionality of (f). What else is amazing is HERA protects the conservator from courts, But Lamberth lets Treasury off hook also, even though Treasury does not carry such protection under HERA, only the FHFA has this. Amazing.
Section 4617(f) Applies to Treasury’s Authority under HERA
However, the defendants’
argument that granting relief against the counterparty to a contract with FHFA would directly
restrain FHFA’s ability as a conservator vis-à-vis that contract is based on sound reasoning.
Additionally, when the counterparty to FHFA’s contract—Treasury—is also a
government entity operating based on authority derived from HERA
Here he gives a Blanket of HERA to all the deal with the conservator. This is not what (f) says. especially when the party to the contract with FHFA is directing the FHFA what to do. (f) is unconstitutional as is, Let alone moving that power over to treasury also is not what (f) says. The third amendment says give me all you profit and when you need money you dont have to pay. Well is it not convenient that the Treasury is also immune to judicial review as they are the ones getting the money. This according to Lamberth and his interpretation of (f)
Treasury’s Execution of the Third Amendment Does Not Constitute the
Purchase of New Securities in Contravention of HERA
Both claims are unpersuasive.
Lamberth claims the third amendment was not a new purchase. It is Illegal after 2009 for treasury to make purchases. Lamberth disagreed this was new purchace.
whereby Treasury doubled its funding cap to $200 billion for each GSE.
(at an amount that, in the end, totaled greater than $200 billion per GSE)
This net worth sweep represented a new formula of dividend compensation for a $200 billion-plus investment Treasury had already made
Lamberth is under the impression that each GSE needed $200 billion dollars. His last statement is just bizarre as we all know the total is 187 billion for both. Its like he has a bone to pick. NEW formula? yeah pay all your money. forever.
claim of breach of fiduciary duty against FHFA. The parties dispute whether the Fairholme plaintiffs’ fiduciary duty claim is direct
Treasury may have amended the
compensation structure of its investment in a way that plaintiffs find troubling, but doing so did
not violate the purchase authority sunset provision.
So he dismisses this claim that the Treasury purchased a new security.
FHFA Acted within Its Statutory Authority
The individual plaintiffs put forth a number of claims that FHFA violated HERA by
entering into the Third Amendment.17 These arguments concern both FHFA’s conduct and the
purported reasons for FHFA’s conduct—the what and the why, so to speak.
At bottom, the Third Amendment sweeps nearly all GSE profit dollars to Treasury.
The result for non-Treasury shareholders is virtually no likelihood of dividend payments (given the
lack of profits along with Treasury’s discretion to pay dividends, see, e.g. Treasury AR at 58
(Freddie Mac PSPA § 5.1)) and a decrease in the potential liquidation preference they would
receive if the company liquidated during a period of profitability. Both parties essentially admit
this same depiction in their briefs, biased adjectives aside. Looking past the financial
engineering involved in the PSPAs and subsequent amendments, the question for this Court,
simply, is whether the net worth sweep amendment represents conduct that exceeds FHFA’s
authority under HERA
Yet construing the allegations in a light most favorable to the plaintiffs, the Court finds that the
plaintiffs fail to demonstrate by a preponderance of the evidence—if at all—that FHFA’s
execution of the Third Amendment violated HERA
Here Lamberth says plaintiffs fail to prove by preponderance of the evidence that FHFA exceeded Hera when giving signing the third amendment and giving away all the profits to Treasury. But Lamberth does not read HERA. He cherry picks his parts he likes for this dismissal. First what evidence? When No discovery was done or allowed to transfer from Sweenys Claim court? Lamberth did not allow this, instead chose to dismiss the case.
(B) Operate the regulated entity
The Agency may, as conservator or receiver—
(iv) preserve and conserve the assets and property of the regulated entity
This time MAY is not an option. read in context. The Agency may….

FHFA’s Justifications for Executing the Third Amendment and,

Consequently, the Accompanying Administrative Record, Are Irrelevant

for § 4617(f) Analysis
Lamberth believes that (f) means no Judge shall have power of FHFA as conserator. That is not what it says, but that is what he reads.
Similarly, the individual plaintiffs argue that FHFA violated HERA by not producing the full
administrative record
the Court need not view the full administrative record to
determine whether the Third Amendment, in practice, exceeds the bounds of HERA
HERA’s jurisdictional bar would
render the anti-injunction provision hollow, disregarding Congress’ express intention to divest
the Court of jurisdiction to restrain FHFA’s “exercise of [its] powers or functions” under
HERA—i.e., how FHFA employs its powers or functions. See 12 U.S.C. § 4617(f). Therefore,
the Court will only consider FHFA’s actual conduct
Notwithstanding the plaintiffs’ perspective that the Third Amendment was
a “one-sided deal” favoring Treasury, the amendment was executed by two sophisticated parties,
and there is nothing in the pleadings or the administrative record provided by Treasury that hints
at coercion actionable under § 4617(a)(7)
This claim does
not pass muster under either Rule 12(b)(1) or Rule 12(b)(6).
And finally i get to the part I like. Lamberth says he does not need a complete Administrative record. Then in his same argument on why There is no proof of coercion he uses the lacking full record from the FHFA and the treasury which were requested by the Plaintiff just days earlier after the same parties failed to produce the blackrock papers showing the DTA had value and lots of it prior to the sweep. The lack of the full DISCOVERY in this case makes it impossible for Lamberth to determine coercion and makes it impossible to throw out under 12b1. The point Ill make is Lamberth wanted this out of his court. So he dismissed it on every count, but this particular one is a doozie. Entered just days before was the request for discovery from sweenys case. He actually did everyone a favor, by his ruling, sending this to the court of appeals, After that would be the supreme court. I do not think it would need to get past the court of appeals as there would be no need to take the FHFA to the supreme court. Anyway the appeals court comes to 3 judges now. Like a small version of supreme court. Most cases take a year to get through this court. Some faster, some slower.
This will not be missed that he cannot know if coercion existed without a complete record. Note treasury withheld the blackrock information on the first record it submitted as full. How can that be? Lack of disclosure to the court told Lamberth the govt has no respect for his court. So he did the unexpected. He dismissed it. With this little bit in it to be sure it is overturned. Another thing I find interesting is his sighting of 2 arguments for dismissal. 12b1 lack of jurisdiction for his court, And the what I believe is his knowing (f) is unconstitutional. He sent it to the higher court to deal with. As any ruling he may have would be put through the appeals court by the govt anyway. His dismissal takes it there that much quicker. Appeals court will rule. And there rule is final, unless they kick it back to the lower court. Then we proceed forward.

HERA Bars the Plaintiffs’ Derivative Claims against FHFA and Treasury
The class plaintiffs bring derivative claims against both FHFA and Treasury on behalf of
Fannie Mae and Freddie Mac.
An Exception to HERA’s Bar on Shareholder Derivative Claims Would
Contravene the Plain Language of the Statute
No it does not, but ill explain why with this.
A shareholder brought suit for the failure of Delta and the OTC for their failure in preventing the discrimination. The court ruled:
The court concluded that “[g]iven the nature and extent of the relationship between the FDIC and the OTS, . . . the FDIC cannot be expected to objectively pursue lawsuits against the OTS, even when it is in the best interest of the failing bank to do so.” Id. Therefore, it found that the “common-sense[ ] conflict of interest exception to the commands of FIRREA” established in First Hartford applied in this case, giving the shareholder plaintiff standing to sue.
Fairholme is suing both Treasury and FHFA, they are contesting the legality of enacting the 3rd amendment as well as its terms. All three of these are absent from the case above

It is a slippery slope for the
Court to poke holes in, or limit, the plain language of a statute, especially when, as here, the
plaintiffs have not asked the Court to weigh in on the statute’s constitutionality. Therefore, the
Court finds that HERA’s plain language bars shareholder derivative suits, without exception.
(i) all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity; and
Lambereth says slippery slope to interpret a statute? He is a judge, this is what they do. They dont just read it. This is true if the conservator is fulfilling his duty lawfully. Since The FDIC has this little line in theirs except at the request of the Board of Directors by regulation or order, They can be reviewed.
Since the plaintiff has not asked on the statutes constitutionality the court wont. HUH. YOUR A COURT. This is another very peculiar thing Lamberth has chose to do. Courts hold all laws up to the constitution and the law Lamberth is using to defeat this case he has a problem with its constitutionality but yet still chooses to dismiss on THIS charge.
Even If the Exception Applies, There Is No Conflict of Interest between
FHFA and Treasury
was not just based on the presence of two government entities, but
rather two sufficiently interrelated government agencies.
the FDIC and the OTS were “interrelated agencies with overlapping personnel,
structures, and responsibilities As the Delta Savings Court

so i found this:
Second, Delta Savings Bank, too, is inapposite. In that case, the Ninth Circuit applied the conflict-of-interest exception that was articulated in First Hartford, even though the conservator of the bank was not the agency that had allegedly harmed it, as was the case in First Hartford.
The court reasoned that the circumstances of Delta Savings Bank could “not [be] distinguish[ed] from First Hartford” because the OTS and the FDIC were so intertwined. 265 F.3d at 1022. In other words, the Ninth Circuit found that the two ostensibly separate agencies were so closely related that it was as if Delta Savings Bank were being operated by a single agency, the agency that harmed it, as in First Hartford.
Lamberth does not even try on this one to quote the reason why he writes this, but he did.
Furthermore, the Court understands that Treasury represented the only feasible entity—
public or private—capable of injecting sufficient liquidity into and serving as a backstop for the
GSEs within the short timeframe necessary to preserve their existence in September 2008. There
was no other investment partner at FHFA’s disposal
Courts, generally, should be wary of labeling a transaction with an investor of last resort as a
conflict of interest.33
Thus, the class plaintiffs’ derivative claims, on behalf of the GSEs, for breach of
fiduciary duty by FHFA and Treasury, are dismissed pursuant to Rule 12(b)(1) for lack of
note the 12b1 ruling again. lack of standing. Treasury was only one capable of loaning money and court should not label them, or THE TREASURY as having a conflict of interest. 4 years after the bailout? and 30 billion more back than they borrowed to the companies. pure profit.
The Plaintiffs’ Breach of Contract and Breach of the Implied Covenant of
Good Faith and Fair Dealing Claims for Monetary Damages Must Also Be
The Plaintiffs’ Liquidation Preference Claims Are Not Ripe
Given that the plaintiffs maintain no current right to a liquidation preference while the
GSEs are in conservatorship, the plaintiffs are no worse off today than they were before the
Third Amendment. Therefore, there is no hardship imposed on the plaintiffs by withholding
court consideration until this contingent right matures at the moment of liquidation.
the right to a liquidation preference can be adjudicated during the statutorily prescribed receivership
claims process
Here Lamberth says they are not ripe, and that in receivership they can be looked at again.
No loss he says.
FHFA’s power over the assets of
the GSEs surely includes the power to declare discretionary dividends from the surplus assets of
the GSEs.
Your a judge, look at the statute. DOES the FHFA have the power to do that and break contracts with preferred shareholders? Dont make a statement, tell where that power is derived to select who gets the dividend.
Without a contractual right to dividends, the plaintiffs cannot state a claim for breach of
contract specifically based on their alleged dividend entitlements
The claim goes like this, We will pay a dividend to us and only us, no matte what your contracts say. Thats it. Is there a law against that? I dont know says lamberth, Im only a judge?
The Class Plaintiffs Fail to Plead That the Third Amendment Is an
Unconstitutional Taking
Finally, the class plaintiffs claim that the Third Amendment effected an unconstitutional
taking of their alleged dividend entitlements and liquidation rights without just compensation.
U.S. Const. amend. V
The Jurisdictional Defect in the Class Plaintiffs’ Pleadings Is Not
Dispositive of Their Takings Claims
As an initial matter, the defendants argue that the class plaintiffs’ takings claims belong
in the Court of Federal Claims rather than in this Court.
the Court of Claims maintains exclusive jurisdiction over claims
against the United States that exceed $10,000
Basically he says, Get this out of my court. This is the wrong court. This is over 10,000 and this belongs in the federal claims court. Sweenys court. Where discovery is happening. Court of claims for the FIFTH.

There you have it. Best I could do.”

I apologize for the confusion on yesterday’s post. We misunderstood exactly what could and couldn’t be shared from one of our meetings.
There seems to be a great deal of confusion surrounding our cause once again. To see our opponents, declaring victory Based on Judge Lamberth’s ruling is delusionally premature. There is a lot of time left on the clock at this stage of the game, and anything can happen.
I am going to take everyone back to the three key components I laid out in my very first post.
“This is a very simple trade as it boils down to three key components 1) The courts 2) congress/white house and 3) the huge role Fannie and Freddie play in our economy. If you have any faith in the rule of law, you have to know that ultimately the courts will strike down at least parts of the current arrangement, the government has in place. To think such a divided congress will agree on a total reform of home financing, you have not been watching the news. Fannie and Freddie play a huge role in what amounts to 25 percent of our economy, and there is no way private capital can or be willing to fill their shoes. I will try to make time to give updates as this progresses. I would suggest that people do their own research as it is a pretty complicated situation as well as unprecedented in many ways.”

Just as I said in January and still today all of our answers can be found here. I would say the three components carry about equal weights. We could lose every legal case yet if congress didn’t pass any reform we will win by default.
I want to look briefly at the 33% legal component briefly as that is on everyone minds.We have always considered the perry injunction a long shot; the Fairholme lawsuit was where we had most of our legal hopes. Let’s say 70% Fairholme lawsuit 30% Perry injunction. When I apply this calculation, I find that the Perry Injunction comprised about 10 percent of our overall situation. The appeal was filed yesterday, so the perry injunction is not even over yet. On the other hand, we are looking incredibly well in Fairholme lawsuit.
So you see just how bizarre it was for our opponents to be declare victory after a ruling on what amounted to 10% of our situation. I will elaborate much deeper on this by Sunday night. There I will cover the political component and the huge role of Fannie component. I have learned some great things in DC; my clarity is fine-tuned. I will say that everything I have written concerning the coup is confirmed.
Keep the Faith!!

Edit 12:18 pm

Folks, I just want to add that if this were a baseball game we are probably in the 5-6th inning. We do have allies on our side, many more than most would imagine,each in their own way and on both sides of the aisle as well. I am not participating in this blog to win a popularity contest. I am here to make sure the truth is known. The articles I have read the last few days have been shocking. The lengths our opposition will go to lie and distort the truth is sickening. I am glad that Richard Epstein joined with me by declaring the Wall Street Journal is nothing more than a Soviet -Style propaganda machine. In his recent article he stated, “This morning, Judge Lamberth’s decision received a full-throated defense that reads as if it was published in Revolution Magazine, but which in fact appeared on the normally level-headed editorial page of the Wall Street Journal.”
Bravo Mr. Epstein, I know we have been trying to speak, and I hope this can happen in the next week.