We have a lot of ground to cover tonight we have seen a flood of critical developments the last few days. We will begin with yesterday’s status conference in the Fairholme lawsuit.
As we expected, Judge Sweeney was not happy with the government for defying her orders.She rewarded their gamesmanship yesterday by informing them that although she has not yet written the order she will not be granting their motion to stop discovery. This was a big victory that the government left her no choice but to grant us.
Doctor/Judge Sweeney confirmed her prior schizophrenia diagnosis of the government as they once again tried to claim that the FHFA was both not part of the government and part of the government. The FHFA seems to switch roles magically when it is most beneficial to their current argument. The following was shared with us by someone who was present yesterday:

“Also, as a side note, Sweeney gave the government a little bit of a black eye in an exchange about depositions for Fannie & Freddie. Apparently, Plaintiffs have requested information from Fannie & Freddie, and they’ve complied — so they’re going to move forward on depositions w/ the CEOs. (It’s the depositions for Treasury & FHFA that will have to wait until after the discovery.) In any case, the Government made some comment about that, and Sweeney interrupted to say that she was confused as to why Justice is objecting on behalf of private entities given that their entire case is premised on the belief that when the GSEs were put into conservatorship, FHFA was no longer acting as the government. I nearly fell out of my chair with laughter.”

Apparently numerous parties have attempted to contact Judge Sweeney regarding our case. We want to stress to everyone that under no circumstances should you ever attempt to contact Judge Sweeney. If you feel as if you have information of any kind that would be beneficial to the case, please email us and we will ensure it get’s to the appropriate attorneys.

Now for our headline story: the statement made by Senator Shelby today on Bloomberg.

Video is below (GSE discussion starts at 5:00). Shelby actually said he would like to get Fannie and Freddie up and running on their own. Mark Calabria reminded us that the 2005 Shelby GSE reform bill did not make any attempt to kill the GSEs, just to give them a tough regulator who would impose strong capital standards.


This is the exchange:

Peter Cook: What about Fannie Mae and Freddie Mac? What’s your sense now about whether or not there is the political will, the ability to wind them down in this Congress?

Chairman Shelby: We’ll address that, we’ll see how far we can go. We’ll need bipartisan support in the Senate to do it. But, I don’t want a bill just for the sake of a bill. I’m not interested in any bill with explicit guarantees. I would like to get Fannie and Freddie up and running on their own without the government help. Is that possible? We don’t know. It’s a big bipartisan lift, that’s what we’re here for.

Politically Shelby’s proposal will never fly but the power in this is his wish “to get Fannie and Freddie up and running again”. Bloomberg was just dying to get another “wind down” story out, boy were they surprised.

Today we saw a tag team of sorts by Senator Shelby and his former aide Mark Calabria with the release of the Calabria/Krimminger paper entitled “The Conservatorships of Fannie Mae and Freddie Mac: Actions Violate HERA and Established Insolvency Principles”.
Mark Calabria and Mike Krimminger both were very involved in the crafting of HERA and make it clear that the seemingly “endless” conservatorship was never intended. Also, the 3rd amendment sweep violates not only HERA but the very foundations of American law, to stay on the course they are on would severely undermine Americas credibility worldwide.Folks, Mark Calabria, is from the CATO Institute. His opinions carry a lot of weight in Republican circles. Although, like many Republicans, Mark is vehemently opposed to the model of the GSEs, he understands that the rule of law is far more important than who backs American mortgages.This is a great excerpt from the paper:

“In short, HERA requires that FHFA as conservator return the Companies to “a sound and solvent condition” and act to carry on the business to “preserve and conserve the assets and property” of the Companies. Unfortunately, through the Third Amendment, Treasury and FHFA have expressly rejected complying with these requirements, as confirmed in testimony by Director Watt of FHFA.123 That these continuing actions violate HERA’s explicit requirements is demonstrated by the long-standing practices of the FDIC under the virtually identical provisions of the FDIA and of the principles underlying other U.S. and international insolvency frameworks. This is important to the stakeholders in Fannie Mae and Freddie Mac, of course. However, it is perhaps more important to the future of public policy and the government role in future insolvency proceedings. If Treasury and FHFA can conduct the conservatorships of the Companies to strip out any value and prevent the restoration of regulatory and market capital despite their obligations under HERA, this manipulation of the process will dramatically affect public confidence in the fairness and predictability of government’s participation in insolvency proceedings. These unprecedented deviations from settled insolvency practices and creditor protections undercut one of the critical foundations of a market economy, and could call into question the reliability of the government as a resolution authority. It is essential that HERA be enforced and that Treasury and FHFA comply with their duties. Fair and predictably applied insolvency rules allow investors, creditors and even consumers to judge the risks of investing in, doing business with, or buying products or services from a company. Without public confidence in this process, a critical foundation of our market economy will be lost.”

This paper will be incredibly useful as we move forward.Again I commend Mark Calabria for putting his more petty ideological opinions aside to honor his core conservative values by standing up for the rule of law.
Krimminger-Calabria-HERA-White-Paper-Jan-29 2

Since we have emerged as the number one source for the truth in this great debate, it has been advised that we curtail calling attention to those writers who choose to perpetuate lies. To dignify their work by giving them the massive amount attention a mention here brings is unproductive. We have largely shifted our focus to primarily exposing the lies of our elected leaders. Recently I made the decision to expose the lies of Peter Wallison because of the influence he holds over several lawmakers.
Peter is not happy with our actions as you can see by his article on the Daily Caller today:

I will now address Peter and his outrageous new claims in an open letter here:

Mr. Wallison this blog is not the result or work of one person. I am part an anonymous,grass roots, loosely organized contingent of patriots who are committed to truth and justice. Some have risked quite a bit to ensure that the truth is not lost in this debate. We are far more powerful than both you and AEI because the truth always triumphs over lies.

In your desperate quest to try and sell more books I note you tried to frame this as a battle of right vs. left. You were not attacked by the left Peter you were exposed by the truth. We are not affiliated with any political party and since this blog has begun we have been accused of being, libertarian, left wing and a right wing Trojan horse. I know in your ideological world it is impossible to believe that anyone could solely be committed to the truth. It is obvious the truth plays no role in your world for to you the ends justifies the means period. Your book was so detached from the cold hard facts it begs the question, at what point in your writing career did you come to believe that “Soviet Style” propaganda would benefit America?

You claim “None of these reviews showed any familiarity with the book, or contradicted the extensive data that shows the 2008 financial crisis was caused by the government’s housing policies – and not, as the political Left has asserted, by insufficient regulation of private sector financial firms.”
This is not true Peter, in the post of mine that you linked I completely contradicted the “data” that is in your book. Many of the reviews contradict you as well.Rather than try and address our claims you chose to try and whip this up into a delusional right vs. left conspiracy.Ironically Peter you chose to do exactly what you condemn in your article.

You stated : “If we can’t have a civil discussion about an important public issue we are doomed to a kind of civil cold war, and maybe something worse.”
Over the last several weeks, I have sent messages to AEI challenging you to a debate that have never been answered. So Peter once again I will challenge you to debate the facts. Will you accept or will you choose to continue to lurk in the shadows of deceit? We have both made some pretty bold claims, let’s see who is man enough to stand publicly and defend them.

Keep the Faith