Comments on: "What Would a Fannie/Freddie Conservatorship Look Like?" http://www.nakedcapitalism.com/2008/07/what-would-fanniefreddie.html Sun, 22 Nov 2009 22:11:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/07/what-would-fanniefreddie.html#comment-11312 Anonymous Mon, 14 Jul 2008 14:04:00 +0000 http://www.nakedcapitalism.com/2008/07/what-would-a-fanniefreddie-conservatorship-look-like/#comment-11312 If one GSE goes into Conservatorship the other will follow. Then more than 90% of mortgages originated in the US would reside in the hands of the gov't. Socialized Mortgage Debt. If one GSE goes into Conservatorship the other will follow. Then more than 90% of mortgages originated in the US would reside in the hands of the gov’t. Socialized Mortgage Debt.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/what-would-fanniefreddie.html#comment-11243 Anonymous Sun, 13 Jul 2008 18:30:00 +0000 http://www.nakedcapitalism.com/2008/07/what-would-a-fanniefreddie-conservatorship-look-like/#comment-11243 What amuses me is that fannie and freddie are going to split 15 billion. Wasn't it countrywide that onlyh bought about 90 to 120 days with 10 billion?<br/><br/>This is a very tiny band-aid for a very large and growing wound. What amuses me is that fannie and freddie are going to split 15 billion. Wasn’t it countrywide that onlyh bought about 90 to 120 days with 10 billion?

This is a very tiny band-aid for a very large and growing wound.

]]> By: Steve http://www.nakedcapitalism.com/2008/07/what-would-fanniefreddie.html#comment-11206 Steve Sun, 13 Jul 2008 08:22:00 +0000 http://www.nakedcapitalism.com/2008/07/what-would-a-fanniefreddie-conservatorship-look-like/#comment-11206 I think the 45 day business is a bit confused and misleading. If a GSE is placed into conservatorship, <em> and the board of the GSE does not agree with the appointment </em>, its board or shareholders have a window of 20 days in which to contest the appointment of the conservator. (For failed banks, there is an automatic stay of 30 days before the appointment of a receiver or conservator can be contested.) The conservator of a GSE can obtain a 45 day stay of <em> any action </em>. FDIC as Receiver or Conservator has <em> no </em> special powers to automatically stay litigation against it (as Receiver or Conservator). And it doesn't have to finish its job in 45 days, either (no idea where that one came from).<br/><br/>In practice, with FDIC, shareholders do file suit to challenge the chartering authority's determination of insolvency, but these cases drag on for years, and I know of no case where a court has intervened in the operation of a bank receivership (or where the shareholders have prevailed against the determination of insolvency).<br/><br/>So, yeah, the shareholders of a GSE could file suit, but it would take forever and be a tough climb; meanwhile, the courts are unlikely to inject themselves into the conservator's operations.<br/><br/>As a final note, the capital ratios that <em> compel </em> the appointment of a conservator for a GSE are clearly stated in the law, and that would make a suit unviable unless somebody at OFHEO fat fingers a spreadsheet. And of course nobody at OFHEO is making that calculation, anyway. I think the 45 day business is a bit confused and misleading. If a GSE is placed into conservatorship, and the board of the GSE does not agree with the appointment , its board or shareholders have a window of 20 days in which to contest the appointment of the conservator. (For failed banks, there is an automatic stay of 30 days before the appointment of a receiver or conservator can be contested.) The conservator of a GSE can obtain a 45 day stay of any action . FDIC as Receiver or Conservator has no special powers to automatically stay litigation against it (as Receiver or Conservator). And it doesn’t have to finish its job in 45 days, either (no idea where that one came from).

In practice, with FDIC, shareholders do file suit to challenge the chartering authority’s determination of insolvency, but these cases drag on for years, and I know of no case where a court has intervened in the operation of a bank receivership (or where the shareholders have prevailed against the determination of insolvency).

So, yeah, the shareholders of a GSE could file suit, but it would take forever and be a tough climb; meanwhile, the courts are unlikely to inject themselves into the conservator’s operations.

As a final note, the capital ratios that compel the appointment of a conservator for a GSE are clearly stated in the law, and that would make a suit unviable unless somebody at OFHEO fat fingers a spreadsheet. And of course nobody at OFHEO is making that calculation, anyway.

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