A Scheme to Blow Up the Housing Mkt.

[kadee79]

Didn't work...awww shucks!

In 2016, a group of wealthy investors hatched a lawsuit to dislodge $124 billion from the United States treasury and transfer a chunk of the money to their own pockets. The investors attacked the Federal Housing Finance Agency, a powerful executive agency that regulates Fannie Mae and Freddie Mac. Their plan was to force a settlement that would enrich shareholders by transferring billions of dollars back to the mortgage giants and release them from government control.

It is difficult to overstate how badly this scheme backfired. On Wednesday, the Supreme Court affirmed the investors’ constitutional theory—then rejected their effort to claw back billions while deregulating the mortgage industry. In the process, they allowed President Joe Biden to appoint a new head of the FHFA, a progressive who will keep Fannie Mae and Freddie Mac funneling money to the government (instead of shareholders) indefinitely. The plaintiffs, in other words, did not just lose this case. They inadvertently defeated their ultimate objective, entrenching the very system they tried to topple.

The roots of Wednesday’s decision in Collins v. Yellen go back to the Great Recession. In 2008, as the U.S. housing market collapsed, Congress created the FHFA to regulate the mortgage industry. The agency placed Fannie Mae and Freddie Mac into a conservatorship. Under this arrangement, the government gave Fannie and Freddie billions in federal funds—basically, a bailout—and received some money in return. Specifically, under a 2012 deal with the FHFA, Fannie and Freddie sent quarterly payments consisting of nearly their entire net worth to the U.S. treasury.

Predictably, Fannie and Freddie’s investors were displeased with this deal. It forced the companies to hand the government about $124 billion more than they would have under previous arrangements. And it left nothing for the companies’ private shareholders, who sued to recoup the money that, in their view, should’ve gone to them in the first place. The shareholders alleged that the FHFA had an unconstitutional structure because it was led by a single director whom the president cannot fire without cause. This structure, they asserted, violates the constitutional separation of powers by depriving the president of control over the executive branch. And, they reasoned, the solution is to invalidate the agency’s actions—namely, the 2012 deal that sent $124 billion to the U.S. treasury.

This step would’ve set off a bomb in the housing market, throwing the mortgage industry into chaos while forcing the government to somehow unravel years of transactions amounting to billions of dollars. It may also have spurred the Biden administration to settle with the plaintiffs to stave off this disaster. The shareholders appeared eager to leverage a decision in their favor to end Fannie and Freddie’s conservatorship once and for all.

On Wednesday, the Supreme Court went in a very different direction. By a 7–2 vote, the court agreed that the FHFA director’s job protections violate the Constitution. This outcome was no surprise: Just last year, the court ruled that the president must be able to fire the head of a single-director federal agency; that decision dictated the result here. By an 8–1 vote, though, the court rejected the plaintiffs’ theory that the director’s actions are void because he is unconstitutionally shielded from removal. (Only Justice Neil Gorsuch sided with plaintiffs on this question.)

slate.com/news-and-politics/2021/06/collins-yellen-supreme-court-fhfa-backfire.html

[Tennesseer]

Oh, well!

[Tiny]

Doesn't this just put off their plans until 2024 when trump (or a different republican) take back the presidency when the Republican in charge can then fire and install their own person as the FHFA director?     

[Opti]

Jun 24, 2021 21:17:15 GMT -5 Tiny said:

Doesn't this just put off their plans until 2024 when trump (or a different republican) take back the presidency when the Republican in charge can then fire and install their own person as the FHFA director?     

   I haven't read the OP, but it sounds right to me.


BTW, is anyone else seeing the Miami-Dade High rise collapse? I've only seen some aftermath, but looks horrible.    One ten yr old boy rescued I think but not Mom yet?

I am really tired. 

[Tiny]

Jun 24, 2021 21:44:15 GMT -5 Opti said:

BTW, is anyone else seeing the Miami-Dade High rise collapse? I've only seen some aftermath, but looks horrible.    One ten yr old boy rescued I think but not Mom yet?

I am really tired. 

I've been watching it since this morning. The coverage looks and feels different than usual for something as sensational as this as in - instead of a steady stream of "new" info or conjecture or interviews with sobbing friends and relatives - it's just been repeats of the same info - sometimes just re-arranged or presented a new way. I'm think it might be because wealthy and or politically connected people may have died in the disaster. They get more privacy even in death than regular joes.

There were  hints that they had found survivors (or maybe someone dead) - but then I couldn't find that info again.   

Should probably start a Current News thread...  

ADDED:  it's been 24 hours and the news coverage is providing a wider range of info.  Just took some time, I needed to be patient. 

[Tiny]

And Back to the Topic: 

www.msn.com/en-us/money/markets/white-house-replaces-regulator-overseeing-u-s-mortgage-giants-following-supreme-court-ruling/ar-AALnr3V

The Biden administration moved Mark Calabria, a Trump appointee and libertarian economist, out of the job. On Wednesday night, the White House appointed Sandra L. Thompson as the agency’s acting director.

“Much work remains,” Mr. Calabria wrote. “When the housing markets experience a significant downturn, Fannie Mae and Freddie Mac will fail at their current capital levels. I wish my successor all the best in fixing the remaining flaws of the housing finance system in order to preserve homeownership opportunities for all Americans. 

I'm not sure how removing the conservatorship from Freddie/Fannie would help in a downturn...
 
Aren't Freddie/Fannie kind of a 'cash cow' for the Federal government right now?  

[kadee79]

Jun 24, 2021 21:55:08 GMT -5 Tiny said:

Jun 24, 2021 21:44:15 GMT -5 Opti said:

BTW, is anyone else seeing the Miami-Dade High rise collapse? I've only seen some aftermath, but looks horrible.    One ten yr old boy rescued I think but not Mom yet?

I am really tired. 

I've been watching it since this morning. The coverage looks and feels different than usual for something as sensational as this as in - instead of a steady stream of "new" info or conjecture or interviews with sobbing friends and relatives - it's just been repeats of the same info - sometimes just re-arranged or presented a new way. I'm think it might be because wealthy and or politically connected people may have died in the disaster. They get more privacy even in death than regular joes.

There were  hints that they had found survivors (or maybe someone dead) - but then I couldn't find that info again.   

Should probably start a Current News thread...  

ADDED:  it's been 24 hours and the news coverage is providing a wider range of info.  Just took some time, I needed to be patient. 

What I read yesterday was that a lot of the missing were foreign tourist...from several different countries.  That might be why there isn't so much coverage on them...they don't have anyone else here & the info isn't available like it would be on US citizens.