Thread by @FnFGateFan

This is it #Fanniegate Fans

Closing Arguments

Hamish Hume for the Plaintiffs
First, I want to thank you and I'm sure Mr Stern will agree, your lives have been disrupted and I know at times it seems messy and confusing and boring, and I know how hard you've worked, we've seen you taking notes, and this is how our system works

we've had a disagreement for a very long time, and its messy, but now we get a chance to summarize and hopefully clear up all the confusion. So I'd like to begin with what the question is, because that is critical and its this,

By agreeing to the Net. Worth. Sweep... on Aug. 17

2012, did the defendants exercise their power in a way that was Arbitrary...and Unreasonable...thereby destroying shareholders Rights...to receive potential dividends in the future.

That's the question, let me say it again. [repeats]

And the Reason that is the question, is

that shareholders have a Contract with the defendants, and the Contract has what's called an "implied covenant... of Good Faith... and Fair Dealing" and that means that when the contract gives discretion, that means Power, they cannot exercise that power Arbitrarily or

Unreasonably. The legal test is either OR, you'll hear me say it was both, but the test is Either One. So this goes back to what I said at the very beginning, that this Case is about what happens when Power People exercise their power in way that is Arbitrary, or Unreasonable,

and shows utter disregard for the Harm that it causes other people...and whether sometimes there can be a remedy...and you may think that happens all the time (hopefully not too often) but the reason there can be a remedy in this case is that shareholders have a contract.

Now let me say a little bit about what the case is Not about. It's not about whether Cship was a good idea in 2008. It's not about if the original deal was fair. It's not about whether FHFA has the power to act in the public interests, we agree with that. And it's not about

maximizing shareholder value, we actually agree the FHFA has the power to act in the public interest and we agree they didn't have to maximize shareholder value.
But they couldn't act unreasonably.
This case also isn't about public versus private interests. It's about powerful

people who use their power with No Regard for harm and when there is no good reason.

Now at some level, I should be able to finish in 5 minutes and sit down (they'd be pretty mad if I did that). FnF were in Cship, shareholders have a contract, there's no guarantee of

dividends we agree, and FnF enter the PSPAs, Tsy gets the warrants, the 10% on draws, the $1B, all of that. Tsy get's practically everything. If FnF get better, they own 80%, and All the private shareholders have...is Hope...a contractually based hope, that IF they recovered

and IF things turned around, they might get dividends again one day. Then things in 2012 start to turn the corner, and Suddenly the deal changes, NWS, 3rd amendment, and it changes, from 10%, to 100%. That Destroyed our hope, Erased the contract, because we could never get

dividends. The fact is this...there's never been anything Like this before...its Unprecedented...a NWS has never happened before, its not a Thing. You also saw what happened, they send $385B...$150B More than the 10%...and it's Still going on.

You also saw no consideration,

No memos, No studies....it just happened. You didn't see a Single memo, what are the Alternatives? Is this going to accomplish our goals? So that should answer the first question.
[shows the jury decision sheet selecting yes to the questions]
So what's the Reason the Ds give?

Mario Ugoletti, gave a deposition, saying the reason was the circular draws, borrowing to pay the draw, and that at the end of 2012 there would be cap of around $278B and there was Grave Danger that the $278B would fall, so much that the people who bought the bonds would panic.

And that would be bad if they panicked. But there's No Evidence that they were going to panic, and there were No Documents at FHFA saying they were concerned about that, and No Documents studying "when will the markets panic?". They didn't even analyze it

But there IS Evidence

of the Opposite.
June 25, 2012 email, Miller to Stegman

"The Secretary [Geithner] provided an overview of meeting with DeMarco," acting director of FHFA and he's the sole decision maker for the NWS.

"[Ever] Since the Secretary raised the potential of a principal reduction (PR)

covenant, DeMarco [suddenly, ie. in response] no longer sees the urgency of amending the PSPAs."

Paraphrasing, it says DeMarco gave two reasons for not needed PSPAs, 1. GSEs will make large revenues enabling them to pay the 10% div well into the future, and 2. [ran out of time]

Hamish: That doc wins the case for the Plaintiffs hands down, if you look at no other doc, please read that doc.

You saw Dharan, and Ds tried to attack his credibility saying "oh, you relied on a draft", because they wanted to discredit the Benson projections, because they were

shown to FHFA, and shown to the board, and you heard the CEO say that when they showed something to the board it was Reliable, and Credible, and Reasonable. And they didn't throw the projections out, they showed them to Tsy on Aug. 8, right before the NWS. They showed no

serious erosion problem You saw these slides Dharan prepared, this is what they thought the cap would be [$275B] and the Benson projections barely impact them at all. Sometimes they projected more than the 10% and sometimes less, but they were always making profits, never having

to draw down the whole 10%. Look at all the versions, this one was shown to the Board, this one to FHFA, this one to Tsy, these don't show a problem at all, especially not one you would solve w/ a NWS, something completely unprecedented.

Now, let me tell you what you won't see,

you won't see "let's study this problem", "let's get Ms. Tagoe and all these other smart people to study this problem". They didn't do that. Because this wasn't the reason. In fact, it was the opposite. Here's a new document, it just came into evidence, a July 3, 2012 email

"TFG [Geithner] testifying on 25th/26th [before congress] housing will be a topic, we need you to review the Q&A", they write back "See attached Q&A"

Q: Has the admin. considered modifying the PSPAs before the caps come back?

A: 1) Under the conservative baseline stress test forecast, both FnF will have positive net income in 2013, Tsy not expected to need to fund any operating losses.
2) To the extent funding may be necessary, FHFA could consider not declaring dividends [so knew about PIK option]

3) We expect the 275B will provide a substantial cushion and give the market confidence.

Based on all of this evidence, we should already win. The objective facts inform reasonable expectations. That's why witnesses couldn't say what they expected, the wouldn't say -
Ds: Object

Hamish: Not complaining, I'm just explaining, here's the objective fact. 33B paid in. 5B back in dividends. Now this isn't a loan, they weren't expecting to get paid back, but in fact it was better than a load, they were supposed to keep getting dividends, and in 2007-08

which is stipulated that's when the GFC began, private shareholders in 07-08 paid in 19B and only got 1B in dividends. Now, I want to be clear, this isn't our damages, I'm just giving context to the expectation. For decades congress had created FnF to help support the american

dream and homeownership. And Shareholders supported that mission. DeMarco testified he was at FHFA and they wanted FnF to raise capital, and they went to shareholders for money. Now, we don't claim to be angels, we weren't doing it Just to support the mission, people invest in

these stocks to receive dividends. The FHFA fact sheet set up their expectations, Ds try to say we were trying to hide something on the fact sheet, I hope you read every word of this document, I'll be happy if you read it 10 times.

Q: What is Cship
A: S&S

NWS was completely the opposite, it took away soundness.

Q: What are the goals?

They tried to say by focusing on the 1st sentence I was hiding the ball. I think the 1st sentence should be pretty important.

A: P&C assets, S&S financial cond.

And yes there are other statements

about the mission but that's consistent with everything we are saying.

Q: When will Cship end?

That is the opposite, that will never happen under the NWS.

Q: What are the powers?

You can tell I like this document!

A: To put into S&S cond. and C&P assets.

Now it gets even better b/c DeMarco was There in 2008 and in His Own slides he says the same thing and Even More, look "until it is stabilized..." and....AND... "...and returned to shareholders".

We had Hope, contractual Hope. The NWS Decimated that hope. They'll never return

Now, who are the shareholders
[goes over slides about class representatives and Berkley Ps rep]

Bottom line, by agreeing to the NWS on Aug. 17, 2012, did Ds arbitrarily and unreasonably Destroy potential to receive future dividends?

At least three ways to get there.

If you find that we have proven any of the following, then in our view you should check yes.
1) Grossly inadequate process: No studies, no memos, no analysis. That proves both arbitrary and unreasonable.
2) Reason given makes no sense
3) True Motive was Different (opposite)