Thread by @FnFGateFan

Last Day of Arguments #Fanniegate Fans!

Let's pick up where we left off, in the middle of Ps closing. We'd just seen plaintiffs trilemma, and any one of them proves their case.

Of course DeMarco's selective memory has deleted all his meetings with Geithner, so Ps need to rely on emails discussing those meetings to show the jury what really happened. But critically we don't need to prove ill will or malfeasance here, gross negligence is sufficient.

Hamish: How reasonable is it that someone wrote out that memo about the meeting with Geithner and DeMarco and it not be true? That email shows they weren't concerned about the companies or the market, the rush was because they WERE making profits above the dividends, building...

...net worth, and there were certain people who didn't like FnF. DeMarco said their charters were fundamentally flawed, and as soon as they saw the profits, they did the NWS. You don't need to find all 3, any 1 of those. Let's go one at a time.

DeMarco was asked, was there a single doc, a single memo analyzing the pros and cons? No. This decision sent $150B from FnF to Tsy. There are all kinds of decisions we make in life; coffee or tea, left door or right door, you might remember that example Ds made with our expert.

But if you are in Power, making big decisions, the burden goes up. Remember how he said he had, "his own plans"? Part of being reasonable and not arbitrary is taking in new information. He doesn't even remember where the idea for the NWS came from, who came up with it.

He had a fleet of experts, didn't even ask for any new projections, the old projections should have been updated. DeMarco testimony:
No emails? No.
No analysis? No.
No studies? No.
No negotiation? No
He didn't consider any alternatives, that's part of being reasonable.

Did he negotiate? How about a cap on the NWS? Or only NWS if you reach certain levels of erosion? How about the lesser of 10% and the NWS and if it's less you pay it back later with interest? He didn't negotiate at all. They were getting better and better, and huge DTAs coming

You remember docs about principal reduction? It was about writing down some of the debt for people that were underwater, and Tsy wanted to do it and DeMarco didn't, it was against his philosophy. But the real point is, he did so much work on the PR; massive analysis, extensive...

...work, intense negotiation. PX-500, 23 pages of analysis sent to Congress, graphs and data addressing the PR. That's just One report, he said there were others. Nothing like that on the NWS. He was proud of the with he had done on the PR, he obviously felt strongly.

He modeled out what the PR would cost the companies, why didn't the model out the NWS?
Stark stark contrast.

Tsy wanted PR, but he was tough, they Really wanted it, but They. Didn't. Get it. He could be tough when he cared about something.
Tagoe, Benson, McFarland, Kari, a lot

of smart people, he didn't ask any of them. Mr. Ugoletti was the only person he got involved. His friend from back at Tsy. He hired him. As a special advisor. Why was he in charge, why not anyone else? Ugoletti was involved in the original PSPAs on the Other side of the deal,

for Tsy, FHFA is supposed to be representing FnF. It wears two hats, yes it can act in the public interest, but as conservator it has to preserve and conserve assets.
[Video of Ugoletti: Were you acting as FHFA or standing in the shoes of the Cos? I Didn't Sign the Documents.]

That answer Makes. No. Sense. He doesn't know if he's acting as a regulator or a conservator so he bails himself out and says he didn't sign, that's true.
DeMarco signed.

One more huge alternative, payment in-kind, PIK, if you can't pay and don't pay, the amount is just added

to the liq. pref., and then the rate goes up to 12%, and yes 12% is higher, but it's a hell of a lot better than drawing to pay. And you can't pay back the draws, that's weird, but that was the deal, but the PIK part you can pay down, so when you have a good quarter you can pay

it back. [Slide animating how PIK increases l.p. but doesn't effect the commitment at all]
The l.p. goes up, what happens to the commitment? The key reason they say they needed the NWS, and why? Because the people that buy the bonds and MBSs. But they don't care how big the l.p.

gets because that is underneath, they don't care no matter how big that l.p. bar gets, because all they care about is the commitment.
DeMarco didn't consider it, didn't ask about it, he tried to say he rejected it because 12% is higher but that's not true, he said in his depo

it never came up. Now that's the first reason you should decide for Ps.
Here's the second. Mario Ugoletti's declaration. Remember the problem they say they are solving is not occasional draws because they had 275B, they would only be concerned about huge, related draws.

Email, June 25, 2012 memorializing meeting with Tsy and FHFA. Why would Geithner lie? Why would someone make this up in an email? And there are no emails with anyone saying, "no that's not what happened".

[DeMarco testimony]
Did you tell Geithner in June 2012 the GSEs would have

large revenues enabling them to meet the dividends?
In deposition: "I don't recall."
In trial: "No, I don't think so".
I asked him again, he said, "I don't believe I did, no."
I asked him, You don't see the the diff between "no I don't believe I did" and "I don't recall"? No.

In arriving at the truth, you can use all your instincts and experience as human beings on this planet, and I submit to you that he isn't credible on this question, he's playing word games.

It wasn't just a fluke, they were getting better, g-fees we're going up. It wasn't a cash

problem it was an accounting problem. They wrote down a bunch of assets saying they would never pay. In July 2012 they were forecasting home prices going up. So this isn't hindsight, Dharan looked at what they knew in 2012. DeMarco gets an email saying "Susan said plan reflects

an inflection point". Dharan was telling you it wasn't necessary, and they tried to say he wasn't saying it wasn't reasonable, the whole left door right door thing. This isn't left door vs right door, this is a huge decision, and Dharan was telling you it's up to you to decide

if it's reasonable, but he says it wasn't necessary, and I'm telling you no one would do something as extreme as the NWS if it wasn't necessary, so it wasn't reasonable.

Now, you learned some accounting in this case, DTAs, whether you wanted to or not, and you may say,

"that's just an accounting thing", well, yeah, the whole case is an accounting thing. This isn't about losing cash, they had to write down the DTAs, they were forced to and had to draw all that money from Tsy and when the DTAs came back they weren't even allowed to pay it back.

They had to give all that in the NWS. McFarland told Tsy and FHFA about the profits and the DTA coming in mid-2013, in fact it was even earlier. Will skip the PCF b/c that was a ridiculous fall back argument, they tried to say the whole NWS would have been the PCF anyways.

No analysis, nothing. You heard Thakor, a leading expert in the world. Now, what was the real reason? Wind down. Wind down means the companies going under, so of course they can't admit that here, but look at the emails, "doesn't make sense", "designed to demonstrate wind down"

The Opposite. Opposite, of what they said. We're going to tell you a little bit about the impact the NWS had, not b/c its our damages, but so you can understand how devastating it was. $130B in the first year [2013].

Sometimes you learn what someone is thinking, what they're really about, by how they react. And after that first year, not a single email or document saying "woah! that's not what we wanted" or "Damn, I wish we didn't do that". Tells you that's what they wanted all along.

Total Tsy has gotten $385B, after $191B drawn down, and the red arrow [above $385B bar, points up] means its still going on. Now, we were harmed, our clients were harmed, that's easy to see, don't have to spend a lot of time on that. It eliminated shareholders potential for divs

The value of our stocks was $2.93B and here's what happened, they fell $1.6B. That is measuring the injury, so the the only value after the NWS is the possibility that someday the NWS will go away, maybe another lawsuit, maybe congress-
[Ds object / overruled]

Now, there was an analysis by their expert. The amount of the stock drop is stipulated, it's a fact. Only question is, was it caused by the NWS, and that's common sense. The NWS took everything, you'll never get a dividend forever. And you had an economist who agreed w/ that.

JX-1 has the stipulated facts, you can see the few things we agree on other than that we thank you for your service.
[verdict form:]
Question 2: Have we shown that we suffered harm? Yes. The NWS clearly caused the damages.
Question 3: How much harm? Here are the numbers.

[puts up slide with the #'s filled in for Fannie JPS, Freddie JPS, and Freddie Commons]
Question 4: Pre-judgement interest, here it's a loss of value for the shares, this happened 10 years ago, and it's been a long time coming, and the date was Aug. 17, 2012.

I'm going to end where I began. Thank you.

Yes. it was arbitrary and unreasonable.
Yes. we were harmed.
Yes. the amounts, and
Yes. to prejudgement interest.

[That concludes Ps closing on Monday, Oct 31, but they will have the last word, another 30mins. on Tuesday]