Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Plaintiff McKinley Opposition to Defendant FHFA Summ Judgment Motion 17 Dec 2010 (Lawsuit #4)

Plaintiff McKinley Opposition to Defendant FHFA Summ Judgment Motion 17 Dec 2010 (Lawsuit #4)

Ratings: (0)|Views: 10|Likes:
Published by Vern McKinley
Plaintiff McKinley Opposition to Defendant FHFA Summ Judgment Motion Regarding Fannie Mae Freddie Mac Systemic Risk of placement into conservatorship over receivership 17 Dec 2010
Plaintiff McKinley Opposition to Defendant FHFA Summ Judgment Motion Regarding Fannie Mae Freddie Mac Systemic Risk of placement into conservatorship over receivership 17 Dec 2010

More info:

Published by: Vern McKinley on Dec 18, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

12/18/2010

pdf

text

original

 
- 1 -
IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA
VERN McKINLEY, ))Plaintiff, ) Civil Action No. 10-cv-01165 (HHK))v. ))FEDERAL HOUSING FINANCE )AGENCY, ))Defendant. ) ______________________________)
PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTFEDERAL HOUSING FINANCE AGENCY’S MOTION FOR SUMMARY JUDGMENTAND IN SUPPORT OF PLAINTIFF’S CROSS-MOTION FOR SUMMARY JUDGMENT
Plaintiff Vern McKinley, by counsel and pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, respectfully submits this memorandum of law in opposition to the motion for summary judgment of Defendant Federal Housing Finance Agency (“FHFA”) and in support of Plaintiff’s cross-motion for summary judgment. As grounds thereof, Plaintiff states as follows:
I.Introduction.
In July 2008, a report prepared by Lehman Brothers estimated that the Federal NationalMortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation(“Freddie Mac”) might need as much as $75 billion in additional capital to avoid a financialcollapse.
1
The stock of both Fannie Mae and Freddie Mac fell by nearly 20 percent in one day.
2
To address the advanced stage of Fannie Mae’s and Freddie Mac’s capital problems in
1
David S. Hilzenrath,
Shares of Fannie Mae, Freddie Mac Plummet: Report Raises Alarm About Firms' Capital 
, Washington Post, July 8, 2008 (available athttp://www.washingtonpost.com/wp-dyn/content/article/2008/07/07/AR2008070701487.html).
2
 Id 
.;
 see also
, Henry M. Paulson,
On the Brink: Inside the Race to Stop the Collapse of the Global Financial System
, 142 (2010).
Case 1:10-cv-01165-HHK Document 10 Filed 12/17/10 Page 1 of 16
 
- 2 -September 2008, the two primary options available to the federal government were for FHFA to place Fannie Mae and Freddie Mac into either conservatorship or receivership. Conservatorshipis a process designed to restore a weak financial institution to sound financial health while preserving and conserving assets. Receivership entails a liquidation of the institution through thesale of assets and payment of claimants.Henry M. Paulson, Secretary of the Department of the Treasury, initially concluded thatthe best option for Fannie Mae and Freddie Mac would be to have FHFA place them intoreceivership. This would have allowed for a downsizing of Fannie Mae and Freddie Mac and for addressing their long-term position in the market. According to Secretary Paulson, FHFAultimately placed Fannie Mae and Freddie Mac into conservatorship because it allowed for arapidly implemented “time out” not unlike Chapter 11 bankruptcy, so that Fannie Mae andFreddie Mac could avoid defaulting on their debts.
3
Once the decision was made to place Fannie Mae and Freddie Mac into conservatorship,Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System, described“the catastrophe that would occur if we did not take these actions” in a meeting with the boardsof Fannie Mae and Freddie Mac.
4
Yet, this catastrophe scenario has not been detailed publicly.Defendant asserts that the review conducted prior to the decision to place Fannie Mae andFreddie Mac into conservatorship and the rationale for that decision were explained by FHFADirector James B. Lockhart. Defendant Federal Housing Finance Agency’s Memorandum inSupport of its Motion for Summary Judgment (“Def’s Mem.”) at 3 (referencing Director Lockhart’s statement of September 7, 2008 for that proposition). Although the statement does
3
 Id 
. at 162 – 166.
4
 Id.
at 16.
Case 1:10-cv-01165-HHK Document 10 Filed 12/17/10 Page 2 of 16
 
- 3 -reference the placement of Fannie Mae and Freddie Mac into conservatorship, it does not evenmention receivership, let alone detail why the option of conservatorship was chosen over receivership. Presumably, the justification for placing Fannie Mae and Freddie Mac inconservatorship over receivership had something to do with the perceived systemic impact of thereceivership option.
5
As with so many of the decisions made during the recent financial crisis,the details of this analysis have not been released publicly. Defendant has refused to release anyinformation in this regard.Because the public remains uninformed of why Defendant chose to place Fannie Mae andFreddie Mac into conservatorship, Plaintiff, on May 23, 2010, sent a FOIA request to Defendantseeking access to:Any and all communications and records concerning or relating tothe assessment of an impact on systemic risk in addressing FannieMae and Freddie Mac, and in particular how the FHFA and theDepartment of the Treasury determined that conservatorship wasthe preferred option to avoid any systemic risk of placing FannieMae and Freddie Mac into receivership.FOIA Request, attached as Exhibit A to the Declaration of David A. Lee. Defendant failed torespond to Plaintiff’s FOIA request within the statutorily allotted time period, and Plaintiff filedsuit on July 12, 2010. Def’s Mem. at 4. Subsequently, Defendant notified Plaintiff that it hadlocated three records responsive to Plaintiff’s request and that each record was being withheld inits entirety pursuant to Exemption 5.
 Id 
. Upon reviewing the declarations and
Vaughn
Indexsubmitted by Defendant in support of its Motion for Summary Judgment, Plaintiff has elected
5
See
, Federal Housing Finance Agency,
Questions and Answers on Conservatorship
,Undated (available at http://www.fhfa.gov/webfiles/35/FHFACONSERVQA.pdf) (“The goals of the conservatorship are to help restore confidence in the Company, enhance its capacity to fulfillits mission, and mitigate the systemic risk that has contributed directly to the instability in thecurrent market.”).
Case 1:10-cv-01165-HHK Document 10 Filed 12/17/10 Page 3 of 16

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->