HERA 2008 replaced the Federal Housing Enterprises Financial Safety and Soundness Act of 1992
The 1992 Act had identical provisions for conservatorship (then to OFHEO, predecessor to FHFA).
I am not as convinced on challenging the constitutionality of the c-ship provision in HERA, and to my knowledge, that hasn’t been a point in any of the lawsuits.
The Washington Federal case challenges the c-ship itself, which is a good thing!
The c-ship needs to end, it was initiated under false pretenses. The sweep agreement was done behind closed doors without public debate and it’s legality is, to state the obvious, questionable…it too needs to end.
Everyone agrees that if FHFA (under Ed DeMarco) was truly “acting as conservator” he could not or should not have given all of FnF’s (publicly held companies) profits to the Executive Branch.
The Sweep is an agreement between two parties – FHFA and Treasury. “This Third Amendment shall not become effective until it is executed by Purchaser and Seller.”
The sweep is a done deal…it’s happening. There are three ways to end it – act of Congress, directive from the Courts…or both parties agreeing to cancel it.
The question is can Director Watt unilaterally cancel the Third Amendment? Some think yes, some think no (I think no).
Can Director Watt end C-ship? I don’t think anyone doubts that he can.
Senator Tim Johnson is saying Congress is not going to act. And Senator Johnson is not saying “let’s wait for Judge Sweeney to decide.”
Senator Johnson is clearly of the mindset that C-ship should end now, but that it must be agree-upon by Treasury (because of the Sweep!).
I personally don’t think Secretary Lew will act on this hugely controversial matter without the support and/or direction of President Obama.
“Watt acknowledged that the process would have to begin with the Treasury Department because of the sweep established under the third amendment to the Senior Preferred Stock Purchase Agreements, which prevents Fannie Mae and Freddie Mac from building capital.”
The time is now for President Obama to do the right thing!