At issue in many of the lawsuits between shareholders and the US Government is the contention that US Treasury is directing the actions of FHFA, which by law is designed to be an independent agency. In fact, the following is written in HERA:
“When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency.”
So, if Treasury is forbidden by law to direct FHFA’s actions while Fannie Mae and Freddie Mac are in Conservatorship, it is assumed that Treasury is also forbidden to directly control the actions of Fannie and Freddie, right?
However, Treasury entered into Financial Agency Agreements directly with Fannie and Freddie on February 18, 2009, which run until February 17, 2019. The funds associated with the agreements are $534 million for Fannie Mae and $379 million for Freddie Mac. Remember, the Conservatorships that were forced upon Fannie and Freddie started on September 6, 2008.
There does not seem to be an “arms-length” relationship between Treasury and Fannie/Freddie once the forced Conservatorship began. In fact, just the opposite exists.
The following language on Treasury’s website and within the Agreements show that the US Treasury is directing at least some of the actions of Fannie and Freddie.
“Financial agents act on behalf of the Government during the performance of their duties under an agent-principal relationship with Treasury. Financial agents have the fiduciary obligation to protect the interests of the United States.
Pursuant to the authority of the Secretary of the Treasury under the Act, the Treasury hereby designates and authorizes the Financial Agent to act as a financial agent of the United States under the terms and conditions of this FAA to perform certain services as more fully described in Exhibits A and C. The Treasury may, in its sole discretion, modify, add to, or reduce the specific services required under the general scope of this FAA by providing written notice to the Financial Agent.
The Treasury may periodically issue instructions through bulletins, letters, or other communications, consistent with this FAA, which will further describe or clarify the scope of the duties and services of the Financial Agent under this FAA.”
The US Treasury has had these types of Agreements with other financial institutions in the past. However, at a time when Treasury is claiming they have no direct influence over FHFA, the Conservator, Treasury has a direct control over at least a portion of the management of Fannie Mae and Freddie Mac, the Conservatees.