Fairholme Funds has formally filed a notice of appeal in the U.S. Court of Appeals for the District of Columbia of a ruling by District Court Judge Royce Lamberth that dismissed lawsuits filed by Fairholme and other plaintiffs against the U.S. Government.
The lawsuits relate to the Fannie Mae/Freddie Mac Preferred Stock Purchase Agreement and subsequent amendments.
Fairholme issued the following statement via its legal counsel, Charles J. Cooper of Cooper & Kirk, PLLC:
“Fairholme believes strongly that the Net Worth Sweep – imposed four years after the financial crisis – was not authorized by the Housing and Economic Recovery Act of 2008 (“HERA”) and must be unwound. Fairholme also believes strongly that the Federal Housing Finance Agency (“FHFA”) has contractual and fiduciary duties to the preferred shareholders of Fannie Mae and Freddie Mac, and that these duties can and will be enforced.”
“The resolution provisions of HERA are virtually identical to those that apply to U.S. banks. We are confident that Congress did not authorize the conservator – a Federal agency – to operate a profitable financial institution perpetually, to strip away all of its capital, to pay all its future profits to another Federal agency, to violate the order of priorities of corporate law, to transfer its assets without determining fair price, to replace the organized claims process of receivership with the self-dealing expropriation of private property, or to make corporate governance decisions without a standard of care. And yet, if the D.C. District Court’s opinion stands, FHFA is authorized to do all of this with impunity, previously and forever. In fact, the District Court opined that it lacks the authority even to review the conservator’s actions – a fundamentally flawed interpretation of the statute. After all, why would Congress write a 260-page HERA statute specifying and limiting the conservator’s powers if no court has jurisdiction to enforce it? Where there is no remedy, there is no law.”