I was shocked that SCOTUS did not permit the APA statutory claim to go forward. The constitutional claim portion of the case was presaged by oral argument questioning, so while I do not agree with that outcome either, I cant say that I was totally surprised. On a day on which SCOTUS states that a farmer can exclude from his private property union organizers, SCOTUS also decides that the conservator has the statutory authority to appropriate over $100 billion of shareholder property.
Going forward on remand, Collins Ps should argue that all senior preferred distributions from the time Director Watt came on board are subject to invalidation. There is some question whether Ps can only argue that the excess of distributions over the 10% dividend amount should be voided…but I would argue that the POTUS unremovable Director Watt did not have the authority to make any and all distributions on the senior preferred.
This remanded portion of the case goes to the Houston federal district court, and however that court decides, it will be appealed to the 5th Circuit, which is already on record as believing that SCOTUS is wrong as to the merits of the APA claim. So while SCOTUS’s decision prevails for pre-2014 distributions, one might think that the 5th Circuit will be solicitous of the Collins Ps argument with regard to the post 2014 distributions.
The Lamberth trial goes forward, with Ps arguing that the NWS breached the implied duty of FHFA/Treasury to deal in good faith which was owed to public shareholders. Judge Lamberth has already essentially stated that there was no APA claim, so having SCOTUS agree with him doesnt affect the case moving forward as is. To my mind, Ps should argue that there are exactly zero instances in the history of shareholder capitalism where the terms similar to the NWS have been implemented and upheld…so how could public shareholders have expected the NWS as a possible outcome…and if this is right (and it is), how can the public shareholders have expected that the NWS would comply with this fair dealing duty (understanding that expectations as to what is fair are based in major part on what history and custom informs one to expect).
The court of federal claims case survives with added urgency. If congress is permitted to authorize the conservator to appropriate shareholder wealth, then shareholders should receive the fair value of their expropriated wealth as damages. A major issue in this case is whether this claim “runs with the shares”, or whether only 2012 shareholder can assert this claim.
TINA (There Is No Alternative to the GSEs) still exists but the public shareholders ownership claims to the GSEs in the future have taken a hit. Dont ask me how the Biden administration can expect to recapitalize the GSEs given this outcome…and therefore one might expect that the GSEs will simply limp along in conservatorship for the next three years, building capital albeit with the Treasury having the right to all of that capital as its senior preferred stock preference increases.