Fannie Mae, Freddie Mac Full Court Hearing [Transcript]

Here is a transcript of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) full court hearing. See a nice summary of the Fannie Mae, Freddie Mac transcript here. H/T ValuePlays

Fannie Mae and Freddie Mac

UNITED STATES COURT OF FEDERAL CLAIMS

FAIRHOLME FUNDS, INC., ET AL.,)

( Plaintiffs, ) Case No.

( vs. ) 13-465C

7 THE UNITED STATES OF AMERICA, )

( Defendant. )

Courtroom 4

Howard T. Markey National Courts Building

717 Madison Place, N.W.

Washington, D.C.

Thursday, June 19, 2014

11:00 a.m.

Defendant’s Motion for Protective Order

BEFORE: THE HONORABLE MARGARET M. SWEENEY

Elizabeth M. Farrell, CERT, Digital Transcriber

(Proceedings called to order at 11:01 a.m.)

LAW CLERK: The United States Court of Federal

Claims is now in session. Fairholme Funds, Incorporated vs. the United States, Case Number 13-465, the Honorable Margaret M. Sweeney presiding.

THE COURT: Good morning. Please be seated.

(Chorus of good mornings.)

THE COURT: Will counsel in the courtroom please identify themselves for the record?

MR. COOPER: Certainly, Your Honor, Charles Cooper for the Plaintiffs. With me today are two of my colleagues, Brian Barnes and Vince Colatriano.

MR. COLATRIANO: Good morning, Your Honor.

MR. COOPER: I’d also like to note for the Court that two of my colleagues are joining us by phone, Nicole Moss and Peter Patterson. And, Your Honor, if I may, I would like to introduce to the Court one of my clients, Mr. Bruce Berkowitz. He’s the president of the Fairholme Fund.

THE COURT: Thank you very much. Good morning to all of you. And for the United States?

MR. DINTZER: Good morning, Your Honor. Kenneth Dintzer for the Department of Justice representing the United States. And with me at counsel table are Elizabeth Hosford and Gregory Schwind.

MR. SCHWIND: Good morning, Your Honor.

THE COURT: Good morning. Well, on this morning’s agenda, we have Defendant’s motion. Are you ready to begin?

MR. DINTZER: We are, Your Honor. Ms. Hosford will be speaking for the United States.

THE COURT: Thank you.

MS. HOSFORD: Good morning, Your Honor, may it please the Court. We filed our motion for protective order for two reasons. First, we’ve asked the Court to limit the time frame of discovery into the future of the enterprises to documents that predate execution of the third amendment. Second, we would ask the Court to limit the scope of discovery to the issues that were actually identified in the Court’s February 26th order. I’ll first address the issue of the future of the enterprises. Plaintiffs’ requests that are focused on the termination of the conservatorships and future profitability seek virtually all internal Treasury and FHFA documents that discuss the future of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) with virtually no ending. If Treasury and FHFA are required to respond to these requests without a cutoff date, the Government would suffer substantial and potentially insurmountable harm in three ways.

First, potential disclosure of internal discussions about the future of the Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) conservatorships would, to quote Director Watt’s declaration, “have extraordinarily deleterious consequences on the conservator’s conduct to be ongoing in future operations of the conservatorships.”

That’s —

THE COURT: Let me ask you this, if there’s a protective order in place which provides for the sealing of all such documents, how is the conservator harmed? There will be no release of documents.

MS. HOSFORD: First, Section 4617(f), which is part of the Housing and Economic Recovery Act of 2008 —

THE COURT: Yes, I don’t agree. I know you’re going to say that the Court has no ability to have any — to, in any way, impact FHFA, and I disagree with that. I don’t believe that is a blanket insulation. If FHFA enters into contracts and there’s a dispute and there’s a breach of contract — and the agency breaches the contract, I don’t think they can invoke that — the agency can invoke that provision to insulate itself. And, also, I think here — I’m not trying to control the conservatorship, I’m not trying to influence it in any way, I’m just trying to allow citizens to have every opportunity to meet the jurisdictional hurdle that the Plaintiff — excuse me, that the Government has asserted.

The Government has said that the Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) conservators are not part of the United States and, therefore, the Defendant is not implicated here. Now, on the other hand, by requesting these documents, the Government is saying, no, I’m sorry, you’re not entitled to any of these documents because the conservators are part of the United States. So, it’s a government entity and, therefore, you’re asking for deliberative process documents.

So, it seems to me the Government is trying to have it both ways and, so, I don’t accept that argument. And as I said, you know, I understand and can appreciate the bar of — or the — not the bar, but the — that Congress intended that courts do not meddle in the business of the conservators.

That’s not my goal or desire. I have enough on my plate without trying to run the conservatorships. But I do want the Plaintiffs to have an opportunity to meet the jurisdictional challenge that’s been raised by the Government.

MS. HOSFORD: Your Honor, we are not asking the Court to bar all discovery in this case. We are merely asking for a cutoff date for the issue of whether the — when and how the Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) conservatorships will end and what their future profitability will be. And there are very serious policy and operational concerns for the conservatorships that are at risk here, as our — as the Government officials who provided the declarations in this case pointed out, if internal discussions about the future of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), both ongoing and in recent times, are divulged to the public or even in advertently disclosed under a protective order, it could literally affect interest rates. It could have aneffect on the market and the economy.

See full Fannie Mae, Freddie Mac Full Court Hearing [Transcript] in PDF format here.