Let’s look at the scenarios here and get a sense of what this bills says and does and does it really matter?
1- The courts rule the 3rd Amendment to the SPSA illegal:
This simply means Corker’s addition is wholly meaningless as the NWS will be thrown out and now Treasury owes shareholders $243B (and counting). What to see Congress pass a law and the President sign it in about 15min? Consider that outcome. In this scenario Congress passes a law calling it “all even” and eliminating the SPSA (but maintaining their 70% ownership in the common) and whoever the President is signs it…nothing busts a budget faster than a >$200B verdict. Shareholders happily take the deal and commence figuring out a recap.
Of course one has to think Treasury appeals a decision like this but a negative outcome in any court now puts everything in doubt and makes the repayment of $243B + VERY real. The conversation in Congress and the media VERY quickly then turns to “how will they repay it?” and “Conservator-Gate” articles will start popping up everywhere.
2- The President decides to direct the FHFA to release the GSE’s from conservatorship…
Can he? Doesn’t the act prohibit it? Nope….the FHFA, even with this act included could do it. Treasury could legally suspend the dividend and cancel the NWS without falling in violation of the Bill. The bill only says they cannot “sell or dispose of the shares” themselves, it says nothing about altering the terms of them. The President, or FHFA, Treasury could then declare the SPSA extinguished as of 1/1/2018 and commence actions to recap (or combine) the GSE’s and exit the conservatorship.
Couldn’t the next Administration then just reverse this decision? Doubtful. Once released the GSE’s would elect new management and Board of Directors. This group would be highly unlikely to agree to anything they would view as going backwards. If the entities were combined (makes sense for cost savings) then the new charter could explicitly contain language extinguishing the SPSA as of 1/1/18 making it almost impossible to reverse. Should Congress balk at that then Treasury and FHFA could just alter the terms of the SPSA again sunsetting it on 1/1/18. Having both the FHFA, Treasury and President sign off on its extinguishment makes a subsequent administrations actions to reverse that virtually impossible and would set off another round of litigation no new administration would want.
3- The courts rule for the government
This scenario is not affected by the Jump Start act as plaintiffs will appeal this as far as they can meaning any final resolution is many years away and well after the 1/1/18 date
Well, then, what does this bill do?
Well, it lets Corker and Warner grab another round of TV air time to thump their chests and lets them go home for the Christmas break and tell their constituents how much safer they have made the housing market (which is a lie). They’ll be the toast of the Waffle House……
Other than that, it does absolutely nothing.
The wording:
