Next up, the legal state of Frannie.
Just because the US Treasury took over the GSE’s and moved them into a conservatorship under FHFA doesn’t mean they have a plan on what do with them. The first order of business was to prevent them from collapsing. Next, structure and direction, Lastly, prosecution.
There is a brief but excellent article in the New York Law Journal that summarizes the army of lawyers needed: “Scores of Lawyers Tapped in Takeover“
In the weeks leading up to the federal government’s takeover of Fannie Mae and Freddie Mac, dozens of top lawyers worked to figure out the best way to save the two Washington-area mortgage giants.
The in-house teams at the U.S. Department of the Treasury and the Federal Housing Finance Agency, which is now the conservator for the two companies, were dealing with lawyers from at least nine private firms
Many were involved and are still involved. Here are total counts, but not all were working on the takeover:
- 2,000 US Treasury attorneys plus outside counsel
- 90 Freddie Mac attorneys plus outside counsel
- 130 in-house Fannie Mae lawyers plus outside counsel
- 40 in-house FHFA lawyers plus their outside counsel
The total is…a lot.
The attorneys are there to interpret and structure the unprecedented legal arrangement of the new entity as well as going after those responsible:
Even the battalions of lawyers may not be able to ward off lawsuits in the wake of the takeover.
AFSCME’s Mr. Ferlauto said that “there is activity going into holding those people responsible for not appropriately providing guidance.” He said he expects some pension funds to look for ways to sue the outgoing boards and management, and said lack of transparency, inaccurate guidance, fraud, and market manipulation could all be grounds.
A lot has to go into the mix before we can begin to talk about things getting fixed.
So in the meantime, please, please, don’t kill all the lawyers.