The government has fought back in the battle over Fannie Mae and Freddie Mac profits.
In September, Judge Margaret Sweeney in the U.S. Court of Federal Claims ordered the U.S. Department of Treasury to release 56 documents related to sweeping of GSE profits into Treasury in a shareholder lawsuit.
The government is refusing to release the documents, however. The government asked the U.S. Court of Appeals for the Federal Circuit to issue a writ of mandamus seeking to have Sweeney’s order reversed. A writ of mandamus is a direct order to a lower court that is considered a drastic and extraordinary measure that is typically used only an abuse of discretion has occurred. According to the Wall Street Journal, the appeals court agreed to consider the government’s request on Thursday, October 27; Fairholme has seven days to respond.
Sweeney’s ruling required the government to turn over the 56 documents to Florida-based mutual fund Fairholme Funds and other GSE shareholders. According to Fortune, presidential privilege was cited in the government’s decision to withhold four of the 56 documents ordered to be released which were either authored or sent to then-National Economic Council Director Gene Sperling, who in May 2016 was named Hillary Clinton’s top economic advisor.
The GSEs’ bailout agreement was amended in August 2012 to require all of Fannie Mae’s and Freddie Mac’s profits to be swept into Treasury quarterly. The original agreement required only a 10 percent dividend to be paid to Treasury annually. The Net Worth Sweep, as it has come to be known, has prompted close to two dozen lawsuits from GSE investors who claim the sweep is illegal.
In April 2016, Sweeney ordered the unsealing of seven documents related to the Net Worth Sweep that seem to suggest that key government officials (namely the CFO at Fannie Mae at the time, Susan McFarland) knew that the GSEs were on the brink of major profitability in the summer of 2012 right before the bailout agreement was amended.