U.S. Senator Chuck Grassley (R-Iowa), Chairman of the Senate Judiciary Committee, has written separate letters to U.S. Attorney General Eric Holder and U.S. Department of Treasury Secretary Jack Lew seeking more transparency from the government regarding GSE profits.
According to an announcement on Grassley's website, the Senator's letters were based on a report that originally appeared in the New York Times regarding an alleged lack of transparency and claims of the assertion of executive privilege by the government. These claims were made in relation to Treasury's amending of Fannie Mae's and Freddie Mac's bailout agreement with the government in 2012. The two GSEs received a combined $188 billion in bailout money in 2008 when they were taken into conservatorship by the Federal Housing Finance Agency (FHFA); in 2012, the GSEs returned to profitability but since then all of their profits have been swept into Treasury, a practice that investors say is unconstitutional and shortchanges taxpayers.
Grassley wrote in his letters that it is unclear whether the President asserted executive privilege to withhold documents regarding the sweeping of GSE profits into Treasury and questions whether the Justice Department was authorized to withhold the documents. The news reports that prompted Grassley's letters assert that the documents that were withheld are public by definition.
"The taxpayer has a right to know what has transpired,” Grassley wrote in separate letters to Holder and Lew. "But, instead of transparency, there appears to be an invocation of executive privilege. If true, this is cause for concern."
In Grassley's letters, the Senator asks a series of questions surrounding the assertion of executive privilege and details regarding the Treasury's agreement, and whether or not the sweeping of GSE profits is in compliance with statutory requirements under the FHFA's conservatorship of Fannie Mae and Freddie Mac. Copies of Grassley's letters can be viewed here and here.
Rafferty Capital analyst Dick Bove called Grassley's sending of the letters "gargantuan" news.
"This is the right guy asking the right questions at the right time," Bove said in a statement. "He is doing it because the Administration may have overplayed its hand in dealing with Fannie Mae. The Administration is taking all of the capital out of the company and intends that by 2018 it will have no capital at all. At the same time, the Administration and its dupe the Wall Street Journal are claiming that Fannie Mae will need another taxpayer bailout."
The sweeping of GSE profits into Treasury has prompted several lawsuits by investors, notably two by Pershing Square (one of which was voluntarily withdrawn by Pershing CEO Bill Ackman) and one by Fairholme Funds, which is still pending. Grassley is making it clear, however, that his calls for more transparency should not be construed as support of the investors' lawsuits.
"Senator Grassley isn’t taking a position on who’s entitled to what shares or appropriate levels of return," a Grassley spokeswoman told MReport. "He’s simply asking why the Administration reportedly is citing executive privilege to withhold documents on major government decisions. He says the public’s business ought to be public with few exceptions."