Roberts v. Federal Housing Finance Agency, No. 17-1880 (7th Cir. 2018)Annotate this Case
During the 2008 financial crisis, Congress created the Federal Housing Finance Agency and authorized it to place into conservatorship the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (Fannie Mae and Freddie Mac), 12 U.S.C. 4617(a) and empowered the U.S. Treasury to purchase their “obligations and other securities” through 2009. In exchange for a cash infusion and fixed funding commitment for each enterprise, Treasury received senior preferred shares and extraordinary governance and economic rights, including the right to receive dividends tied to the amount of Treasury’s payments. As Fannie and Freddie’s capital needs grew, Treasury agreed to modify the original agreements. The First and Second Amendments primarily increased Treasury’s funding commitment. The third modification, made after Treasury’s purchasing authority expired, set Treasury’s dividend rights equal to the companies’ outstanding net worth. Plaintiffs, private shareholders of Fannie and Freddie, sued, claiming that the Agency violated its duties by agreeing to the net‐worth dividend and by unlawfully succumbing to the direction of Treasury and that Treasury exceeded its statutory authority and failed to follow proper procedures. The Seventh Circuit affirmed dismissal. Section 4617(f) bars “any” judicial interference with the “exercise of powers or functions of the Agency as a conservator.” The purpose of the conservatorship is the “reorganizing, rehabilitation, or winding up” of the companies’ affairs, not just the preservation of assets. Wiping out Treasury’s acceptance of the original agreements or the Third Amendment would undermine the conservatorships.