Obamacare & GSEs - Key Players Trading Hats

TABLE OF CONTENTS
Exhibit 1............Obamacare, GSEs, and Securitization: A Journey through Time

Exhibit 2...................................................Cast of Characters: Infographic of Notable Individuals
Exhibit 3...Chronology of the Common Securitization Platform
Exhibit 4Former White House Officials Involved in GSE Scandal
Exhibit 5..New York Times Article on Revolving Door and GSEs
EXHIBIT 1
A JOURNEY THROUGH TIME: OBAMACARE, GSES, AND SECURITIZATION

Article I Section VIII of the Constitution:

The Congress shall have power to lay and collect taxes, duties, imposts and excises, to
pay the debts and provide for the common defense and general welfare of the United
States; but all duties, imposts and excises shall be uniform throughout the United
States
Implications for the Obama Administration:

The number one domestic policy issue for Obama is healthcare. In a recent court
case brought by Congressional Republicans which argued that the Obama
Administration spent monies that Congress refused to appropriate in the 2013
budget, the Court found:
The subsidies were authorized by the law, but Congress rejected an

appropriations request from the administration to fund them. The
administration moved some money around and funded them anyway. Estimates
indicate that the program would funnel about $130 billion to insurers over the
course of a decadei and Such an appropriation cannot be inferred None of
Secretaries extra-textual arguments whether based on economics, unintended
results, or legislative history is persuasive. The Court will enter judgment in favor
of the House of Representatives and enjoin the use of un-appropriated monies to fund
reimbursements due to insurers under Section 1402.ii
WHERE DID THAT MONEY COME FROM?

On GSE reform and implementation of the 2008 Housing and Economic
Recovery Act, Obama has inexplicably ignored core members of his
constituency affordable housing advocates and minority groups with little
explanation.
In litigation brought forth by GSE investors, relating to the August 2012

amendment to the Preferred Stock Purchase Agreement, the White House has
asserted executive privilege on 45 documents. An additional 11,000 documents
are currently under the veil of attorney-client or deliberative process privilege.
On April 11, 2016, Judge Margaret Sweeney of the U.S. Court of Federal Claims issued
an order unsealing seven documents. She stated:
While the court recognizes that protection of the Nations financial

markets and fledgling financial institutions were legitimate goals when
the court first entered its order, with the passage of time, the potential
for harm to the Nations markets and then-fledgling financial institutions
no longer exists. Instead of harm to the Nation resulting from disclosure,
the only harm presented is the potential for criticism of an agency,
institution, and the decision-makers of those entities. The court will not
condone the misuse of a protective order as a shield to insulate
public officials from criticism in the way they execute their public
duties. Thus, avoidance of second-guessing an agencys decisions
several years after the fact, as described by Mr. Watt, is, with the passage
of time no longer a legitimate basis to maintain documents under a
protective order. The court notes that from the inception of this litigation,
the government has consistently maintained that the court lacks
jurisdiction over this case because the United States had no control over
the enterprises. Taking the government at its word, it is surprising that
defendant is concerned with the unsealing of government officials
deposition testimony. Moreover, there can be no serious dispute that
it is extremely rare for a document filed under seal in a civil case to
remain so for all time. There is no suggestion that the documents
subject to the protective order are classified as relating to national
security. Nor do these documents contain trade secrets or proprietary
information. However, even cases in which trade secrets and proprietary
information are filed under seal and subject to a protective order, it is not
unusual that after the passage of time, that same information is
eventually unsealed because the protective order has outlived its
usefulness. Indeed, because the government does not argue that
information that it requests remain protected concerns matters involving
national security, trade secrets, or proprietary information, or that
specific privileges attach to any of the seven documents, it is clear
that there is no longer a need to maintain the protected designation for
them.
Given that the Obama Administration sought to fund $130 billion of un-
appropriated monies to health insurers beginning in FY2013, one must wonder
if the decision to amend the Preferred Stock Purchase Agreement in August
2012 and sweep GSE profits of $130 billion in 2013 ($82.4 billion from Fannie
Mae, and $47.6 billion from Freddie Mac) was an attempt to circumvent
Congress on the single most important policy priority of the White House. The
timing is particularly interesting given that September 2012 marked the beginning of
the sequestration discussions.
01/2010 11/2010: Jeffrey Zients is Acting Director of the Office of Management and
Budget at the White House. He was a key player in GSE policy and Obamacare fix. He
led the Administrations preparations for dealing with the fiscal cliff in 2012, and
oversaw the administrations budget content and message and has come to be
referred to as Mr. Fix-It within the Obama Administration.iii
2010: Administration begins to have conversations about how to fund the CSR
program. They appear to recognize the need for funding through appropriations.
01/09/2012: President Obama selects Jack Lew as Chief of Staff.
2011-2012: in the early stages of 2011, 2012, when we were all getting prepared, the
cost sharing reduction discussions were with HHS and OMB, and we were talking
about the APTC/PTC process.
01/27/2012: Jeffrey Zients becomes Director of the Office of Management and Budget
and serves there until April 24, 2013.

2012: Treasury understood that the 31 U.S.C. 1324 appropriation would be available
for APTC payments but not for CSR payments and Treasury believed no appropriation
payments existed at the time.
2012: IRS expresses concerns about using allocation accounts in connection with tax
refund activity. At OMBs request, Treasury prepared a memorandum analyzing the
legal basis on which the IRS could make these payments using an allocation structure.
The committees obtained this memorandum, which, in part, examines whether the
ACA provides a source of funding for the CSR program (see below). Despite the IRS
concerns, Treasury concluded in the memorandum that ACA 1411 and 1412 may
be interpreted to authorize the transfer of funds from Treasurys refund appropriation
to an HHS allocation account for purposes of making the advanced payments of the tax
credit.

2/06/2012: Jeff Foster sends Treasury draft housing finance proposal to New York
Feds Joe Tracey, which closely mirrors the 2009 Mortgage Bankers Association
housing finance reform proposal and what later becomes the Corker-Warner Bill
(S. 1217).
02/14/2012: Senator Corker meets with FHFA Acting Director Ed DeMarco at 185
Dirksen Senate Office Building (DeMarco call with Freddie Mac immediately followed
by conference call with Treasury Under Secretary for Domestic Finance Mary Miller).
02/28/2012: HHS Secretary Kathleen Sebelius 2013 Budget Testimony ... *Mr.
Herger. The Medicare savings in the budget, the Presidents budget, totals $302.8
billion, but the estimated cost for the SGR fix is $429 billion. Taken together, that
means the President is proposing to increase Medicare spending by nearly $130
billion over the next ten years.iv
02/29/2012: HHS Secretary Kathleen Sebelius warns that the private market is in a
death spiral.
03/08/2012: Senator Corker telephone call with Secretary Tim Geithner.

03/22/2012: From Treasury privilege log, Email communication among Treasury

staff and legal counsel reflecting legal advice and containing predecisional
deliberations regarding draft responses to Congress concerning FY 2013
budget. (from ACA Report: Typically, HHS budget process begins during the spring
of a given year and finishes when the Presidents final budget request is submitted to
Congress the following February. For example, HHS began preparing its proposed FY
2017 budget during the spring of 2015. The President submitted his FY 2017 Budget
to Congress in February 2016. )
03/29/2012: Senator Corker meets with FHFA Acting Director Ed DeMarco at 185
Dirksen Senate Office Building; DeMarco goes straight to meet with Treasury Secretary
Tim Geithner immediately thereafter.
04/02/2012: Michael Bright conference call with FHFA Acting Director Ed DeMarco at
FHFA.
04/17/2012: Speech by Gene Sperling entitled The Case for Shared Sacrifice it
creates what health economists term a death spiral.
Summer 2012: Similar to a typical budget cycle, HHS started preparing its FY 2014
budget request during summer 2012.
07/12/2012: Treasury Secretary Tim Geithner meets with Gene Sperling & Brian
Deese followed by meeting with Jeff Zients, and then calls to Lew, Dudley and then
another in person meeting with Sperling.
08/06/2012: Despite the IRS concerns with the legality of the allocation account
approach, OMB ultimately decided to move forward and use an allocation account to
make the APTC payments. On August 6, 2012, an official in OMBs Health Division
emailed HHS and Treasury officials to inform them that OMB had decided that an
allocation account arrangement between Treasury and HHS is the most logical way to
move forward:
07/31/2012: As the Administration was developing the allocation account payment
structure for APTC payments, the Department of the Treasury wrote a memorandum
to the Office of Management and Budget (OMB) asserting that although the 31 U.S.C.
1324 permanent appropriation would be used to make the APTC and PTC payments, it
could not be used to make CSR payments. The memorandum stated that there is
currently no appropriation to Treasury or to anyone else, for purposes of the cost-
sharing payments.
08/18/2012: Parrott email - You guys did a remarkable job on the PSPAs this week.
You delivered on a policy change of enormous importance thats actually being
recognized as such by the outside world (or the reasonable parts anyway), and as
a credit to the Secretary and the President. It was a very high risk exercise, which
could have gone sideways on us any number of ways, but it didn't great great
work.
07/25/2012: Geither calls Sperling followed by Bi-Weekly meeting w DeMarco
07/31/2012: Corker teleconference with DeMarco re Update on Strategic Plan for

GSEs
10/09/2012: e21 writes a note: Fannie and Freddie's Huge Profits Raise
Questions for Future of Mortgage Finance which points out: The GSEs have
become a de facto slush fund for the general fund of the Treasury as a result of the
Obama Administrations August 2012 amendment to the terms of the original
bailout...In fact, Fannie and Freddie are likely to be more profitable than even the
2000-2005 periodIn August, the Obama Administration responded to the positive
outlook by amending the terms of the bailout to require the GSEs to distribute all
profits to the Treasury as dividends each quarter. This decision was partially
rationalized by the desire to end the circularity of having the GSEs borrow money
from Treasury only to then turn around and pay the 10% dividend rate on past bailout
funds. However, this rationalization for the change makes little sense. When the
GSEs are profitable, as they are today, they can fund the dividend payments out of
current income. There is no need to borrow from Treasury. If there was concern
about the circularity, it should have been addressed in 2009-2011 when the GSEs
borrowed $35 billion from Treasury to pay the Treasury $35 billion in dividends.
Today, the cash flows are one-way (from the GSEs to Treasury). If there is concern
that profits wont be sufficient to meet the $18 billion in annual dividends owed
Treasury, a better amendment might have been to allow the GSEs to repay
taxpayers by repurchasing senior preferred shares with any retained earnings.
11/09/2012: Geithner call to Corker 11/26/2012 Geithner call to Corker 01/2013:

01/2013 - CMS and the IRS signed a Memorandum of Understanding (APTIC MOU) that
outlined the roles and responsibilities of both agencies for administering APTC
payments and making the payments from the 1324 permanent appropriation.22 The
APTC MOU did not apply to CSR paymentsCMS established a separate account
intended for CSR payments and requested an annual appropriation of approximately
$4 billion to make CSR payments in fiscal year 2014.23
At some point, however, the Administration changed its strategy for making CSR
payments. In response to questions posed by Senators Mike Lee and Ted Cruz, then-
Office of Management and Budget Director Sylvia Mathews Burwell wrote that HHS
would not be using the account set up by CMS for the CSR program to make CSR
payments. Instead, for efficiency purposes, payments would be paid out of the same
account from which the premium tax credit portion of the advance payments for that
program are paid.
03/04/2013: Obama selects Sylvia Mathews Burwell to become Director of Office of
Management & Budget.
3/14/2013: S.563 introduced, by Senator Corker, in Senate: An increase in the

guarantee fee required to be charged by an enterprise may not be used to offset an
increase in outlays or a reduction in revenues for any purpose other than those
related to the enterprises business functions under the congressional budget; the
Balanced Budget and Emergency Deficit Control Act of 1985; or the Statutory Pay-As-
You-Go Act of 2010. The bill is read twice and is then dead. Did Corker get a call offering
that he becomes the sponsor of the UST plan circulated by Foster in Feb? Did they say,
leave this approps issue alone and we agree that we will support you introducing
legislation to kill the GSEs? Conservative writer criticize this legislation pointing out:
The problem is that the Act doesnt go far enough. It prevents Congress from
affirmatively requiring the GSEs to increase fees and then using the additional revenue to
offset new federal spending, but it does not address the problem of the Obama
Administrations unlimited dividend sweep. Congress does not need to mandate an
increase in guarantee fees for the GSEs to be huge contributors to the Treasury in 2013
and beyond.v
03/18/2013: Corker & Warner meet with DeMarco at FHFA

04/03/2013: e21 issues note Is it Fannie and Freddies Turn to Bailout the U.S.
Treasury? which points out: The cash flow relationship between the government-
sponsored enterprises (GSEs) and the Federal Government has now reversed: instead of
receiving bailout funds from the Treasury in the form of senior preferred stock
purchases, the GSEs now send billions of dollars in dividend payments to Treasury to
fund unrelated government spending. Fannie Mae announced yesterday that it
earned $17 billion in 2012 the greatest profit it has ever earned in a single year and
is now generating profits at an astounding $30 billion annual rate. At current rates,
Fannie and Freddie will combine to contribute enough dividends to the Treasury in
2013 $40 billion to cover the costs of the National Institutes of Health (~$30
billion) and half of the Department of Agriculture (~$20 billion). And due to a
looming change to the accounting treatment of deferred tax assets, the actual cash
payments to Treasury in 2013 could be a multiple of this figureThe profits at
Fannie and Freddie are about to explode upward in 2013, as Fannie and Freddie write
up the value of deferred tax assets they have accumulated over the years. At year end,
Fannie and Freddie reported valuation allowances that reduced the value of their
deferred tax assets by $58.9 billion and $31.6 billion, respectively. Now that the
outlook has improved, it is reasonable to expect Fannie and Freddie to generate future
taxable income necessary to realize a large portion of their deferred tax assets.
Whenever they reach this judgment, their net income for the quarter will increase by
tens of billions of dollars, which will require Fannie and Freddie to either sell assets or
issue new debt to pay the required dividend to Treasury. When adding the $40 billion
in profits to the $90 billion in deferred tax assets, the total 2013 dividend to the
Treasury could exceed $130 billion.vi
04/10/2013: the Administration submitted its FY 2014 budget request to Congress.
This budget requested $3.9 billion for the CSR program. Also on April 10, 2013, OMB
submitted to Congress its sequestration preview report explaining what would happen
to the Presidents budget in the event of sequestration. According to this OMB report,
the $3.9 billion the Administration had requested to fund the CSR program was subject
to a mandatory 7.3 percent budget cut under sequester mandates. Notably, most
permanent appropriationsincluding the permanent appropriation for tax refunds
and credits were not subject to sequestration
4/22/2013: Michael Bright meets with Gene Sperling at WH

05/04/2013: WaPo: In effect, then, what we have is a set of off-balance-sheet
entities (Fan and Fred) using clever accounting to re-create an asset that it can
turn into cash and use to pay a bid dividend to an owner/sponsor (the Treasury)
anxious to pump up its financial results.vii
05/15/2013: Michael Bright meets with Gene Sperling at WH
05/17/2013: Presidents formal budget amendment submitted to Congress. CSR

appropriation request was still in this budget. The administration quietly withdrew it
at some time after.
05/20/2013: OMBs revised sequestration report, submitted to Congress on May 20,
2013, similarly reflected a 7.2 percent budget reduction for the CSR program. shortly
after OMB submitted its sequestration report and around the same time Assistant
Secretary Ellen Murray called the Senate Committee on Appropriations to informally
withdraw the Administrations request for an annual appropriationOMB began
developing a legal justification to justify an alternative source of funding for the CSR
program. OMB attorneys prepared a memorandum, which allegedly provided the
legal basis for the decision to make CSR payments from the premium tax credit
account. The Administration has refused to provide this memorandum to Congress
even pursuant to subpoena. Nevertheless, Administration witnesses made it clear
during transcribed interviews and a deposition that this memorandum was key to
obtaining buy-in from the highest levels of the Administration to move forward with
paying for the CSR program through the PTC account.
05/31/2013: Michael Bright meets with Wayne Ting at WH

06/11/2013: Senate Committee on Appropriations expressly denied the Presidents
request for nearly $4 billion to fund the CSR program

09/13/2013: Obama chooses Zients to replace Gene Sperling as Director of the
National Economic Council.

Fall 2013: As OMB was preparing and vetting its legal memorandum both internally
and with other agencies, senior officials at the IRS expressed concerns about the
funding source for the CSR program. For example, IRS employees raised questions
about establishing sufficient IRS audit trails, especially because CMS would be
directing CSR payments out of an IRS-managed account. And so there was already
some confusion and concern about IRS from an audit standpoint, about being
able to trace these payments all the way back to the source, which is
fundamental for a financial audit In late 2013, OMB shared this memorandum
with top Administration officials at several departments and agencies. For example,
OMB showed the memorandum to both the Treasury and HHS general counsel offices.
Additionally, then-OMB General Counsel Geovette Washington briefed then-Attorney
General Eric Holder on the issue. According to witness testimony, the Attorney General
personally approved the legal analysis in the memorandum. High-level IRS officials
raised concerns about this plan, but the decision had already been made. Toward the end
of 2013, several high-level IRS officials began raising concerns about the source of
funding for the CSR program. The first CSR payments were scheduled to be paid out at
the end of January 2014. Only a couple of months earlier, the IRS learned that the
Administration would be using an IRS-administered permanent appropriationnot
subject to sequestrationto fund the CSR program instead of an annual appropriation
to HHS. According to the former-IRS Chief Risk Officer, [t]he question at hand became
whether or not the [ACA] actually authorized, appropriated those dollars using the
permanent appropriation [under 31 1324].2 After the IRS raised these concerns to
OMB, OMB permitted the IRS officials to review its memorandum at the Old Executive
Office Building. At this meeting, OMB officials instructed the IRS officials not to take
notes or take a copy of the memorandum with them.

11/2013: Meetings between IRS, OMB, DOJ and confidential WH representatives.
Appear to be about funding CSR but Congress stymied on details by deliberative
privilege.
02/21/2014: WSJ Fannie and Freddie sent $130 billion to the Treasury last year, the
first year in which they were required to send most of their net income to the
government as a dividend payment.viii
04/11/2014: Obama selects Sylvia Matthers Burwell to replace Kathleen Sebelius as

Secretary of Health & Human Services.
05/22/2014: President Obama nominated former HUD Secretary Shaun Donovan to be
the next director of the Office of Management & Budget. Donovan has no relevant work
experience in budget analysis and his educational credentials are unrelated
(Master of Public Administration from the John F. Kennedy School of Government and a
Master of Architecture from the Graduate School of Design).
06/09/2014:Brian Deese becomes Acting Director of OMB 06/12/2014 Michael
Bright meets with Jeff Zients at WH

HHS to GSE Language

i http://reason.com/blog/2016/05/12/federal-court-rules-that-obamacare-subsi ii
http://thehill.com/policy/healthcare/279695-judge-rules-for-house-gop-in- obamacare-suit
iii https://en.wikipedia.org/wiki/Jeffrey_Zients
iv http://waysandmeans.house.gov/hearing-on-the-presidents-fiscal-year-2013- budget-
proposal-with-u-s-department-of-health-and-human-services-secretary- kathleen-sebelius/
v http://www.economics21.org/html/fannie-and-freddies-huge-profits-raise- questions-future-
mortgage-finance-463.html
vi http://www.economics21.org/html/fannie-and-freddies-huge-profits-raise- questions-future-
mortgage-finance-463.html
vii https://www.washingtonpost.com/news/wonk/wp/2013/05/04/this- accounting-tweak-by-
fannie-mae-and-freddie-mac-will-mean-60-billion-for-the-u-s- government/
viii
http://www.wsj.com/articles/SB100014240527023036364045793967006974159 02

EXHIBIT 2
EXHIBIT 3
COMMON SECURITIZATION PLATFORMCHRONOLOGY

Date Event Source
Mortgage Bankers Association creates blueprint for Corker Warner bill. They abandoned efforts to rebuild the private label securitization mortgage http://archives.financialservices.house.gov/media/file/hearings/111/berman_t
9/2009
market, and instead use the GSEs infrastructure to create. estimony.pdf
American Securitization Forum, who is tasked with Project Restart in 2008, pitches a broad-based platform for future securitization. Notwithstanding the http://www.banking.senate.gov/public/_cache/files/ce52591a-8855-48b2-
10/7/2009
success of the TALF program and the restoration of a modest degree of securitization financing and liquidity in some market segments, significant 8bb7-
challenges remain, including establishing a stable, sustainable and broad-based platform for future securitization market issuance and investment activity e31ee80d0428/23C6AE00CC53D93492511CC744028B5E.millerbankingcommitt
that is less reliant on direct government support. eetestimony100609.pdf
FHFA White Paper: Building a New Infrastructure for the Secondary Mortgage Market (Excerpt: The purpose of this white paper is to describe a proposed http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/FH
10/4/2012
framework for both a new securitizationplatform) FA_Securitization_White_Paper_N508L.pdf
FHFA: Prepared remarks of Edward DeMarco (Excerpt: Moving on to the build goal, the basic premise is that the Enterprises outmoded proprietary http://.www.fhfa.gov/Media/PublicAffairs/Pages/Remarks-as-Prepared-
3/4/2013 infrastructures need to be updated and maintained, and any such update should provide enhanced value to the mortgage market with a common and for- Delivery-Edward-J-DeMarco-Acting-Director-FHFA-National-association-
more efficient model.) for- Business-Economics-.aspx

Fannie Mae: First mention of "common securitization platform" in FNMA SEC filing. (Excerpt: Performance Goals for 2013 In conjunction with FHFA,
continue the foundational development of the CSP: Establish initial ownership and governance structure for the CSP. Assign dedicated resources and https://www.sec.gov/Archives/edgar/data/310522/000119312513098581/d4
3/8/2013
establish independent location site for the CSP Team. Develop the design, scope and functional requirements for the CSPs modules and develop the 96259d8k.htm
initial business operational process model.Develop multi-year plans, inclusive of CSP build, test and deployment phases, and the Enterprises related
system and operational changes. Develop and begin testing the CSP. Support FHFA progress reports to the public on the design, scope and functional
requirements. Update documents based on feedback received.
FHFA: A Progress Report on the Common Securitization Infrastructure http://www.fhfa.gov/PolicyProgramsResearch/Policy/Documents/WhitePaper
4/30/2013
ProgressReport43013.pdf

Treasury: Testimony of Secretary Jacob J. Lew Before the Senate Committee (Excerpt: Specifically, the Council recommends that the FHFA continue to
5/21/2013 https://www.treasury.gov/press-center/press-releases/Pages/jl1952.aspx
pursue changes such as a common securitization platform, model legal agreements, improvements to the mortgage recordation and title transfersystem,
and an improved compensation system for mortgage servicers. )
7/26/2013 Freddie Mac: Inaugural STACRTransaction Freddie Mac Presentation
http://www.fhfa.gov/Media/PublicAffairs/Pages/Remarks-as-Prepared-
10/7/2013
FHFA: Formation of Common Securitization Solutions, LLC for- Delivery-Edward-J-DeMarco-Acting-Director-FHFA-National-association-
http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-
10/7/2013
FHFA Announces Significant Steps in Organization of Joint Venture to Establish Common Securitization Platform Significant- Steps-in-Organization-of-Joint-Venture-to-Establish-Common-
10/15/2013 Fannie Mae: Inagural credit-linked securities offering under Connecticut Avenue Securities (CAS) series http://fanniemae.com/portal/funding-the-market/credit-risk/conn-ave.html
Fannie Mae: Wording in SEC filing (Excerpt: In March 2013, FHFA announced that a new business entity would be established by Fannie Mae and Freddie
https://www.sec.gov/Archives/edgar/data/310522/000031052213000205/fan
11/7/2013 Mac that would be separate from the two companies in order to further the goal of building a common securitization platform that would function like a
niemaeq30930201310q.htm
market utility.)
11/25/2013 FHFA: Progress Report - Implementation of Strategic Plan for Enterprise Conservatorships http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/20131125_Conserv
11/25/2013 FHFA: FHFA Progress Report Details Advancement on Securitization Infrastructure and Credit Risk Sharing http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Progress-Report-Details

Treasury: Remarks Of Counselor To The Secretary For Housing Finance Policy Dr. Michael Stegman Before The ABS Vegas 2014 Conference (Excerpt: In the
lead up to a successful transition, the GSEs should ramp up their risk sharing transactions, and make strong progress on their CommonSecuritization
Platform, since a single securitization utility is central to the future system. )

Treasury: Testimony Of Secretary Jacob J. Lew Before The House Financial Services Committee On The 2014 Annual Report Of The Financial Stability
Oversight Council (Excerpt: Member agencies also made progress on the risk-retention rule, and infrastructure reforms such as the development of the
Common Securitization Platform are movingforward.)
8/11/2014 Freddie Mac: First HQ (High LTV) Transaction Freddie Mac Presentation

Treasury: Remarks by Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman Before The North Carolina Bankers Association 2014
9/9/2014 American Mortgage Conference (Excerpt: Three such actions include expanded efforts to transfer GSE mortgage credit risk to the private sector through https://www.treasury.gov/press-center/press-releases/Pages/jl2625.aspx
credit risk-sharing transactions; continued progress on the development of the Common Securitization Platform; and, most recently, a decision to
transition the Enterprises towards the issuance of a single security.)

Treasury: Remarks of Treasury Deputy Assistant Secretary Patrick Pinschmidt before the ABS East Conference (Excerpt: In the meantime, the Council will
9/22/2014 continue to encourage relevant agencies and Congress to develop and implement a broad plan to reform the housing finance system grounded in three https://www.treasury.gov/press-center/press-releases/Pages/jl2644.aspx
principles: First, reduce the GSE footprint. Second, facilitate increased private mortgage market activity. And third, build a new housing infrastructure, as
exemplified by the Common Securitization Platform.)

Treasury: Remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman before the Virginia Governors Housing Conference
10/29/2014 (Excerpt: Three such actions include expanded efforts to transfer GSE mortgage credit risk to the private sector through credit risk-sharing transactions; https://www.treasury.gov/press-center/press-releases/Pages/jl2682.aspx
continued progress on the development of the Common Securitization Platform; and, most recently, a decision to transition the Enterprises towards the
issuance of a single security.)
FHFA: 2015 Scorecard for Fannie Mae, Freddie Mac and Common Securitization Solutions (Excerpt: Continue working with FHFA, each other, and Common

Securitization Solutions, LLC to build and test the Common Securitization Platform (CSP) and to implement the changes necessary to integrate the
1/1/2015 http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2015-Scorecard.pdf
Enterprises
related systems and operations with the CSP. )

3/5/2015 Treasury: Remarks by Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman Before the Goldman Sachs Third Annual Housing https://www.treasury.gov/press-center/press-releases/Pages/jl9987.aspx
Finance Conference (Excerpt: developing a securitization infrastructure that can serve as the backbone for the broader mortgage market over time. All of
these initiatives are consistent with the long-term vision of providing secure homeownership opportunities for responsible middle-class families.)

https://www.treasury.gov/initiatives/fsoc/studies-
5/19/2015 Treasury: FSOC 2015 annual report (Excerpt: The Council continues to support this effort to enhance efficiencies in the secondary market and to allow for
reports/Documents/2015%20FSOC%20Annual%20Report.pdf
integration into a future system featuring the Common Securitization Platform.)
7/29/2015 Freddie Mac: First Actual Loss Transaction with On the Run Collateral Freddie Mac Presentation
9/28/2015 Freddie Mac: First Actual Loss Transaction with High LTV Collateral Freddie Mac Presentation

12/4/2015 Treasury: Remarks by Counselor Antonio Weiss at The Consumer Federation of America's Annual Financial Services Conference (Excerpt: Finally, FHFA is https://www.treasury.gov/press-center/press-releases/Pages/jl0291.aspx
working with the GSEs to build the Common Securitization Platform (CSP), which will allow both GSEs to issue a standardized mortgage-backed security.
The creation of a fungible security between Fannie and Freddie will strengthen their infrastructure and improve overall market functioning.)

EXHIBIT 4
May 23, 2016
Joshua Rosner
646/652-6207
jrosner@graham-fisher.com
Twitter: @JoshRosner
FORMER WHITE HOUSE OFFICIALS INVOLVED IN GSE SCANDAL
Last week, 53 documents pertaining to the governments 2012 decision to impose a

Net Worth Sweep on Fannie Mae and Freddie Mac were unsealed. These documents
reveal a brazen attempt, by a group of former White House, United States Treasury
(Treasury), and Federal Housing Finance Agency (FHFA) officials, to
apparently violate the spirit and perhaps letter of the law, exceed their statutory
authorities and advance a bank-centric housing finance reform schemei nearly identical
to an industry groups 2009 proposal.iiThe newly de-designated documents also suggest a
concerted attempt to cover-up these actions by misleading Congress and the public in
2012 and the United States District Court for the District of Columbia in 2013.
Given that these are the first documents that have been seen by the public which directly
implicate former high-ranking White House officials, the behaviors exposed in these
documents is deeply troubling and raise serious questions about the content of the
approximately 12,000 documents on which presidential privilege, deliberative
process privilege and attorney-client privilege have been asserted, as well as the
propriety of those privilege assertions.
Background
During the financial crisis, Congress passed and the President signed into law the
Housing and Economic Recovery Act of 2008 (HERA). The goal of HERA was to
rectify shortcomings in the oversight of Fannie Mae and Freddie Mac, to create a new
and appropriately empowered regulator, and address the potential rehabilitation of each
company. The law gave the new regulator, FHFA, the authority to establish
criteria governing the portfolio holdings of the enterprises, to ensure that the
holdings are backed by sufficient capital and consistent with the mission and the
safe and sound operations of the enterprises and to establish risk-based capital
requirements for the enterprises to ensure that the enterprises operate in a safe and
sound manner, maintaining sufficient capital and reserves to support the risks that
arise in the operations and management of the enterprises.
Between 1999 and 2008 there had been several legislative reform attempts to bolster
oversight of the GSEs while adding both conservatorship and receivership authority to
their regulators enumerated powers. Conservatorship authority was intended to
authorize the FHFA to appoint a conservator who could take such action as may be (i)
necessary to put the regulated entity in a sound and solvent condition; and (ii)
appropriate to carry on the business of the regulated entity and preserve and conserve the
assets and property of the regulated entity. In contrast, receivership authority was
Please refer to important disclosures at the end of this report.

The Weekly Spew May 2016
intended to manage the potential failure of a GSE that could not be rehabilitated to a
sound and solvent condition and to place the regulated entity in liquidation and proceed
to realize upon the assets of the regulated entity in such manner as the Agency deems
appropriate, including through the sale of assets, the transfer of assets to a limited-life
regulated entity or the exercise of any other rights or privileges granted to the Agency
under this paragraph. There is no middle ground: distressed enterprises may be
placed in either conservatorship or receivership, with each respectively having its
own distinct goals and specific powers assigned to the party administering it.
Key Information in the Recently Unsealed Documents
The documents demonstrate that former Obama Administration officials violated

the intent and purpose of HERA while choosing a path not provided for in that
statute or any other. In 2012, as the GSEs were on the verge of massive and sustainable
profitability, the Administration rushed to change the terms of the Preferred Stock
Purchase Agreement (PSPA) which governed Treasurys financial support to the GSEs
in conservatorship.
That agreement was originally put into place in 2008 and amended twice in 2009. The
2012 changes, referred to as the Net Worth Sweep, demanded terms that forced the
GSEs to sweep any future profits directly into Treasurys coffers in perpetuity. Rather
than retaining earnings and building capital in accordance with the goal of
rehabilitation (as required in a conservatorship pursuant to HERA, and as was
demanded of every other financial institution after the crisis), the Third
Amendment ensured that the GSEs could never rebuild capital nor no matter how
much money they returned to the Treasury be allowed to ever repay the
government. These actions clearly violate the most basic requirement of HERA that
instruct the Director of FHFAiii to oversee the prudential operations of each regulated
entity and to ensure that each regulated entity operates in a safe and sound manner,
including maintenance of adequate capital and internal controls.
The newly-released documents also show the actions of these former senior officials
were premeditated and defended with false public statements which falsely
articulated there was an imminent risk the GSEs would need more financial assistance.
While there are Constitutional questions worth considering regarding the legal authority
of the Executive to create a new tax on private companies and to spend the receipts of
that tax without congressional appropriations, that is not the subject of this document.
Instead, we will focus on the actions of these administration officials that demonstrate
their true objectives and seemingly extra-legal behaviors.
HERA specifically requires that the Treasury make certain determinations in

writing before exercising its authority to purchase obligations or securities of the
-2-
GSEs.iv The pertinent section of the statute reads: In connection with any use of this
authority, the Secretary must determine that such actions are necessary to provide
stability to the financial markets and prevent disruptions in the availability of
mortgage finance. HERA further requires that any Treasury exercise of authority
must take into account: The corporations plan for the orderly resumption of private
market funding or capital market access The probability of the corporation
fulfilling the terms of any such obligation or other security, including repayment
The need to maintain the corporations status as a private shareholder-owned company
Restrictions on the use of corporation resources, including limitations on the
payment of dividends and executive compensation and any such other terms and
conditions as appropriate for those purposes. Upon making such a determination,
HERA requires that Treasury report to the Committees on the Budget, Financial
Services, and Ways and Means of the House of Representatives and the Committees on
the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate as to the
necessity for the purchase and the determinations made by the Secretary under
subparagraph (B) and with respect to the considerations required under subparagraph
(C), and the size, terms, and probability of repayment or fulfillment of other terms of such
purchase. While Treasury made, and reported, such determinations when
implementing the original PSPA in 2008 as well as the first and second amendments
in 2009, it failed to make any such determinations or reports at the time of the Third
Amendment. The language in HERA appears to anticipate and include amendments, as
the requirements are binding in connection with any use of this authority and an
amendment to the PSPA would have to be in connection to the original use of the
authority and not a new agreement.
On Saturday, August 18, 2012, the day after the Net Worth Sweep was announced, Jim
Parrott, a senior White House official serving on the National Economic Council
who was intimately involved in devising and implementing the Net Worth Sweep,
sent an email with the subject Great Job to Under Secretary of Domestic Finance
Mary Miller and other Treasury officials. This e-mail, and others recently unsealed,
make it clear that FHFA was not acting as an independent agency under HERAs
reuuirement that: When acting as conservator or receiver, the Agency shall not be
subject to the direction or supervision of any other agency of the United States or any
State in the exercise of the rights, powers, and privileges of the Agency.v The email
states: You guys did a remarkable job on the PSPAs this week. You delivered on a
policy change of enormous importance thats actually being recognized as such by the
outside world (or the reasonable parts anyway), and as a credit to the Secretary and the
President. It was a very high risk exercise, which could have gone sideways on us any
number of ways, but it didn't great great work.vi
Another internal e-mail from Mario Ugoletti (former Senior Advisor to the Director at
FHFA, and previously a senior official at Treasury), clearly shows that Treasury not
FHFA was clearly calling the shots:
-3-
Close Hold: As a heads up, there appears to be a renewed push to move forward
on PSPA amendments. I have not seen the proposed documents yet, but my
understanding is that largely the same as previous versions we had reviewed in
terms of net income sweep, eliminating the commitment fee, faster portfolio wind
down, and a de minimis safe harbor for ordinary course transactions.vii
Of course, this is simply confirmation of that which former Treasury Secretary Hank
Paulson articulated in his 2010 book On the Brink: FHFA had been balky all along.
That was a big problem because only FHFA had the statutory power to put Fannie and
Freddie into conservatorship. We had to convince its people that this was the right thing
to do, while making sure to let them feel they were still in charge.viii
Email correspondence transmitted by Jim Parrott also lays bare the motivation in
implementing the Net Worth Sweep as to ensuring Fannie and Freddie would not be
able to use their substantial profits to repay the government, rebuild capital, and
return to normal business operations all in direct opposition to the clear statutory
requirements of HERA. In what appears to be his first action on the day that the Net
Worth Sweep was announced, Mr. Parrott emailed Peter Wallison of the conservative
think tank American Enterprise Institute to give him a heads up and coordinate
messages. The email states: Hey guys. If youre interested, be glad to talk you through
the changes were announcing on pspas today. Feel like fellow travelers at this point so I
owe it to you. Just let me know and suggest a few times. Im also looping in Tim
[Bowler], who runs the capital markets show over at [Treasury] and is more adept at the
mechanics should we want to go there.ix
Later that day, in a separate email, Mr. Parrott states that Wallisons comments to
Bloomberg News about the Net Worth Sweep were exactly right on substance and
intent.x The comments to which Mr. Parrott appears to refer are Mr. Wallison in a
Bloomberg News article: The most significant issue here is whether Fannie and Freddie
will come back to life because their profits will enable them to re-capitalize themselves
and then it will look as though it is feasible for them to return as private companies
backed by the government . . . What the Treasury Department seems to be doing here,
and I think its a really good idea, is to deprive them of all their capital so that doesnt
happen.xi In other emails sent around the same time, Parrott said that under the Net
Worth Sweep, the Dividend is variable, set at whatever profit for quarter is, eliminating
ability to pay down principal (so they cant repay their debt and escape as it were).xii
Parrott also indicated that the aim of the Net Worth Sweep was ensuring that [the
Companies] cant recapitalize by clos[ing] off the possibility that they ever go
private again.xiii
In yet another email exchange, Parrott notes that all the investors will get this very
quickly in response to a message from Mary Goodman, a managing director at James
-4-
Caird Asset Management (and a former Senior Advisor to Treasury Secretary Tim
Geithner who later served as Special Assistant to the President for Financial Markets at
the National Economic Council), who stated that the Net Worth Sweep should lay to
rest permanently the idea that the outstanding privately held pref will ever get turned
back on.xiv
Consistent with Parrotts statements, in a deposition transcript released last week,

Fannies Chief Financial Officer Susan McFarland testified that she didnt believe that
Treasury would be too fond of a significant amount of capital buildup inside the
enterprises.xv Indeed, a February 2012 Treasury document on housing finance reform
proved her correct, as it reveals that Treasurys actions were premeditated and motivated
by a desire to restructure the PSPAs to allow for variable dividend payment based on
net worth as a transition step towards winding down the Companies.xvi The day before
the announcement of the Third Amendment, an internal Treasury document makes
clear that the Administrations goal was tied to its willingness to violate HERA and
desire to wind down the GSEs as quickly as possible by taking all of their profits
going forward, we are making clear that the GSEs will not ever be allowed to return to
profitable entities at the center of our housing finance system.
Further demonstrating the motivation of government officials, in his deposition transcript

former FHFA Acting Director Edward DeMarco testified that he believed that the
Companies had flawed charters and therefore, without consideration of his
unambiguous obligations as defined in HERA, he did not plan to return them to a safe
and solvent condition.
Treasury and FHFA Affirmatively Mislead the Public and Federal Judge Royce
Lamberth
After the Third Amendment went into effect and litigation ensued, FHFA submitted a
sworn declaration by Mario Ugoletti to the D.C. District Court stating that the intention
of the [Net Worth Sweep] was not to increase compensation to Treasury. However, a
Treasury document dated August 16, 2012 the day before the Net Worth Sweep was
announced lists the Companies improving operating performance and potential
for near-term earnings to exceed the 10% dividend among the reasons for promptly
adopting the Net Worth Sweep.xvii That same document reveals Treasury anticipated
robust profits from both Fannie Mae and Freddie Mac for the foreseeable future, and was
therefore putting in place a better deal for taxpayers.
The unsealed documents also show that Treasury and FHFA understood that by mid-
2012 the Companies had returned to sustained profitability, separate and apart from
their substantial deferred tax assets and loan loss reserves. Minutes emailed among
senior FHFA officials from Fannies July 9, 2012, executive management meeting
-5-
indicate that Fannies Treasurer referred to the next 8 years as likely to be the golden
years of GSE earnings. xviii
During her deposition, Fannies Chief Financial Officer Susan McFarland said that she
did not think that Fannie Mae was in a death spiral in mid-August of 2012 that would
have prevented it from paying Treasurys 10% cash dividend.xix In April 2012, Treasury
Under Secretary for Domestic Finance Mary Miller told Secretary Geithner that she
had met with officials from the Capital Group in Los Angeles (a financial services
company that manages the American Funds) who indicated that it had done a fair
amount of work analyzing the sufficiency of the PSPAs and thought that they provided
adequate protection for investors.xx Fannie Maes Chief Executive Officer Timothy
Mayopoulos maintained a similar viewpoint and at an August 6, 2012, executive
management meeting, stated that Goldman Sachs had confirmed that foreign investors
seem to have little concern regarding the PSPAs upcoming expiration date.xxi On
August 7, 2012, a Treasury official observed that home price, delinquency and refi
trends at the GSEs were all very positive.xxii
An outside analysis circulated among senior FHFA officials on August 9, 2012, discusses
the GSEs convincing return to profitability in the first half of 2012.xxiii Similarly,
during this period an FHFA official states that an article wasnt news to us when it
observed that at the current quarterly burn rate of Treasury preferred stock Fannie
and Freddies capital backstops should last them quite a while after the unlimited
period expires at the end of the year.xxiv Treasury was also in possession and aware of
an internal analysis from February 2012 by its former chief restructuring officer Jim
Millstein who stated: with market-based g-fees and investment portfolios sized solely
for liquidity purposes, Fannie and Freddie could have the earnings power to provide
taxpayers with enough value to repay Treasurys net cash investments in the two
entities.xxv Keenly aware that the GSEs would be profitable and able to pay the
10% dividend required by the original PSPA, Treasury misled the public and the
judiciary when it asserted that the key reason for imposing the Net Worth Sweep on
August 17, 2012, was to end the circular practice of advancing funds to the GSEs simply
to have them pay dividends back to Treasury.
Deferred Tax Assets Another Honey Pot
In 2013 alone, Treasury swept over $130 billion dollars in GSE profits in the form of
dividends via the Net Worth Sweep. To highlight the scale of these dollars, these are
the same amounts recently at issue in a lawsuit over the cost of 10-yearsxxvi of
Obamacare reimbursements to insurers.xxvii A significant portion of those GSE
proceeds resulted from changes in how the Companies accounted for their deferred tax
assets and releases of their loan loss reserves. Prior to the release of these newly
unsealed documents, the Government claimed publicly and in court that it did not
-6-
anticipate these accounting adjustments when the Net Worth Sweep was announced.
The unsealed documents show that this claim was patently false.
As early as May 2012, Treasury and its consultant discussed returning the deferred
tax asset to the GSEs balance sheets.xxviii And a Treasury official observed in a July
2012 email that release of loan loss reserves could increase the [Companies] net
[worth] substantially.xxix
An internal briefing memo intended to prepare Treasury Under Secretary for Domestic
Finance Mary Miller for her August 9, 2012, meetings with senior management from
both GSEs reveals that Treasury was keenly focused on how quickly they forecast
releasing credit reserves.xxx Treasury also produced a copy of the presentation Freddie
presented at the August 9 meeting that includes a handwritten note: expect material
release of loan loss reserves in the future.xxxi The documents also reveal that Fannie
originally planned to recognize its deferred tax assets during the fourth quarter of 2012
just after the Net Worth Sweep was announced but before it went into effect, yet FHFA
forced the company to delay that action until 2013 by threatening the company that
recognizing the deferred tax assets in 2012 would force the Conservator to take certain
actions adverse to Fannies interests due to the effect that this accounting change would
have on Fannies remaining capital.xxxii After all, according to FHFA, [c]apital is key
driver for composite rating of critical concerns.xxxiii
Net Worth Sweep - Intentionally Stale Financial Projections
In 2014, before the D.C. District Court, Treasury produced financial projections
that purported to be from June 2012 and which appeared to demonstrate the
Companies would suffer large losses in the near term, and would therefore be unable to
afford a 10% cash dividend on Treasurys investment.xxxiv However, the newly de-
designated documents reveal that the figures in Treasurys June 2012 presentation
were taken from projections that Grant Thornton had prepared for Treasury in
November 2011 using data from September of that year.xxxv Furthermore, documents
released by the Court show that the Grant Thornton projections were not intended to be
valid 11 months laterxxxvi and, according to Fannie Chief Financial Officer Susan
McFarland, the outdated Grant Thornton figures were not anywhere close to what our
projections were showing in mid-2012 and that financial projections for Fannie could
become very dated very quickly given the changing environment in 2012.xxxvii
Treasury and FHFA contend that the Third Amendment was necessary because the
GSEs would not be able to meet the 10% dividend required under the prior PSPA
terms. Yet even the stale Grant Thornton projections which did not account for
improvements in the housing market that occurred after September 2011 show
that Fannie would be able to pay a 10% cash dividend on Treasurys investment
-7-
until 2026xxxviii and that Freddie would be able to pay its dividend in cash until
2039.xxxix Even so, Treasurys stated concern about the ability of the companies to
make dividend payments is spurious as, prior to the Net Worth Sweep, the
Companies maintained the option to pay Treasury its dividends in kind at a 12%
rate rather than the 10% cash rate. This PIK would increase the Treasurys
liquidation preference and could be paid with additional preferred stock to the
extent that they could not afford to pay the dividends in cash. Recently unsealed
documents repeatedly acknowledge this fact.xl
As we have shown previously, financial projections possessed by Treasury and FHFA

just prior to the Net Worth Sweep showed that both agencies were well aware that the
GSEs were on the verge of massive profitability. We now know that Treasury, and the
governments lawyers, passed off old projections to the District Court as if they had
come from the time of the Net Worth Sweep. Such actions are very troubling, as
demonstrated by another recent case in which the federal government, as defendant,
knowingly misled a federal court.xli
53 Documents Are Just The Beginning
The Nations largest financial institutions continue to spend tens of millions of dollars
lobbying to take control of the secondary mortgage marketxlii even as leading affordable
housing advocates and small lenders warn of flaws in their legislative and administrative
proposals and, instead, support requiring the GSEs to build capital.xliii Proper reform
requires a full understanding and accounting of what transpired in the businesses of the
GSEs between the time they were put in Conservatorship in 2008 and the implementation
of the Third Amendment to the PSPA.
Before any further administrative or legislative actions are implemented it is critical

that the public has the right, through full transparency, to review the 12,000
remaining documents on which privilege has been asserted. Given what has been
discovered in just these 53 documents, which are presumably not the most damning,
opacity cannot be supported on any grounds.
Last month, in her first order making public documents that contradict the governments
spurious claims, Court of Federal Claims Justice Margaret Sweeney wrote: instead of
harm to the Nation resulting from disclosure, the only harm presented is the potential
for criticism of an agency, institution, and the decision-makers of those entities. The
court will not condone the misuse of a protective order as a shield to insulate public
officials from criticism in the way they execute their public duties... Moreover, there
can be no serious dispute that it is extremely rare for a document filed under seal in a
civil case to remain so for all time. There is no suggestion that the documents subject
to the protective order are classified as relating to national security. Nor do these
-8-
documents contain trade secrets or proprietary information. However, even cases in

which trade secrets and proprietary information are filed under seal and subject to a
protective order, it is not unusual that after the passage of time, that same information
is eventually unsealed because the protective order has outlived its usefulness. Indeed,
because the government does not argue that information that it requests remain
protected concerns matters involving national security, trade secrets, or proprietary
information, or that specific privileges attach to any of the seven documents, it is clear
that there is no longer a need to maintain the protected designation for them.xliv Her
logic is compelling, and we should look forward to the release of more documents.
i
UST00480703.
ii
MBAs Recommendations for the Future Government Role in the Core Secondary Mortgage Market,
John Courson & Michael Berman.
iii
Housing and Economic Recovery Act of 2008, Sec. 1313.
iv
Housing and Economic Recovery Act of 2008, Sec. 1117.
v
See the Housing and Economic Recovery Act of 2008 at 1117, AGENCY NOT SUBJECT TO ANY
OTHER FEDERAL AGENCY
vi
UST00503985.
vii
FHFA00031696 dated August 9, 2012
viii
Paulson, Henry M., On the Brink. 2010. 6.
ix
UST00061067.
x
UST00503986.
xi
C. Hopkins & C. Benson, U.S. Revises Payment Terms for Fannie Mae, Freddie Mac, Bloomberg,
August 17, 2012, http://goo.gl/1YQhqE
xii
UST00061067.
xiii
UST00503991.
xiv
UST00517664.
xv
McFarland Deposition Transcript at 149-150.
xvi
UST00480703 at UST00480714; see also FHFA00025815 for January 2012 agenda of meeting between
Treasury and FHFA observing that FHFA and Treasury share common goals to . . . provide the public
and financial markets with a clear plan to wind down the GSEs).
xvii
UST00554581.
xviii
FHFA00047889.
xix
McFarland Deposition Transcript.
xx
UST00537214.
xxi
FHFA00107336.
xxii
UST00002404.
xxiii
FHFA00002036.
-9-
xxiv
FHFA00012792.
xxv
UST00502303.
xxvi
Judge Rules Against Administration In Cost-Sharing Reduction Payment Case, Timothy Jost,
HealthAffairsBlog, May 12, 2016 available at: http://healthaffairs.org/blog/2016/05/12/judge-blocks-
reimbursement-of-insurers-for-aca-cost-sharing-reduction-payments/ (See: If the CSR payments to
insurers stopped, the insurers would still be legally required to reduce cost sharingat a cost $7 billion this
year and $130 billion over the next ten yearswithout reimbursement.
xxvii
United States House of Represantives, Plaintiff, v. Sylvia Matthews Burwell in her official capacity as
Secretary of the United States Department of Health and Human Services, et al., Civil Action No. 14-1967
(RMC), United States District Court for the District of Columbia, Rosemary M. Collyer, United States
District Judge, available at PACER (See: " On April 10, 2013, the Office of Management and Budget
(OMB) submitted the Presidents Fiscal Year 2014 Budget of the U.S. GovernmentThe Affordable Care
Act unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402
reimbursements to insurersSuch an appropriation cannot be inferred. None of the Secretaries extra-
textual arguments-whether based on economics, 'unintended' results, or legislative history-is persuasive
the Court will enter judgment in favor of the House of Representatives and enjoin the use of unappropriated
monies to fund reimbursements due to insurers under Section 1402.
"
xxviii
UST00405880.
xxix
UST00406876.
xxx
UST00556835.
xxxi
UST00532169.
xxxii
DT-055484.
xxxiii
DT-055781.
xxxiv
UST3847 and UST3849.
xxxv
GT007252 and GT007328.
xxxvi
Eberhardt Deposition Transcript at 209.
xxxvii
McFarland Deposition Transcript at 76 and 79.
xxxviii
GT007252 at GT007276.
xxxix
GT007328 at GT007354.
xl
DT-061696; DT-058799; FHLMC_00000475; PWC-FM 00008736; PWC-FM 00009055; PWC-FM
00009099; PWC-FM 00010617; FHFA00025049; FHFA00028608; FHFA00028634; FHFA00083259;
FHFA00083979; Ugoletti Deposition Transcript at 52; Kari Deposition Transcript at 140; GT001514.
xli
Memorandum Opinion and Order, State of Texas et al., Plaintiffs v. United States of America, et al.,
Defendants, Andrew S. Hanen, United States District Judge, CIVIL NO. B-14-254 (To the contrary, this
Court is disappointed that it has to address the subject of lawyer behavior when it has many more pressing
matters on its docket. It is, at best, a distraction, and there is nothing best about the conduct in this case.
The United States Department of Justice (DOJ or Justice Department) has now admitted making
statements that clearly did not match the facts. It has admitted that the lawyers who made these statements
had knowledge of the truth when they made these misstatements These misrepresentations were made on
multiple occasions starting with the very first hearing this Court held The duties of a Government
lawyer, and in fact of any lawyer, are threefold: (1) tell the truth; (2) do not mislead the Court; and (3) do
not allow the Court to be misled. See MODEL RULES OF PROFL CONDUCT r. 3.3 cmts. 2 & 3 (AM.
BAR ASSN 2013). The Governments lawyers failed on all three fronts There is no de minimis rule that
applies to a lawyers ethical obligation to tell the truth.)
xlii
Housing. Opensecrets. N.p., n.d. Web. 22 May 2016.
https://www.opensecrets.org/lobby/issuesum.php?id=HOU&year=2016&sort=a&page=1
xliii
Rosner, Joshua. Housing Policy Experts Call For Recapping and Reforming Fannie and Freddie,
Oppose Jumpstart GSE Reform Language in Omnibus. PR Newswire, 16 Dec. 2015. Web. 21 May 2016.
xliv
Fairholme Funds, Inc., et al., v. The United States. United States Court of Federal Claims. 13 Apr. 2016.
PACER. Web. 22 May 2016.
- 10 -
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- 11 -
EXHIBIT 5
A Revolving Door Helps Big Banks Quiet Campaign to Muscle Out Fannie and Freddie
A behind-the-scenes effort of Wall Street banks to take over the mortgage market is driven by advocates who switch
between roles in Washington and the private sector.
New York Times
By Gretchen Morgenson
7 December 2015
Seven years after their dubious lending practices helped push the United States economy to the brink of
disaster, the nations largest banks are closing in on a long-sought goal: to unseat Fannie Mae and Freddie
Mac, the mortgage finance giants, and capture their share of the profits in the countrys $5.7 trillion home
loan market.
Taking place largely behind the scenes, the movement to take over the mortgage market has been
propelled in part by a revolving door between Washington and Wall Street, an investigation by The New
York Times has found.
While the big banks effort to enshrine their vision into law has failed so far, plans to replace Fannie and
Freddie which have long supported the housing market by playing a unique role as so-called
government-sponsored enterprises, or G.S.E.s are still very much alive. The Obama administration has
largely embraced the idea, and government regulators are being pushed to put crucial elements into
effect.
A review of lobbying records, legal filings, and internal emails and memorandums, as well as housing
officials calendars and White House and Treasury visitor logs, illuminates the banks effort. Assisting in
this work, the documents show, is a group of high-level housing finance specialists who have moved
back and forth between public service and private practice in recent years.
The charge began under Michael D. Berman, who has served not only as chairman of the Mortgage
Bankers Association, one of the industrys most influential lobbying organizations, but also as a senior
adviser to Shaun Donovan, who was the secretary of Housing and Urban Development from 2009 to
2014.
Conversely, Mr. Berman recruited David H. Stevens who was one of the lead architects of the Obama
administrations proposal to phase out Fannie and Freddie to the mortgage bankers group, where Mr.
Stevens is now president and chief executive.
Many in Congress believe Fannie and Freddie contributed to the collapse of the housing bubble, and they
still rest on a shaky financial foundation, largely because of actions taken by the Treasury and the
companies regulator.
While they continue to pose a risk to taxpayers, Fannie and Freddie so far have not been replaced by Wall
Street behemoths, partly because local banks popular with many lawmakers are resistant. Moreover,
some members of Congress are concerned that low-income borrowers would not be well served by
private lenders.
For all the problems associated with Fannie and Freddie, some housing experts say, allowing the nations
largest banks to assume greater control of the mortgage market would most likely increase costs for
borrowers. It would also reduce participation and competition from smaller lenders, and could imperil
taxpayers because of the potential for even greater bailouts for financial institutions that Washington
considers too important to be allowed to fail.
Elise J. Bean is among those who are troubled by the quiet advances Wall Street is making toward Fannie
and Freddies turf. A former chief counsel for the Senate Permanent Subcommittee on Investigations, Ms.
Bean oversaw a bipartisan investigation into the causes of the financial crisis, playing a central role in the
committees four hearings and helping produce a revealing 650-page report.
Fannie and Freddie have their flaws, but that doesnt mean the answer is to hand over their business to
the banks, Ms. Bean said. Their role in the mortgage market is too important to put under the thumb of
banks with a history of toxic mortgages, structured finance abuse and consumer maltreatment.
Behind the Bailout
Decades ago, Fannie Mae and Freddie Mac were created by the government to provide prospective home
buyers with financing in both good times and bad. Fannie was born in 1938 during the Depression, when
bank lending dried up. The company didnt make mortgage loans outright; it bought them from other
entities. Later, it pooled loans in securities that it sold to investors.
If credit was scarce, the thinking went, banks would be more inclined to lend knowing they could sell a
loan to Fannie or to Freddie, a competitor company created in 1970. A bank could then turn around and
make another loan, earning fees while keeping the housing finance wheels spinning.
In addition to benefiting borrowers, this system enabled small community lenders to sell their loans to
Fannie and Freddie as easily as even the biggest guns in banking. This gave borrowers a choice of
lenders, encouraging competition and keeping costs down.
Although government creations, Fannie and Freddie also had public shareholders. Fannie sold shares for
the first time in 1968 and Freddie followed suit two decades later. As the nations economy grew and
homeownership expanded, Fannie and Freddie became increasingly powerful and profitable institutions.
The unusual hybrid of shareholder-owned companies carrying the governments imprimatur worked
well for a long time. But the combination turned sour in the 1990s when Fannie executives began using
the companys lush profits to finance lobbying efforts that enhanced their stature and independence in
Washington.
Throughout these years, Fannie and Freddies mounting profits, generated in part by their special ties to
the government, which put them at a financial advantage, also drew resentment from the nations largest
banks.
Fannies success wound up being a double-edged sword. Its enfeebled overseer, the Office of Federal
Housing Enterprise Oversight, allowed its enormous operations to rest on the tiniest sliver of capital,
increasing profits during the fat years. But when the financial crisis hit, expected loan losses at both
Fannie and Freddie overwhelmed the small amount of capital the companies had on hand.
About a week before Lehman Brothers collapsed in September 2008, the government stepped in. It put
Fannie and Freddie into conservatorship under the Federal Housing Finance Agency, a new and stronger
regulator created that summer in the Housing and Economic Recovery Act. The companies ultimately
drew about $187.5 billion from taxpayers in the bailout. They were put on a tight leash by their
government minders and were viewed as political poison by Democrats and Republicans alike.
In an interview on CNBC on Sept. 8, 2008, Henry M. Paulson, the Treasury secretary, talked about the
governments rescue of Fannie and Freddie as a steppingstone to a new housing finance system. Heaven
help us and our nation if we dont figure out what the right structure is going forward, he said.
Devising Alternatives
The ink was barely dry on the Fannie and Freddie bailout when the Mortgage Bankers Association got
busy. Mr. Berman, then vice chairman of the lobbying group and founder of CWCapital, a commercial
real estate lender and management firm specializing in multifamily housing projects, was tapped to
organize a campaign to privatize the nations broken home mortgage system.
With the housing market in collapse and Fannie and Freddie weakened and reviled, it was the perfect
time to push the mortgage bankers plan to take over the companies business and divide their prized
assets.
But with banks popularity plummeting after the financial crisis, their proposal had to be carefully
framed as a way to protect taxpayers from future bailouts.
When President Obama entered office in 2009, taking Fannie Mae and Freddie Mac off government life
support was far down his administrations to-do list. But when officials began turning their attention to
the matter in 2010, the industry-sponsored coalition was ready.
Its answer was to create new mortgage guarantors, backed by private capital, to take the place of Fannie
and Freddie. These entities would issue mortgage securities with government guarantees, a report issued
by the 22-member Council on Ensuring Mortgage Liquidity in late summer 2009 proposed.
The White Paper
The centerpiece of federal support for the secondary mortgage market should be a new line of mortgage-
backed securities.
The language in the Mortgage Bankers Associations white paper about the future of housing finance.
The council, overseen by Mr. Berman, was made up of mostly large banks and mortgage insurers. It also
recommended that assets belonging to Fannie and Freddie be used as a foundation by the new entities.
Chief among these assets were the mortgage underwriting systems the government-sponsored
enterprises had built to bundle loans into securities to be sold to investors.
The M.B.A.s position literally was: Get rid of Fannie and Freddie and create these new entities, Mr.
Berman said in a recent interview. But there were extraordinary amounts of value in the enterprises to
be reused in different ways in the new system.
At first, the industrys views gained little traction. The economy was in tatters, and lawmakers were not
yet ready to tackle the nations enormous and complex housing finance system.
Besides, Fannie and Freddie were providing virtually the only access American borrowers had to
mortgages during this period. Yes, they were still drawing money from taxpayers, but at least the
companies were financing loans as they always had, while big banks were withdrawing from the market.
Throughout 2009 and 2010, Mr. Berman and his colleagues pitched the mortgage bankers ideas, saying
that their plan would prevent the need for future bailouts and keep the home loan spigot open.
Bermans Testimony
The existing system extended an implied federal backing to all the activities of Fannie Mae and Freddie
Mac, including not only their mortgage guarantees, but also their portfolio investments, derivative
counterparties and corporate bondholders. Some of those activities were clearly undercapitalized,
underpriced and under-supervised.
From Michael Bermans testimony before Congress, which cites recommendations of the Mortgage
Bankers Association.
As Mr. Berman made the rounds, administration officials at Treasury and HUD began working on their
own plans regarding Fannie and Freddie. A primary participant in these discussions was Mr. Stevens,
then commissioner of the Federal Housing Administration, a part of HUD.
Mr. Stevens had joined the housing administration in mid-2009 from the private sector, where he had
been president of Long & Foster, the largest privately owned real estate company in the nation.
Previously, he had been an executive at Freddie Mac and Wells Fargo.
Working on the future of Fannie and Freddie at HUD, Mr. Stevens attended large meetings of G.S.E.
principals, according to his calendars, which were obtained by The Times under the Freedom of
Information Act.
At the same time Mr. Stevens was working on the administrations policy, he often interacted with high-
level executives in the mortgage industry, his calendars show.
There is, of course, nothing unusual about government officials meeting with various interest groups
affected by potential policy changes. And during this time, Mr. Stevens was tasked with other matters
involving big banks.
But Mr. Stevenss calendars show far fewer meetings with other groups in the mortgage arena, such as
advocates of low-income housing or those representing middle-class borrowers.
Mr. Stevens said he recalled meeting with every type of stakeholder during this time. My own view is
you meet with everybody to get as much input as you can, he said.
But Robert Gnaizda, general counsel for the National Diversity Coalition, and former general counsel to
the Greenlining Institute, a nonprofit consumer organization in Berkeley, Calif., said he ran into a wall of
disinterest within the Obama administration when he tried to raise issues important to his constituents.
Its been a long time since HUD was an effective advocate for homeowners, much less low- or moderate-
income homeowners, Mr. Gnaizda said.
A Bank-Centric Model
Mr. Stevens was certainly not the only official meeting with the big banks and their advocates to discuss
issues related to Fannie and Freddie. Executives were fanning out across Washington to educate and
influence members of the government charged with devising the administrations new housing policy.
Four meetings on the topic took place at the Treasury Department in late 2010, records show. One hosted
by Timothy F. Geithner, the Treasury secretary, included Brian Moynihan, the chief executive of Bank of
America, and two founders of giant private equity firms: Stephen A. Schwarzman, head of the Blackstone
Group, and Leon Black of Apollo Management Group.
Just before Christmas that year, the Treasurys staff finished fashioning a framework for resolving Fannie
and Freddie, an internal document shows. The recommendations became public in a 31-page report to
Congress, titled Reforming Americas Housing Finance Market, issued jointly by the Treasury and
HUD on Feb. 11, 2011.
After all the meetings and discussions, the administration laid out three options for housing finance
reform. But the message was clear: Fannie and Freddies days were numbered. Working with the Federal
Housing Finance Agency, the administration would reduce their role in the mortgage market and wind
them down.
The policy to eliminate Fannie and Freddie was a page out of the mortgage bankers playbook. And like
the authors of that plan, the administration emphasized that taxpayers would be protected and that a
new, level playing field would benefit all participants in the housing market.
In private, however, officials cited another group of beneficiaries under the plan: big banks.
An internal Treasury memo written on Jan. 4, 2011, to Mr. Geithner by one of his top deputies
characterized the administrations first option to wind down Fannie and Freddie as a bank-centric
model that benefits larger institutions with the capacity to hold mortgages on their books.
The Memo to Geithner

The bank-centric model reduces distortion in the allocation of credit and preference for housing.
However, this model benefits larger institutions that have better access to funding and the capacity to
hold fully diversified portfolios of residential mortgate risk. This could lead to increased concentration in
the banking sector and higher costs for borrowers served by smaller institutions.
The language in a memo to Secretary Geithner from one of his top deputies, describing some of the risks
of a proposal to wind down Fannie Mae and Freddie Mac.
But this raw assessment didnt make it into the final report. While the report acknowledged that smaller
lenders and community banks could have a difficult time competing for business, the bank-centric
nature of the plan was for internal consumption only.
Playing for Both Sides
Roughly a month after the administration published its long-awaited recommendations, Mr. Stevens
agreed to become chief executive of the Mortgage Bankers Association. He had been hired away by Mr.
Berman, who was promoted to chairman in 2010.
Mr. Berman proposed the move over dinner in early March 2011, according to a report in The American
Banker.
It wasnt until March 15 that Mortgage Bankers announced the appointment. Mr. Stevens continued as
commissioner of the Federal Housing Administration through March 31, 2011, his termination documents
show. On March 14, for example, he met with Edward J. DeMarco, acting director of F.H.F.A., the
conservator of Fannie and Freddie.
At the lobbying organization, Mr. Stevens continued to argue for a smaller role in housing finance for
Fannie and Freddie and a bigger role for companies backed by private capital. Although the mortgage
bankers group represents both large and small lenders, under Mr. Stevens it has been an advocate more
for big institutions, smaller members say.
In an interview, Mr. Stevens said he joined the government from the industry to try to help at a time
where I thought I had some value.
When youre picking people for technical roles in the government, he continued, they have to have
some experience.
The movement between government and business has gone both ways. Mr. Berman eventually found his
own lofty perch in the Obama administration at HUD, the same agency from which he had recruited Mr.
Stevens. In November 2012, Mr. Berman signed on as a senior adviser to Mr. Donovan, the HUD
secretary.
My company gets sold and Shaun Donovan asked me to join him as senior adviser, Mr. Berman
recalled in the interview. He said to me in our first conversation that my major focus would be on G.S.E.
reform, to work with him and be his liaison to the White House and Treasury and the National Economic
Council as well as Congress on that issue.
In February 2014, Mr. Berman returned to the private sector, where he now advises real estate lenders. He
said he has also informally consulted for the F.H.F.A.
A Rotating Cast at HUD
A revolving door between business and government is nothing new. But President Obama criticized the
practice and in his first month in office issued an executive order intended to inhibit it. Many of the
abuses of the past had ostensibly been outlawed by legislation.
Another former HUD official who worked on housing finance policy also consults for organizations that
stand to profit from eviscerating the mortgage giants.
He is Jim Parrott, a research fellow at the Urban Institute and an adviser to financial entities. A confidant
and colleague of Mr. Stevens at HUD, Mr. Parrott counseled Mr. Donovan from July 2009 to December
2010. He then moved to the National Economic Council at the White House, where he led housing
finance policy until January 2013.
After leaving the White House, Mr. Parrott set up Falling Creek Advisors, a consulting firm whose clients
have included Bank of America and a mortgage insurer.
Mr. Parrott said that when he left Washington, he planned to set up an institute of politics at the
University of North Carolina. But financial institutions began asking for his help on housing. I advise
five or six companies; each of them are in different parts of the housing finance ecosystem, Mr. Parrott
said. These folks are by and large thoroughly confused about what policy makers are trying to do.
Michael Smallberg, an expert on ethics and until recently an investigator at the Project on Government
Oversight, a nonpartisan independent watchdog group, said he was particularly disturbed by the
comings and goings at HUD.
This is a classic example of the revolving door at its worst, he said. These are large financial
institutions that already have an edge when it comes to getting their voices heard on Capitol Hill and at
their regulatory agencies. When you hear they are hiring the key policy makers to represent them, it
raises serious questions that these decisions are being made not on the merits but on those personal
connections.
The Code of Ethics
After leaving their government posts, Mr. Berman, Mr. Parrott and Mr. Stevens all continued to work on
housing finance. Meeting logs and calendars received under the Freedom of Information Act indicate that
the three men have met with government officials in charge of matters involving Fannie and Freddie.
Mr. Stevens met or talked with housing policy officials most frequently: 19 times between February 2012
and April 2015. Since leaving the government, Mr. Parrott has had six meetings with housing officials at
the White House; Mr. Berman has had two since starting his own firm, including one this past June.
Meeting logs show that Mr. Stevens met 13 times with officials at the White House working on Fannie
and Freddie policy. He also met five times during the period with Mr. DeMarco, the former acting
director of F.H.F.A., and had one phone call with him, Mr. DeMarcos calendars show.
Mr. Stevens said that his work at the Mortgage Bankers Association is being an advocate not on behalf of
individuals or specific companies but for an industry on a broad set of policy issues.
LINK TO VIDEO CLIP
In the interview, Mr. Berman said he kept working on the project with administration officials not as an
advocate but because of his contacts and granular knowledge of what was going on.
Mr. Parrott also said his meetings did not involve advocacy on behalf of his clients. I give them a sense
of how people are thinking and how things are likely going to develop in their world, he said.
Under federal law governing conflicts of interest, former federal officials must take care that their actions
in the private sector do not violate the rules. For example, a violation could occur if a former official who
worked on a particular matter circled back to the government on behalf of another person or organization
to try to influence officials thinking on that issue.
Richard W. Painter, a law professor at the University of Minnesota and former chief ethics lawyer at the
White House under President George W. Bush, is an authority on this section of the law. He was
provided a list of the housing finance meetings.
With respect to Stevens, Parrott and probably Berman, it appears that these officials participated
personally and substantially in the administrations decisions about resolving the financial difficulties of
Fannie and Freddie, Mr. Painter said. This means that they each have a lifetime ban on representing
back to the United States government on either of these two particular party matters involving Fannie
and Freddie.
Mr. Stevens and his lawyer, Scott Fredericksen of Foley & Lardner, disagree. They contend that his work
in the government involved developing public policy, not a particular matter, as specified in the law.
The law is clear that Mr. Stevenss activities involving development of public policy and even proposed
legislation are not encompassed within the prohibited activities outlined in the statute, Mr. Fredericksen
said.
Mr. Berman also said that housing finance reform is a general matter that does not fit in the laws
definition of a particular matter. In any case, he said, Since leaving HUD, I have not attempted to
influence any employee of HUD or any department or agency on policies regarding housing finance
reform and specifically G.S.E. reform.
Mr. Parrott said that before he left the White House, he had careful consultations with the counsels office
about what he could and could not do in the private sector. They were very clear that the statute does
not prohibit me from talking to government officials about general policy issues like housing finance
reform, he said. I dont advocate for anyone, so Im also not communicating or appearing on behalf of
another, as is also required to be in breach of the statute.
The United States Office of Government Ethics holds executive branch agencies accountable for carrying
out effective ethics programs. Asked whether Mr. Stevens, Mr. Parrott or Mr. Berman had consulted
ethics officials at HUD for legal guidance on their meetings, a spokesman for the agency, Cameron R.
French, said he could not comment. However, political appointees and career senior executives are
required to meet with the ethics office before departing the department, he said.
Mr. Painter said that in his view, anyone who participated personally and substantially in decisions
having to do with the governments financial relationship with Fannie and Freddie was working on a
matter involving particular parties and governed by the law.
Mr. Painter said it was hard to know what was said at the meetings. But if Mr. Stevens, Mr. Berman and
Mr. Parrott, made statements at these meetings that were intended to influence government decisions in
these two particular party matters involving Fannie and Freddie, he said, they violated the statute.
The Case for Recapitalization
Fannie and Freddie, still dominating the American mortgage market, not only have returned to the
Treasury the $187.5 billion they received in the bailout, but also will have contributed another $53.8
billion by the end of December. Even so, an array of administration officials at both the Treasury and the
White House have insisted in recent weeks that the government-run companies should not be allowed to
recapitalize and emerge from conservatorship.
Despite generating huge profits since 2012, Fannie and Freddie have been kept financially weak, hobbled
by their government minders during their years in conservatorship.
The argument against Fannie and Freddie rests on a powerful point: Radically reducing the governments
footprint in the mortgage market could help protect taxpayers. Right now, with Fannie and Freddie
backing 80 percent of the nations mortgages, those risks sit squarely on the governments shoulders.
The ideal version of housing finance reform is one in which we are clear about whats worked in the
current system and what needs to be overhauled, Mr. Parrott said. What you want to avoid, he
continued, is a market duopoly thats got an implied government guarantee. It creates such a toxic mix
of incentives where profit-seeking shareholders maximize risk and profit at the expense of taxpayers
sitting there waiting to hold the bag if the thing goes south.
But bringing private capital into the mortgage securities market poses perils of its own, other housing
experts say: Allowing too-big-to-fail banks to dominate the nations mortgage market would crowd out
smaller lenders and expand the federal safety net, putting taxpayers at greater risk of funding bailouts in
a downturn. Relying on mortgage insurers to provide that capital also seems dubious given how badly
these companies performed in the 2008 crisis.
Moreover, private capital would probably flee the mortgage market at the first sign of trouble, as it did
during the recent credit debacle. This raises questions about the availability of home lending when such a
system goes through a rough patch.
Lost in the debate over the future of Fannie and Freddie is the role Congress had in mind for the F.H.F.A.
when it passed the Housing and Economic Recovery Act of 2008. Under the law, a conservator is
supposed to put the regulated entities in a sound and solvent condition and preserve and conserve
their assets and property.
Proponents of eliminating Fannie and Freddie say that allowing them to survive would also mean letting
them go back to their abusive ways. The companies were a huge source of capital for reckless loan
products, in Mr. Stevenss view. We risk going back to that system, he said, because the public cannot
count on regulators to protect us going forward and constrain these guys.
But those who favor recapitalizing the companies a group that includes hedge funds and other
speculators that stand to gain, as well as supporters of low-income housing say that the past need not
be prologue. They contend that the companies could be restructured in a way that would prohibit
dubious activities, and that allowing Fannie and Freddie to rebuild capital would reduce taxpayer risk.
The banks are continuing their push for access to Fannie and Freddies assets and profits. But they are not
putting all their eggs in the legislative basket. In recent months, they have urged Melvin L. Watt, director
of the F.H.F.A., to put at least some of their recommendations in place administratively.
They are making inroads. The design of the new mortgage securitization system being built by Fannie
and Freddie at significant expense $146 million so far allows for future access to outside institutions
like the big banks. And Fannie and Freddie are being increasingly pressed to sell off portions of their
securities to private entities. Big banks will benefit most from both arrangements.
Mr. Berman is encouraged by these moves.
Over the last couple or three years under acting director DeMarco and following through with Mel
Watt, from a regulatory standpoint the progress has been quite positive, he said.

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TABLE OF CONTENTS

Exhibit 1............Obamacare, GSEs, and Securitization: A Journey through Time

Article I Section VIII of the Constitution:

The subsidies were authorized by the law, but Congress rejected an

WHERE DID THAT MONEY COME FROM?

In litigation brought forth by GSE investors, relating to the August 2012

While the court recognizes that protection of the Nations financial

03/08/2012: Senator Corker telephone call with Secretary Tim Geithner.

03/22/2012: From Treasury privilege log, Email communication among Treasury

07/25/2012: Geither calls Sperling followed by Bi-Weekly meeting w DeMarco

07/31/2012: Corker teleconference with DeMarco re Update on Strategic Plan for

11/09/2012: Geithner call to Corker 11/26/2012 Geithner call to Corker 01/2013:

3/14/2013: S.563 introduced, by Senator Corker, in Senate: An increase in the

03/18/2013: Corker & Warner meet with DeMarco at FHFA

4/22/2013: Michael Bright meets with Gene Sperling at WH

05/17/2013: Presidents formal budget amendment submitted to Congress. CSR

10/28/2013: Michael Bright meets with Wayne Ting at WH

04/11/2014: Obama selects Sylvia Matthers Burwell to replace Kathleen Sebelius as

FORMER WHITE HOUSE OFFICIALS INVOLVED IN GSE SCANDAL

Last week, 53 documents pertaining to the governments 2012 decision to impose a

Please refer to important disclosures at the end of this report.

Key Information in the Recently Unsealed Documents

The documents demonstrate that former Obama Administration officials violated

HERA specifically requires that the Treasury make certain determinations in

Consistent with Parrotts statements, in a deposition transcript released last week,

Further demonstrating the motivation of government officials, in his deposition transcript

Deferred Tax Assets Another Honey Pot

Net Worth Sweep - Intentionally Stale Financial Projections

As we have shown previously, financial projections possessed by Treasury and FHFA

53 Documents Are Just The Beginning

Before any further administrative or legislative actions are implemented it is critical

documents contain trade secrets or proprietary information. However, even cases in

Behind the Bailout

The White Paper

The Memo to Geithner

Playing for Both Sides

The Code of Ethics

The Case for Recapitalization

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