<span class="articleLocation”>A federal appeals court on Monday narrowed the
range of documents that the U.S. government must turn over to
investors suing over its August 2012 decision to seize the
profits of mortgage giants Fannie Mae and Freddie Mac
The Federal Circuit Court of Appeals said four documents
could be withheld from Fairholme Funds and other investors on
the basis of presidential privilege, and four other documents
were protected by privilege of the deliberative process. It said
eight other disputed documents were not privileged.
Monday’s decision is a mixed ruling for investors suing the
government over its sweeping of the mortgage companies’ profit
to the U.S. Treasury Department, which they called an
unconstitutional taking of private property.
Fairholme and its lawyer Charles Cooper were not immediately
available for comment. A spokeswoman for U.S. Department of
Justice said the agency is reviewing the decision.
The government seized Fannie Mae and Freddie Mac in
September 2008 as mortgage losses mounted, and put them into a
conservatorship under the Federal Housing Finance Agency.
Both have since become profitable, and according to court
papers have returned roughly $68 billion more to the government
than they drew down during the financial crisis.
Fairholme, overseen by Bruce Berkowitz, said such profit
belonged to stockholders such as itself. Its 2013 lawsuit
focused on the companies’ preferred stock, which threw off 10
percent dividends before being eliminated.
In October, Judge Margaret Sweeney of the Court of Federal
Claims ordered the government to turn over 56 documents sampled
from roughly 12,000 it had withheld on privilege grounds.
The Obama Administration’s appeal focused on 16 of these
documents. It said Sweeney’s ruling “casts a cloud” over whether
all 12,000 documents were properly withheld, and in practice
could chill White House deliberations on sensitive subjects.
Writing for the appeals court, Circuit Judge Kathleen
O’Malley said Sweeney did not abuse her discretion in ordering
most of the disclosures.
Citing the 1974 Supreme Court decision in the Nixon tapes
case, however, O’Malley said disclosing documents subject to
presidential privilege could impede the president and his
advisers from shaping policy “in a way many would be unwilling
to express except privately.”
O’Malley also said Fairholme showed “no particular need” for
the four documents covered by that privilege.
The other four documents ordered withheld concerned proposed
legislation to wind down Fannie Mae and Freddie Mac, draft
memoranda outlining housing reform proposals, and an internal
FHFA presentation on deferred tax assets.
The case is Fairholme Funds Inc et al v. U.S., U.S. Federal
Circuit Court of Appeals, No. 2017-104.
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