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TheStreet Open House

Ralph Nader Discusses Fannie and Freddie Shareholder Fight

Stocks in this article: FNMA FMCC

TheStreet: So why haven't you joined all these other plaintiffs in this latest issue, you know, ignoring the shareholders in the wake of the conservatorship, or abusing them if you want to put it that way. I don't think that's too strong way to put it. Why aren't you suing them?

Nader: Well, first of all, others are and they found lawyers, or they could pay for lawyers. So we decided, you know, why duplicate it? There are plenty of lawsuits now, and [Gibson Dunn partner and former U.S. Solicitor General] Ted Olson's got a lot of credibility in the Supreme Court whereas we couldn't get any lawyers to take the case pro bono, you know, and we usually have to have pro bono lawyers.

TheStreet: I see. Olson has been much more out in front on this than [David] Boies [another high profile attorney representing GSE shareholders in a suit against the government] has. Any sense of why that is? They're both suing but it seems like Olson's been more vocal and you hosted a recent shareholder event with Olson rather than Boies. Why is that?

Nader: I think part of it is Boies is in New York, Olson's in Washington. And Olson has the stronger case. Of all the cases filed, he has the stronger case. You know, that the Treasury revised its position in 2012 [by changing the terms of its investment in the GSEs so that instead of the GSEs owing a 10% dividend to the Treasury, the GSEs suddenly owed the Treasury all of their profits for an indefinite period, aside from minimal capital buffers.]

TheStreet: What do you think is going on here? Why do you think the Treasury did this amendment in 2012?

Nader: I think two reasons. One, they thought they could get away with it because they thought there's no history of law behind conservatorship like this. It's all behind bankruptcy. And so they thought they could write their own rules, just like they wrote their own conservatorship. And the second is, they sensed that this would help keep the deficit down -- that this huge Niagara of profits would --and they were right on that.

Oh by the way, there's a third reason. And they had already stripped the shareholders of any rights, you see, so they didn't have to worry about the shareholders. But they miscalculated that one, at least to the point where they're confronting lawsuits which they think they're going to win.

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