Regulating Fannie, Freddie, and other GSEs

Fannie Mae and Freddie Mac are much in the news today, as the federal government finds itself obliged to make the ‘implicit’ government guarantee quite explicit.

I wrote a lot about these strange entities some time ago, and you can read what I had to say about what should have been done at Reinventing the Government Corporation, 1995 Ill. L. Rev. 543.

Among other things, I advocated breaking up Fannie and Freddie into smaller bodies that would not be too big to fail, and that would compete more with each other. I also proposed various accountability measures, and even looked into the issuance of risky subordinated debt to act like a canary in a coal mine.

I’ve put the full table of contents in the extended part below.

Table of Contents

Footnotes

Amtrak as Object Lesson in How Not to Run a ... Board Meeting

In a stunning coincidence, on the very day I am due to give a guest lecture on the subject of government corporations to my wife�s Business Associations class, the New York Times has published an article about corporate governance issues relating to Amtrak, a federally chartered for-profit (but always money-losing) corporation.

Days after Amtrak's board of directors fired the railroad's president, the chairman of the House subcommittee that oversees Amtrak said Tuesday that the board might have acted illegally because it lacked a quorum. ...
Amtrak's board chairman and the Transportation Department's representatives on the board sat stoically through the hearing. Places were set for two other members of the board, but they did not appear.

The unpopular move by the directors has focused attention on their legal status. Mr. LaTourette, head of the railroad subcommittee of the House transportation panel, said the board had apparently not had a quorum in the last few years. He said that under the board's bylaws, a quorum would be five of seven directors. The board has only four directors, and two of those will lose their seats when Congress recesses for the year in a few weeks.

The Transportation Department's chief counsel, Jeffrey A. Rosen, who also serves on the Amtrak board as the representative of the transportation secretary, disputed Mr. LaTourette on that point and others. But others at the hearing, some seeking to reinstate Mr. Gunn, seized on the procedural questions surrounding the board.

"You've opened up a whole Pandora's box," said Eleanor Holmes Norton, the District of Columbia's delegate to the House and a member of the transportation committee, addressing David M. Laney, the board chairman.

Ms. Norton described the board's uncertain legal status as "a lawsuit waiting to happen."

I claim to be one of the leading authorities on the delicious, if obscure, subject of federal government corporations, as I wrote one of my first articles about them, Reinventing the Government Corporation, 1995 Ill. L. Rev. 543. Please note that I am available for guest lectures, faculty seminars, children�s birthday parties and, of course, expensive consulting gigs.

Discourse.net/Law: Federal Govt Corporations

Regulating Fannie, Freddie, and other GSEs

Amtrak as Object Lesson in How Not to Run a ... Board Meeting