Suing Uncle Sam After Fannie and Freddie? Probably Not

Posted by Dan Slater

Photo: Associated Press

A flood of shareholder suits followed the last bailout on Wall Street. Will the same happen in the wake of the Fannie and Freddie seizures?

We’re not sure yet, but plaintiffs lawyers would do well to consult today’s WSJ before filing. Ashby Jones reports that, though the seizures wiped out most of the remaining value of the companies’ shares, shareholders who seek relief by suing Uncle Sam are likely out of luck.

“I’m skeptical of whether plaintiffs are going to be able to make much of this,” said James Cox, a securities-law expert at Duke. Treasury Secretary Henry Paulson “seems to have had the authority to do what he did.” Law profs say two federal laws — one passed in 1992 and another passed earlier this year — explicitly authorize Paulson to bring the companies under government control.

How about a federal securities-fraud claim? Yesterday, lawyers from Coughlin Stoia filed a suit on behalf of shareholders in federal court in Manhattan against four former or current Fannie officers or directors, alleging that the four made materially false and misleading statements about Fannie Mae’s business and prospects and misrepresented the Company’s financial statements which, in turn, artificially inflated Fannie’s share price. (Fannie Mae didn’t answer the WSJ’s request for comment.) But GW law prof Larry Mitchell said it was unlikely shareholders could show that officers or board members were derelict in their duties as they agreed to the government takeover. “What are they going to say?” Mitchell asked. “The companies were about to tank, and they needed a cash infusion and they got one.”

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US Is "More Communist than China": Jim Rogers

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions," Rogers said.

Stock markets jumped after the U.S. government's decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.

But Rogers said in the long term the move spelled trouble.

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

European stocks soared on Monday, led by banks. UBS was up 11 percent, BNP Paribas up 8 percent, Credit Agricole up 11.1 percent and HBOS up 13.8 percent.

"You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie [FNM 0.99 --- UNCH (0) ] or Freddie [FRE 0.88 --- UNCH (0) ] … because they don't have to worry about going bankrupt all of a sudden," Rogers said. (Watch the video on the left for the full interview)

"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.

"A Huge Mess"

However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.

It's rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I'll just sit and watch," he said.

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.

From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.

"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."

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Report: Armstrong to come out of retirement and ride for Astana

Seven-time champion Lance Armstrong will come out of retirement and compete in next year's Tour de France, VeloNews reported Monday, citing sources close to the situation.

Armstrong

Armstrong, who will turn 37 on Sept. 18, will join the Astana team and compete in five road races, the sources told VeloNews.

He will compete in the Amgen Tour of California, Paris-Nice, the Tour de Georgia, the Dauphine-Libere and the Tour de France. The sources told VeloNews that Armstrong will receive no salary or bonuses.

Armstrong's manager, Mark Higgins, would not comment.

Sources told VeloNews that Armstrong's comeback will be the focal point of a story in the upcoming issue of Vanity Fair, to be published later this month.

Armstrong, who overcame testicular cancer he was diagnosed with in 1996 en route to his string of Tour de France triumphs, has remained active in the three years since his retirement.

In August he raced in the Leadville Trail 100, a 100-mile mountain bike race through the Colorado Rockies, finishing a close second to the six-time defending champion, Dave Wiens. It's the country's highest-altitude bicycle race.

Armstrong has also run the New York and Boston marathons and was set last month to run the Chicago Marathon in October.

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Boy, 13, bullied after losing his hair is banned from wearing a baseball cap to school

By Andrew Levy

Since losing his hair to a serious illness as a young child, Dale Platts and his baseball cap have become inseparable.

The New York Yankees hat has not only helped the 13-year-old to cope with the cruel taunts of other children, but also protects his head and lashless eyes from the sun.

But the schoolboy has now been ordered to remove the cap after his school decided it went against its uniform policy.

Dale Platts wearing his cherished New York Yankees cap, pictured with father Gareth and mother Kenina

Dale - who was warned that he would be taught in isolation if he refused - is now at home and missing classes.

His mother, Kenina Platts, 41, said: 'It's really cruel. I'm outraged the school can be so short-sighted. He wears the hat for medical reasons - it's not a fashion statement.

'Dale has to suffer at the hands of child bullies. Now the school itself is pressurising him and bullying him. He is too ashamed to take it off.

'To say he would be taught in isolation is madness. It is like putting him in solitary confinement. It is punishing him for being bald.'

Dale lost his hair, toenails and fingernails when he was five months old after suffering from severe bronchiolitis, a respiratory virus that left him in hospital for a week.

Bullied: Dale says he wears the baseball cap to fit in at school

During the illness, his immune system began to attack parts of his body, including his hair follicles, stopping the hair and nails from growing - a condition known as alopecia universalis.

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Dale lost his hair at five months old after suffering from bronchiolitis

The condition is the most severe form of alopecia, affecting one in 100,000 people, including Little Britain comedian Matt Lucas.

However, Dale, of Collingham, Nottinghamshire, was unconcerned by his baldness until he started secondary school aged 11 and the bullying began.

He has had items thrown at his head and been taunted with cruel names and chants.

He has not left his bedroom without wearing his baseball hat for two years.
But at the end of last term, Maggie Brown, the deputy head of Robert Pattinson School in North Hykeham, Lincolnshire, told him the cap contravened its dress code.

Although he has been told he can wear a beanie hat as a compromise, Dale has complained the woolly hat causes eczema and headaches, and does not offer the same protection-against harsh fluorescent lighting and dust as his cap.

He was sent home last Thursday, the first day of the new school term.
Dale said: 'I just want to go to school and get no bother.'

A spokesman for the school said its uniform policy does not allow peaked caps or hoodies, but some allowances could be made for medical or religious reasons.

In Dale's case, the school said it believed the family had agreed the teenager would wear a beanie hat.

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