The Federal Housing Finance Agency, which took over Fannie Mae in 2008, told a Washington federal court judge today that in a wrongful termination suit before the court, Fannie Mae should not be considered any more public than a bank deemed "too big to fail" by the federal government.
The question of Fannie Mae's status has put the underlying case on the back burner in recent weeks. Fannie Mae is facing a wrongful a termination suit from one of its former executives, Caroline Herron. After Herron had left Fannie Mae, she was brought back on as a contractor in 2009, only to be fired the following year.
Fannie Mae’s status as either a federal or non-federal actor could have an effect on how it proceeds with its defense. U.S. District Court Judge Rosemary Collyer, in denying Fannie Mae's motion to dismiss, said Fannie Mae had “confused” its legal arguments as to whether it should be treated as a public or private employer. Herron’s attorneys have argued that Fannie Mae should be considered a public employer.
Collyer asked for clarification, at which point the FHFA moved to enter the case.
At a status hearing this afternoon, the FHFA’s attorney, Howard Cayne of Washington’s Arnold & Porter, confirmed that his client and Fannie Mae are maintaining that the mortgage giant should be considered a private entity more akin to a bank.
Herron’s attorney, Lynn Bernabei of Washington’s Bernabei & Wachtel, argued that Fannie Mae was chartered with a public purpose and has always had its debt implicitly guaranteed by the federal government. Cayne countered that by that logic, any financial entity deemed “too big to fail” by the federal government should also be considered public.
Collyer was hearing arguments on whether discovery was needed to clarify whether Fannie Mae should be considered public or private. She had pressed both sides to clarify their arguments to the point where they could stipulate discovery wasn’t needed.
Herron has accused Fannie Mae officials of firing her for reporting on what she has characterized as questionable practices in Fannie Mae’s handling of the Treasury Department’s Homeownership Preservation Program.
Fannie Mae has denied any wrongdoing and claims the suit is retaliation for Fannie Mae’s refusal to help Herron get a job at the U.S. Department of Treasury.