Obamacare, that lead weight around the neck of Mr. Obama’s legacy, might just collapse on its own before the Republicans get around to figuring out how to put the thing out of its, and our, misery. Part of the problem is there are so many people who have reconfigured their health care to depend on Obamacare (one of its obvious goals), that just to can it would leave millions without health insurance — at least temporarily until the market adjusted to the new reality.
Two lawsuits proceeding through the federal courts threaten to expose and disrupt a scheme the Obama administration concocted in 2012 to confiscate all the profits from Fannie Mae and Freddy Mac – the government’s two mortgage giants – with a plan to divert billions of dollars to pay essential Obamacare insurance subsidies that Congress had refused to fund.
On July 9, 2013, Fairholme Funds, Inc., a mutual fund that held preferred stock issued by the Federal National Mortgage Association, commonly known as “Fannie Mae,” and the Federal Home Loan Mortgage Corporation, commonly known as “Freddie Mac,” filed suit against the U.S. government in the U.S. Court of Federal Claims, seeking “just compensation” under the Fifth Amendment for their property when the Obama administration, in the so-called “Net Worth Sweep” of 2012, confiscated all Fannie and Freddie profits.
So the problem was that Congress refused to fund Obamacare to the degree necessary. The solution was to pull money out of trouble government mortgage programs to fill the gap. Perhaps that’s what’s done where you are desperate for a solution, any solution, to get you out of trouble.
But in 2012, when Fannie and Freddie became profitable, as the mortgage market returned with rigorous credit underwriting and a zero-interest rate environment maintained by the Federal Reserve, the Obama administration initiated a “Net Worth Sweep,” designed to confiscate 100% of the profits generated by Fannie and Freddie.
The result was that private shareholders like Fairholme Funds were paid nothing on their Fannie and Freddie stock.
Of course they didn’t get their dividends, the money went elsewhere.
In August 2012, the Obama administration engineered an amendment to the Senior Preferred Stock Purchase Agreements creating a variable dividend that allowed the U.S. Treasury to grab all Fannie and Freddie profits, regardless how large Fannie and Freddie’s earnings might be.
In 2016, U.S. District Judge Rosemary Collyer, in the case U.S. House of Representatives v. Burwell, ruled the Department of Health and Human Services could not use taxpayer dollars to pay Obamacare insurance subsidies Congress refused to fund.
To solve this problem, the Obama administration defied the District Court by diverting profits confiscated from Fannie and Freddie to pay the Obamacare insurance subsidies Congress had refused to fund.
There is much more to this story, and much more litigation will needed before the matter is finally settled. But the point has been made: Mr. Obama was determined to fund his health care program even if he had to play it fast and loose with the law.
This comes as no surprise. After all, Mr. Obama’s legacy depends on it. Wouldn’t it be ironic if in addition to creating an unsuccessful health care program, the courts found that the whole funding method for this monstrosity was illegal? That would be justice served.