Pershing Square Sues Gov’t. Over Fannie, Freddie

Aug 15 2014 | 8:35am ET

Having joined its fellow hedge funds in betting on Fannie Mae and Freddie Mac, Pershing Square Capital Management is now joining them in the courtroom.

The New York-based hedge fund, which invested in the government-backed mortgage giants last year, alleges that the U.S. Treasury’s move to seize nearly all of the companies’ profits is “brazen” and “illegal”—and unfair to their common shareholders, of which Pershing Square numbers among the largest.

Pershing Square's joins about 20 lawsuits filed over the government’s $187.5 billion bailout of Fannie and Freddie, although most, including those filed by Fairholme Capital Management and Perry Capital, focus on the companies’ preferred shares. The Obama administration plans to close the two companies and replace them with new mortgage companies posing less risk to the taxpayer.

Pershing Square has said it believes Fannie and Freddie will survive and thrive. It owns a roughly 10% stake in each.

The hedge fund said it seeks “just compensation” in its lawsuit but does not specify an amount.


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