Investors File For Rehearing In Fannie/Freddie Profits Case

Mar 24 2017 | 8:38pm ET

By Pete Schroeder (Reuters) - A group of investors have filed for a rehearing of a case on whether the government improperly seized profits of Fannie Mae and Freddie Mac.

The investors are asking a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia to reconsider its earlier decision. The move indicates that hedge funds and other investors are not giving up in their fight to reclaim profits in the mortgage companies, which were seized by the government as part of their bailout following the subprime mortgage crisis.

Preferred shares of both companies rose on Friday while their common stock fell. Fannie Mae preferred gained about 1.6 percent to $6.86 a share while Freddie Mac preferred was up 3.1 percent to $3.17 a share.

In February, a panel of the appeals court ruled 2-1 that a lower court had ruled correctly when it rejected investor claims the government exceeded its authority in eliminating dividend payments to Fannie and Freddie shareholders in 2012.

Instead, the Treasury Department required that the companies pay an amount equal to their quarterly net worth to the government, leading to a legal challenge from investors.

A group of investors, led by Perry Capital LLC and Fairholme Funds, are behind the legal charge against the Treasury's actions.

In its decision, the court ruled that the government had the authority to make that move under the terms of legislation authorizing the seizure of the two struggling companies in 2008. The two have since returned to profitability, but the terms of the Treasury's arrangement have not changed.

Major owners of the companies' preferred stock include Bruce Berkowitz's Fairholme Funds, while William Ackman's Pershing Square Capital Management has a large stake in their common shares.


In Depth

Q&A: Portfolio Advisors' Brian Murphy On The Advantages of A Private Markets Platform

Jan 2 2018 | 11:05am ET

Most private markets firms reference their platforms as a source of competitive...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Steinbrugge: The Top Hedge Fund Industry Trends for 2018

Jan 2 2018 | 12:22pm ET

Each year, Don Steinbrugge’s Agecroft Partners compiles the insights gained...

 

FINalternatives Trending

From the current issue of