Hedge funds still won't be able to sue the US government over seizing profits made by the mortgage-loan companies Fannie Mae and Freddie Mac after their postrecession bailout, a federal appeals court ruled on Tuesday, according to Bloomberg.
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Fannie and Freddie plunge after court rules hedge funds can't sue the government over collecting their profits (FNMA, FRMC)
Shareholders had argued that the government illegally seized profits from the companies.
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Shareholders had argued that the government illegally seized profits from the companies after it decided in 2012 to collect a share of earnings every quarter.
Some contract-based claims related to liquidation preferences and dividend rights were returned to the district court for further proceedings, Bloomberg reported.
On Friday, Fannie Mae said it would pay $5.5 billion in dividends to the US Treasury. With that payment, to be made in March, the company will have paid a total of $160 billion in dividends to the government.
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The Federal Housing Finance Agency placed both companies under its guardianship — known as conservatorship — in 2008, and they received a $187.5 billion bailout in the wake of the housing crisis.
Gary Cohn, director of the White House National Economic Council, told The Wall Street Journal earlier this month that the administration planned to direct the Treasury to review the role of Fannie Mae and Freddie Mac. Treasury Secretary Steven Mnuchin said in November, "We've got to get them out of government control."
Fannie Mae's and Freddie Mac's over-the-counter shares plunged nearly 30% after news of the ruling.
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