Hedge fund Perry Capital had argued that the government’s confiscation of profits was illegal
An appeal by a hedge fund investor of Fannie Mae and Freddie Mac accusing the government of illegally confiscating profits has failed after the Supreme Court declined to revive the case, according to a Reuters report.
The case stems from the government restructuring of the mortgage finance firms following the housing crisis in 2008 as the companies were on the edge of bankruptcy. The Treasury pumped $187.5 billion into the government-sponsored enterprises, taking a majority stake in each. Since then, Fannie and Freddie have returned to profitability.
The Supreme Court’s move maintains a 2017 ruling by a lower court which held that investors cannot pursue legal claims against the government on grounds that the profits channeled from the GSEs to the Treasury were unlawful.
Perry Capital was one of the investors that sought to challenge the lower court’s dismissal of lawsuits. The hedge fund had announced plans to shut down in 2016. Individual investors, Fairholme Funds, and Pershing Square Capital Management, the biggest common shareholders in the two GSEs, also sued.
Last year, the Court of Appeals for the District of Columbia Circuit upheld a lower court’s ruling against claims the government exceeded its authority when it removed dividend payouts to shareholders and instead required Fannie and Freddie to pay the Treasury.
According to the appeals court, a 2008 law authorized the government’s seizure of the GSEs. The court said, however, that investors can still seek claims for damages as well as for breach of contract.
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