Fannie and Freddie were taken into conservatorship by the federal government after teetering on the bronk of collapse in 2008. Under the terms of the deal, the companies had to turn all their profits over to the Treasury as dividends. Although Fannie and Freddie have now paid back the $187.5 billion they received from the government, the deal still stands. This is understandably a sticking point with investors who bought stock in the company.
The lawsuit, filed by Perry Capital, Fairholme Funds Inc. and Arrowood Indemnity Company, argued that “blatant overreach by the federal government to seize all of the companies' profits at the expense of the companies and all of their private investors is unlawful and must be stopped.”
But today the court ruled against the plaintiffs, saying that Congress had given the Treasury and the Federal Housing Finance Agency the power to take profits from Fannie and Freddie as part of the Housing and Economic Recovery Act. According to the court, “unambiguous” provisions of the law compelled the dismissal.
A federal judge has thrown out a lawsuit that sought to prevent the government from forcing Fannie Mae and Freddie Mac to turn over their profits to the Treasury.