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Fannie, Freddie sued over bailout

Posted By GABRIELLE LEVY, UPI.com   |   July 8, 2013 at 5:00 PM   |   Comments

July 8 (UPI) -- Hedge fund group Perry Capital LLC filed a suit against the U.S. Treasury, complaining over terms of the bailouts of mortgage firms Fannie Mae and Freddie Mac.

The lawsuit, filed at U.S. District Court in Washington late Sunday, claims Fannie and Freddie's bailout terms, as overseen by the Federal Housing Finance Agency, violated a 2008 law placing the government-owned companies into conservatorship.

The Treasury amended Congress's original authorization, in which it collected 10 percent dividend payments every quarter, to increase the profits in a moved known as a "sweep amendment."

Perry alleges the sweep overstepped Treasury's authority, as it is essentially the purchase of new securities.

“This lawsuit seeks to uphold the rule of law,” Theodore Olson, a partner at Gibson, Dunn & Crutcher, representing Perry Capital, said in a statement. “If the government wanted to assume the powers of receivership, it could have chosen that course. Instead it chose conservatorship, and with the ‘sweep amendment,’ it overreached.”

Perry's lawsuit claims the move has short-changed all private investors and that the government "has maneuvered to ensure that Treasury would be the sole beneficiary of the companies' improved financial position."

The group has been investing in Fannie and Freddie since 2010, and expects the agencies to soon return to profitability.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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