Bill Ackman’s Pershing Square Capital Management LP has sued the U.S. government, claiming revised terms of the 2008 bailout of Fannie Mae and Freddie Mac cheat investors of the profit from the mortgage-financing entities.
The Federal Housing Finance Agency 'purportedly acting as conservator' of Fannie Mae and Freddie Mac, and the Treasury Department 'agreed between themselves to strip all profits from the companies,' depriving shareholders 'of any economic value in their shares,' according to the lawsuit, filed Thursday 14th August in the U.S. Court of Federal Claims in Washington.
Bloomberg News reports the government’s diversion of profits violates the Constitution’s Fifth Amendment, 'which prohibits the taking of private property for public use without just compensation,' Lawrence Rosenberg, of Jones Day, an attorney for Pershing Square and other plaintiffs, wrote in the complaint.
Taxpayers rescued Fannie Mae (FNMA) and Freddie Mac with a bailout that swelled to $187.5 billion. While the firms have sent more than that amount back to the Treasury, funds were counted as a return on the U.S. investment rather than full repayment of the aid.
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