WASHINGTON–A U.S. appeals court has ruled in favor of the dismissal of claims filed by various hedge funds against the federal government for continuing to seize the profits of Fannie Mae and Freddie Mac, which the federal government continues to operate in conservatorship.
By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said the lower court ruling correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay an amount equal to their quarterly net worth to the U.S. Treasury.
The appeals court did say that Fannie Mae and Freddie Mac investors can still pursue breach of contract claims. Both companies were placed in conservatorship in September 2008 as the mortgage crisis was reaching its peak. Both are also now profitable, having returned approximately $68 billion more to the government than they drew down during the financial crisis.