U.S. court upholds dismissal of hedge funds’ Freddie and Fannie claims

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<span class="articleLocation”>A U.S. appeals court on Tuesday upheld a
dismissal of hedge funds’ claims against the U.S. government for
seizing the profits of mortgage financiers Fannie Mae
and Freddie Mac following their taxpayer bailout.

In early afternoon trading, Fannie Mae shares were down 26
percent at $3.06, while Freddie Mac fell 29 percent to $2.84.

By a 2-1 vote, the U.S. Circuit Court of Appeals for the
District of Columbia said a lower court had 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.

Fannie Mae and Freddie Mac investors can still pursue breach
of contract claims, the appeals court said.

The government seized Fannie Mae and Freddie Mac in
September 2008 as mortgage losses mounted, and it put them into
a conservatorship under the Federal Housing Finance Agency.

Both companies have since become profitable. According to
court papers, they have returned roughly $68 billion more to the
government than they drew down during the financial crisis.



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