Moments ago, the stocks of the nationalized GSEs - Fannies and Freddie - tumbled by over 30%, after a federal appeals court upheld a ruling that barred hedge funds from suing to overturn the U.S. government’s 2012 decision to capture billions of dollars in the profits generated by the mortgage guarantors Fannie Mae and Freddie Mac after their bailout.
According to Bloomberg, which first reported the ruling, some Fannie and Freddie investors still have a shot at money damages, based on when they acquired their shares and whether they did so before or after the Federal Housing Finance Agency was created and then imposed its control over Fannie Mae and Freddie Mac.
In place since January 2013, the controversial net worth sweep allowed the U.S. to recapture all of the $187 billion in taxpayer money it spent to stave off the companies’ collapse during the global fiscal crisis and as of 2016, at least $56 billion more. All of that without reducing Treasury’s liquidation stake in either firm.
Meanwhile, some prominent hedge funds investors - most prominently Bill Ackman - have been actively pushing the government to revert to the GSE status quo, as existed prior to the 2008 bailouts, convinced it would unlock substantial stakeholder value. Today, however, that won't be the case.