Speculators who picked up shares of Fannie Mae and Freddie Mac in order to sue the government were dealt a blow.
A federal court decided on multiple related lawsuits that named the Department of the Treasury and the Federal Housing Finance Agency as defendants.
The plaintiffs claim that it was illegal when the Treasury Department made a third amendment to the Senior Preferred Stock Purchase Agreements. The amendment allowed the Treasury to sweep the capital accounts — ensuring that net worth never increases.
The Treasury and FHFA filed motions to dismiss the case, while the individual plaintiffs filed cross-motion for summary judgment.
But the government won.
“Upon consideration of the defendants’ respective motions to dismiss, the individual plaintiffs’ cross-motion for summary judgment, the various opposition and reply briefs thereto filed by the defendants, the individual plaintiffs, and the class action plaintiffs (“class plaintiffs”), the applicable law, and the entire record herein, the court will grant the defendants’ motions to dismiss and deny the individual plaintiffs’ cross-motion for summary judgment,” U.S. District Judge Royce C. Lamberth wrote in his decision.
Shares of Fannie, which opened at $1.72 Wednesday, tumbled to $1.49 at one point but recovered most of the loss, closing at $1.70.
Shares of Freddie moved similarly, opening at $5.00, falling to $3.25 then closing at $4.34.
With so much at stake, the investment fund plaintiffs are likely to consider an appeal.
