On July 7, 2013, Gibson Dunn & Crutcher filed a lawsuit against the above named defendants on behalf of the hedge fund Perry Capital LLC, a shareholder in Fannie Mae and Freddie Mac, two government sponsored enterprises (GSEs) which are currently under conservatorship of the Federal Housing Finance Agency (FHFA).
On August 17, 2012, the Treasury and the FHFA amended the Preferred Stock Purchase Agreements (PSPAs) and stock certificates which were originally used to initiate a conservatorship of the two GSEs. This amendment, referred in the complaint as the ‘Third Amendment,’ modified the structure and nature of the securities that the Treasury purchased under the original PSPAs. The Third Amendment created a ‘dividend sweep,’ by which all future profits of each firm are owed to Treasury moving forward.
The complaint asserts that this action is an overreach by the federal government, unnecessarily destroys the GSEs’ private shareholders’ value, and challenges this action under the Administrative Procedure Act and the Housing and Economic Recovery Act of 2008. The complaint claims that, due to these actions, Perry Capital LLC is entitled to relief.