Multi-Billion Dollar Class Action Filed By BSF For Fannie, Freddie Preferred Shareholders
On July 10, 2013, BSF filed a class action complaint against the United States under the Takings Clause of the U.S. Constitution for appropriating all of the economic rights of the junior preferred stockholders in Fannie Mae and Freddie Mac.
The case, which is filed in the U.S. Court of Federal Claims in Washington D.C., alleges that four years after placing Fannie and Freddie into conservatorship and issuing itself senior preferred stock with a generous 10% dividend right, the U.S. Treasury unilaterally amended its agreement with Fannie and Freddie to ensure that, instead of receiving the 10% dividend it initially agreed to, it will instead now receive a dividend equal to 100% of all profits earned by Fannie and Freddie, thereby ensuring that the private owners of the junior preferred stock never receive any distributions of any kind.
The Treasury took this action immediately after realizing that the recovery of the housing market had caused Fannie and Freddie to return to consistent profitability, which has put them in a position to repay the Treasury all of the amounts it invested in them, plus a significant profit, while also yielding a return to private investors. Instead of allowing the private investors to receive that return on their investment, the Treasury has seized all of the profits for itself, which constitutes a taking of private property under the Fifth Amendment.
Please click the below links for media coverage of this case.
Press Release, July 12, 2013
Investors Challenge Fifth Amendment "Taking" by Treasury Department After Fannie Mae/Freddie Mac Bail-Out
Bloomberg, July 11, 2013
U.S. Sued by Fannie Mae Investors Over Takeover Terms
Law360, July 11, 2013
Gov't Hit With Class Action Over Fannie, Freddie Takeover
Reuters, July 10, 2013
Fannie, Freddie shareholders demand lost dividends from U.S. in new class action
Related Practices: Constitutional Law and First Amendment / Mass Media, Class Actions, Litigation, Securities Litigation