Hedge fund firm Perry Capital has sued the U.S. Treasury, claiming that the decision made by the Treasury and Federal Housing Finance Agency last year to seize all of the profits from Fannie Mae and Freddie Mac violated the government's 2008 bailout terms.
The Wall Street Journal reported that New York-based Perry, which has an undisclosed “significant” stake in mortgage giants Fannie and Freddie, wants the changes made to the bailout agreement last summer to be pushed aside. The article said that Fannie and Freddie paid $66 billion to the Treasury last month.
The federal government took over Fannie and Freddie in 2008 through a legal procedure known as “conservatorship” as losses surged in the housing market. In an effort to keep the two companies operational, the government agreed to pump in huge capital in exchange for senior preferred shares, as well as the rights to buy nearly 80% of the common stock of the mortgage firms.
Perry Capital, which deals in the stocks and debt of companies going through merger or bankruptcy, has over $8.6 billion in assets under management.