This page has been archived and commenting is disabled.
When In Soviet USSA Government Does Not Bail You Out, You Sue
It seems that US investors has become so institutionalized in the new normal world of government bailouts and handouts that when the central planners make a decision that is not instantly accretive to the equity shareholders' bottom-line, the first instinct is to sue them. Following the conservatorship that was forced upon FNM/FRE in 2008, which required the companies to pay a quarterly dividend of 10% on the government's near-80% stake (and obviously implicitly benefited the tag-along bailout riders), the decision in 2012 to change the bailout terms to instead hand over most of their profits to the government (since they moved into profitability - thanks to a Fed-sponsored MBS market). This action "impaired shareholder value" according to Perry Capital - who, Reuters reports, is suing the government, noting "investors had every right to expect these rules to be followed." Indeed, just as the 'rules' have been followed in every bailout that has occurred since 2007.
Via Reuters,
A group of investors led by hedge fund Perry Capital LLC sued the U.S. Treasury in federal court on Sunday to challenge the 2012 changes of the bailout terms set for government-owned mortgage firms Fannie Mae and Freddie Mac.
The lawsuit, filed in U.S. District Court in Washington, alleges that the Treasury and the regulator for Fannie Mae and Freddie Mac violated a 2008 law that put the two mortgage companies into conservatorship as they faced insolvency at the height of the U.S. financial crisis.
The Treasury Department amended the bailout terms last year, forcing Fannie Mae and Freddie Mac to hand over most of their profits to the government, replacing a requirement that the companies pay quarterly dividends of 10 percent on the government's nearly 80 percent stake.
...
Perry Capital, which began investing in both firms in 2010, claimed in the lawsuit that shareholder value was impaired when the government instituted a "dividend sweep."
The new arrangement prevents the firms from building capital that might have allowed them to redeem the government shares and eventually operate independently to the benefit of private shareholders.
...
"This lawsuit seeks to uphold the rule of law," Theodore Olson, a partner at the law firm Gibson, Dunn & Crutcher and a former U.S. solicitor general, said in a statement.
...
Profits at Fannie Mae and Freddie Mac have also led Perry Capital and other hedge funds including Paulson & Co. to push Congress to consider a privatization of the two mortgage financiers to boost the value of preferred shares they have bought.
"Investors had every right to expect these rules to be followed," Olson added.
...
"What we're seeking is to require Treasury and the FHFA to obey the rules set forth in the Housing and Economic Recovery Act" of 2008, a lawyer involved in the litigation, speaking on condition of anonymity, told reporters on a conference call. "There are no damages being sought."
So it seems its ok if laws are broken, rules changed, and investors hurt for a government bailout - as long as its not an institutional shareholder...
- 9505 reads
- Printer-friendly version
- Send to friend
- advertisements -


Post-2008 Fanny%Freddy shareholders have always banked on this move to a "rule of law."
With all the FAS committee rulings four years ago it was nearly a guarentee.
Nobody has to work for a living anymore or even try to make money.
"Nobody has to work for a living anymore or even try to make money."
The US generates debt from the Free Stuff Army and bailouts while the Fed prints up money to buy it. An infinite scheme as long as everyone plays this game.
Hand worthless paper to countries for goods produced. Who is the fool in this game?
The fed prints, and the government gives it away to people who use it to pay rent on properties owned by who?
There is a law for uins, and a law for weins, and they aint the same law.
Hand worthless paper to countries for goods produced. Who is the fool in this game?
Excellent point.
It also seems that the Chinese are now handing their stockpile of OUR worthless paper back to us when they purchase our domestic assets.
OT-Did my computer just experience a "glitch" or is the 10yr bond really up over 8% this morning??!!!
glitch
I predict the open will go something like this!
http://www.youtube.com/watch?v=S8H2FIf1oH4
8 or 800% Who would touch those polished turds, other than the Gov't forcing their own civil servants to buy them.
Poor bastards. Out of all those that save and plan, the civil servants are in the worst position. Their employment contracts are written in pencil. The pensions are offered as a politicians promise. The pay is starting to get sketchy.
It's pretty awful. At least the rest of us only have to take our lumps with early withdrawl penalities, and anyone with common sense dumped three years ago and rolled into PM's when they were available.
Well, the Fed will continue to touch them, since it only has to imagineer the debt to do so. They still have and will be copiously using their old faithful tool from the toolkit: lying.
People with adjustable rate mortgages are watching the costs of their homes skyrocket. I estimate by about 20% for a 30-year loan, since May! Ouch!
The ten year is up to .18% now, which is up 7.12% ON THE DAY. The APY is still around 2.68.
What is this "Rule of Law" thingy?
Those with the gold, make the rules.
That Ukranian bitch must have botched his wifes bikini wax again...
Go tell it to a former GM bondholder. They'll be happy to tell you how this stuff works.
Exactly why collapse should always be allowed to happen.
NO WAY!!!
HAVEN'T YOU READ THE BACKSIDE OF THE CONSTITUTION???!!!
I thought the back side of the Constitution was smeared with shit from our politicians using it as toilet paper? I'm confused.
Oh, precious.
Nothing like watching the vultures at work on the carcass.
'Rule of law' in america being 'If you're important enough, you can gamble and lose and we'll force someone else to pay your losses'.
Wonderful. Land of the Fee, home of the Slave.
+1 Exactly.
NO BAILOUT = 2 BILLION$ COMPENSATION!!!
DID YOU GET YOUR BAILOUT ALREADY?!!
It's the rule of the banksters, not the rule of law. The banksters are the law. Too big to prosecute as Eric Holder would say.
Bailouts are just another entitlement.
the largest of them all, by a long shot
The Bankster Jews and Protestants are going to bring us all down.
Protestants?
Protestants?
WTF?
Sure, haven't you heard? Bankster Catholics, on the other hand, wear capes and masks and prowl the streets, fighting crime all through the night.
re:
Oh now he's worried about the rule of law...isn't that precious.
They go to war over their interpretation of it, you know, he who has more "net worth" has to be in the right solely because of their accumulation of it. It's that simple in the boardroom.
from many moons ago...
I don't know about you guys, but with no one allowed to lose I certainly feel like a winner. Now where ma benefitz at?
I demand my bailout! I would also like an Obamaphone, and a free lunch.
In the words of another ZH poster a few days ago:
I want my FREE $3,000 bucks for that 'Thingamajig!"
Fuck ...I just got back from an extended weekend and this shit is still coing on. I was hoping the pig would collapse while I was gone.
Welcome back Doc! The pig is getting fatter and fatter while it sinks into its own shitpile.
Hope your weekend was fun and you had a chance to rest and party.
Thank you Sloan . It was a good weekend with family and friends. Any diversion from this mess is always welcome.
I just got back from an out of town birthday party with family and friends to get away, but...
Everyone there was either .gov or .gov contractor worried over the furlough/sequester -and- how they will ever make do on 20% less pay for the next 11 weeks. Just about made me sick listening to the fucking whine of the left/right paradigms.
Jeez, although I love them all I wish they weren't so clueless.
"We eat the pig, and....."
http://milkandcookies.com/link/166615
Sometimes you're the windshield, sometimes you're the bug.
pods
HAHAHAHAHAHAHAHAHAHA!
"Rule of law!" That's a good one!
your shirts on backwards
Rosie always wakes up rough in the morning.
Can I sue for shorting banks and trade dissalowed in 2008?
Leges Sine Moribus Vanae ("of what avail empty laws without [good] morals ..
If you get in bed with whores, you best expect to catch an STD.
OT - In another moronic suit, one charity sues another for copyright infringement of a dead celebrity. Just more proof that the world is getting dumber by the day.
Freddie Mercury Norwich Go Go Gorilla in copyright row"A gorilla sculpture painted as Freddie Mercury has been removed because it infringes copyright."
"The trust claimed the suit the gorilla is wearing breaches copyright." The suit is about a "suit"; which is not really a suit it's painted on the gorilla statue.
http://www.bbc.co.uk/news/uk-england-norfolk-23226366#sa-ns_mchannel=rss...
The gorillas should sue for being portrayed with a gay mustache and buck teeth.
"...alleges that the Treasury and the regulator for Fannie Mae and Freddie Mac violated a 2008 law"
Law? Can't seem to find that word in any online dictionary, nor do I find a definition for "rule".
"of" is still there, but what good is a preposition without nouns?
Did NSA expunge "rule" and "law" from the societal lexicon?
Ted Olson, since his wife died has become quite the ambulance chaser
Weren't we all told that "no rules were broken" and "no crimes were committed?" snark
What about all the investors that shorted markets then? should they not sue, because it was expected that the banks were going to be left alone and fail?
Thats who should really be sueing....the govt had no business messing with peoples investments to "pick and choose" winners and lossers.