This page has been archived and commenting is disabled.

When In Soviet USSA Government Does Not Bail You Out, You Sue

Tyler Durden's picture




 

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...

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 07/08/2013 - 08:31 | 3730307 slaughterer
slaughterer's picture

Post-2008 Fanny%Freddy shareholders have always banked on this move to a "rule of law."

Mon, 07/08/2013 - 08:32 | 3730317 CPL
CPL's picture

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.

Mon, 07/08/2013 - 08:36 | 3730328 yogibear
yogibear's picture

"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?

Mon, 07/08/2013 - 08:40 | 3730335 eclectic syncretist
eclectic syncretist's picture

The fed prints, and the government gives it away to people who use it to pay rent on properties owned by who? 

Mon, 07/08/2013 - 08:42 | 3730343 negative rates
negative rates's picture

There is a law for uins, and a law for weins, and they aint the same law.

Mon, 07/08/2013 - 09:35 | 3730463 Divine Wind
Divine Wind's picture

 

 

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.

 

 

 


Mon, 07/08/2013 - 08:36 | 3730329 eclectic syncretist
eclectic syncretist's picture

OT-Did my computer just experience a "glitch" or is the 10yr bond really up over 8% this morning??!!!

Mon, 07/08/2013 - 08:46 | 3730349 fonzannoon
fonzannoon's picture

glitch

Mon, 07/08/2013 - 08:54 | 3730362 eclectic syncretist
eclectic syncretist's picture

I predict the open will go something like this!

http://www.youtube.com/watch?v=S8H2FIf1oH4

Mon, 07/08/2013 - 08:59 | 3730370 CPL
CPL's picture

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.  

 

Mon, 07/08/2013 - 09:27 | 3730445 eclectic syncretist
eclectic syncretist's picture

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!

 

Mon, 07/08/2013 - 09:45 | 3730485 Bobbyrib
Bobbyrib's picture

The ten year is up to .18% now, which is up 7.12% ON THE DAY. The APY is still around 2.68.

Mon, 07/08/2013 - 08:43 | 3730344 Being Free
Being Free's picture

What is this "Rule of Law" thingy? 

Mon, 07/08/2013 - 09:13 | 3730409 Unknown User
Unknown User's picture

Those with the gold, make the rules.

Mon, 07/08/2013 - 08:32 | 3730310 francis_sawyer
francis_sawyer's picture

That Ukranian bitch must have botched his wifes bikini wax again...

Mon, 07/08/2013 - 08:32 | 3730314 NoDebt
NoDebt's picture

Go tell it to a former GM bondholder.  They'll be happy to tell you how this stuff works.

Mon, 07/08/2013 - 08:34 | 3730322 Seasmoke
Seasmoke's picture

Exactly why collapse should always be allowed to happen.

Mon, 07/08/2013 - 08:41 | 3730337 Sudden Debt
Sudden Debt's picture

NO WAY!!!

HAVEN'T YOU READ THE BACKSIDE OF THE CONSTITUTION???!!!

"THOSE WHO ARE RICH HAVE THE GOD GIVEN RIGHT TO GET FILTHY RICH AT TAXPAYERS EXPENSE"

Mon, 07/08/2013 - 22:24 | 3732914 Colonel Klink
Colonel Klink's picture

I thought the back side of the Constitution was smeared with shit from our politicians using it as toilet paper?  I'm confused.

Mon, 07/08/2013 - 08:34 | 3730323 Ignatius
Ignatius's picture

Oh, precious.

Nothing like watching the vultures at work on the carcass.

Mon, 07/08/2013 - 08:35 | 3730325 SheepDog-One
SheepDog-One's picture

'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.

Mon, 07/08/2013 - 10:06 | 3730535 espirit
espirit's picture

+1 Exactly.

Mon, 07/08/2013 - 08:37 | 3730331 Sudden Debt
Sudden Debt's picture

NO BAILOUT = 2 BILLION$ COMPENSATION!!!

DID YOU GET YOUR BAILOUT ALREADY?!!

Mon, 07/08/2013 - 08:38 | 3730332 yogibear
yogibear's picture

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. 

Mon, 07/08/2013 - 08:39 | 3730333 Bobbyrib
Bobbyrib's picture

Bailouts are just another entitlement.

Mon, 07/08/2013 - 12:42 | 3731063 Crtrvlt
Crtrvlt's picture

the largest of them all, by a long shot

Mon, 07/08/2013 - 08:41 | 3730338 Shizzmoney
Shizzmoney's picture

The Bankster Jews and Protestants are going to bring us all down.

Mon, 07/08/2013 - 09:03 | 3730380 NoDebt
NoDebt's picture

Protestants?

Mon, 07/08/2013 - 10:07 | 3730538 espirit
espirit's picture

Protestants?

WTF?

Mon, 07/08/2013 - 11:52 | 3730894 Balanced Integer
Balanced Integer's picture

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.

Mon, 07/08/2013 - 08:41 | 3730339 Disenchanted
Disenchanted's picture

re:

 

"This lawsuit seeks to uphold the rule of law," Theodore Olson

 

Oh now he's worried about the rule of law...isn't that precious.

Mon, 07/08/2013 - 08:48 | 3730351 negative rates
negative rates's picture

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.

Mon, 07/08/2013 - 08:51 | 3730359 Disenchanted
Disenchanted's picture

from many moons ago...

 

Here is a studious and obviously very honest man. The US Solicitor General sits in front of a wall lined with leather-bound volumes of Supreme Court Arguments, with a photo of his dead wife displayed prominently in front of him. Does anyone out there seriously believe that this man, a bastion of US law, would tell even a minor lie on a matter as grave as national security?

 

Theodore Olson’s own words indicate that he would be prepared to do rather more than that On March 21, 2002 on its page A35, the Washington Post newspaper printed an article titled “The Limits of Lying” by Jim Hoagland, who writes that a statement by Solicitor General Theodore Olson in the Supreme Court has the ring of perverse honesty.

 

Addressing the Supreme Court of the United States of America, US Solicitor General Theodore Olson said it is "easy to imagine an infinite number of situations . . . where government officials might quite legitimately have reasons to give false information out."

 

Mon, 07/08/2013 - 08:42 | 3730341 ParkAveFlasher
ParkAveFlasher's picture

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?

Mon, 07/08/2013 - 08:47 | 3730348 Croesus
Croesus's picture

I demand my bailout! I would also like an Obamaphone, and a free lunch.

 

 

Mon, 07/08/2013 - 08:58 | 3730369 Disenchanted
Disenchanted's picture

In the words of another ZH poster a few days ago:

"I want a fucking pony!"

Mon, 07/08/2013 - 10:12 | 3730553 Handful of Dust
Handful of Dust's picture

I want my FREE $3,000 bucks for that 'Thingamajig!"

Mon, 07/08/2013 - 08:49 | 3730354 Dr. Engali
Dr. Engali's picture

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.

Mon, 07/08/2013 - 09:24 | 3730436 RSloane
RSloane's picture

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.

Mon, 07/08/2013 - 09:41 | 3730473 Dr. Engali
Dr. Engali's picture

Thank you Sloan . It was a good weekend with family and friends. Any diversion from this mess is always welcome.

Mon, 07/08/2013 - 10:16 | 3730566 espirit
espirit's picture

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.

Mon, 07/08/2013 - 12:50 | 3731089 IndyPat
IndyPat's picture

"We eat the pig, and....."
http://milkandcookies.com/link/166615

Mon, 07/08/2013 - 09:00 | 3730372 pods
pods's picture

Sometimes you're the windshield, sometimes you're the bug.

pods

Mon, 07/08/2013 - 09:04 | 3730384 wcvarones
wcvarones's picture

HAHAHAHAHAHAHAHAHAHA!

"Rule of law!"  That's a good one!

Mon, 07/08/2013 - 12:17 | 3730973 prains
prains's picture

your shirts on backwards

Mon, 07/08/2013 - 22:36 | 3732951 Colonel Klink
Colonel Klink's picture

Rosie always wakes up rough in the morning.

Mon, 07/08/2013 - 09:12 | 3730405 highwaytoserfdom
highwaytoserfdom's picture

Can I sue for shorting banks and trade dissalowed in 2008? 

Leges Sine Moribus Vanae ("of what avail empty laws without [good] morals ..

Mon, 07/08/2013 - 09:28 | 3730447 moroots
moroots's picture

If you get in bed with whores, you best expect to catch an STD.

Mon, 07/08/2013 - 10:19 | 3730579 Temporalist
Temporalist's picture

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...

Mon, 07/08/2013 - 10:46 | 3730673 shovelhead
shovelhead's picture

The gorillas should sue for being portrayed with a gay mustache and buck teeth.

Mon, 07/08/2013 - 11:08 | 3730768 ebworthen
ebworthen's picture

"...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?

Mon, 07/08/2013 - 13:12 | 3731145 SmittyinLA
SmittyinLA's picture

Ted Olson, since his wife died has become quite the ambulance chaser 

Mon, 07/08/2013 - 14:02 | 3731311 waterhorse
waterhorse's picture

Weren't we all told that "no rules were broken" and "no crimes were committed?"  snark

Mon, 07/08/2013 - 14:33 | 3731438 Dre4dwolf
Dre4dwolf's picture

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.

Do NOT follow this link or you will be banned from the site!