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Supreme Court rejects investor lawsuits over Fannie Mae, Freddie Mac



(Reuters) – The U.S. Supreme Court on Monday declined to rehear a multibillion-dollar lawsuit brought by shareholders of Fannie Mae and Freddie Mac that arose out of the federal government’s takeover of the mortgage lenders during the 2008 financial crisis.

The justices rejected an appeal by the investors of a lower court’s ruling challenging their challenge to a 2012 deal that resulted in hundreds of billions of dollars being redirected from Fannie Mae and Freddie Mac to the U.S. Treasury Department. The shareholders had argued that this arrangement illegally deprived them of dividends without compensation.

The private investors pursuing the Supreme Court appeal include the Bruce Berkowitz Fairholme Funds and funds managed by New York-based Owl Creek Asset Management.

Created by Congress, Fannie and Freddie operate as for-profit corporations with private shareholders, with the mission of expanding the national mortgage market by purchasing mortgages from private lenders and repackaging them as mortgage-backed securities.

When the housing market collapsed in 2008, the companies suffered overwhelming losses. To avoid catastrophic effects on the American economy, they were placed in conservatorship under the newly created Federal Housing Finance Agency.

The case before the Supreme Court arose out of countless lawsuits filed by private shareholders over the 201

2 agreement between the US Treasury Department and the FHFA that sought to repay the government for the bailout.


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