Led by William Ackman, Pershing Square is the GSEs' largest shareholder.

WASHINGTON, DC—A group of shareholders including Pershing Square Capital Management has brought suit against the federal government over the 2012 agreement to divert all of Fannie Mae and Freddie Mac’s earnings to the US Treasury. The complaint filed Thursday in the US Court of Federal Claims here charges that the government’s action violates the Constitution along with a breaching an implied contract in connections with conservatorship of the GSEs. Spokespersons for Fannie, Frieddie, the Federal Housing Finance Agency and the Treasury Department all have declined to comment.

The complaint alleges that in agreeing in 2012 to strip all profits from the two GSEs and sweep the proceeds to Treasury “every quarter, in perpetuity,” FHFA and Treasury have sought “not just to reap a windfall for the government”—some $163.4 billion since March 2013—but also “to deprive the companies’ common shareholders of any economic value in their shares.” The government agencies’ actions, the suit claims, violate the Fifth Amendment’s Takings Clause prohibiting “the taking of public property for public use without just compensation.”

Headquartered in New York City and led by William Ackman, Pershing Square is the largest shareholder in Fannie and Freddie, with a stake of about 10% in the common stock of each. It’s joined in the lawsuit by three individuals: Louise Rafter, a retired nurse who holds common shares of Fannie Mae first purchased over 25 years ago; and Josephine and Stephen Rettien, a married couple who have held Fannie Mae common shares for approximately 15 years.

The suit seeks “just compensation” under the Fifth Amendment as well as “damages, rescission, disgorgement, equitable restitution or appropriate relief” for the breach of FHFA’s implied contractual obligation as the GSEs’ conservator to “preserve and conserve” the companies’ “assets and property” and to “put [them] in a sound and solvent condition.” Bloomberg reported Friday that the suit brought by Pershing Square is at least the 20th to challenge the government’s diversion of Fannie and Freddie profits to the US Treasury.