Pershing Square Sues US Over GSE Profit Sweeps

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.”