WASHINGTON, DC—A group of shareholders includingPershing Square Capital Management has broughtsuit against the federal government over the 2012 agreement todivert all of Fannie Mae and FreddieMac's earnings to the US Treasury. The complaint filedThursday in the US Court of Federal Claims here charges that thegovernment's action violates the Constitution along with abreaching an implied contract in connections with conservatorshipof the GSEs. Spokespersons for Fannie, Frieddie,the Federal Housing Finance Agency and theTreasury Department all have declined tocomment.

The complaint alleges that in agreeing in 2012 to strip allprofits from the two GSEs and sweep the proceeds to Treasury “everyquarter, in perpetuity,” FHFA and Treasury have sought “not just toreap a windfall for the government”—some $163.4 billion since March2013—but also “to deprive the companies' common shareholders of anyeconomic value in their shares.” The government agencies' actions,the suit claims, violate the Fifth Amendment's Takings Clauseprohibiting “the taking of public property for public use withoutjust compensation.”

Headquartered in New York City and led by WilliamAckman, Pershing Square is the largest shareholder inFannie and Freddie, with a stake of about 10% in the common stockof each. It's joined in the lawsuit by three individuals: LouiseRafter, a retired nurse who holds common shares of Fannie Mae firstpurchased over 25 years ago; and Josephine and Stephen Rettien, amarried couple who have held Fannie Mae common shares forapproximately 15 years.