Fannie and Freddie: Expropriation?

In the April 13, New York Times an article discusses developments in the civil proceeding between an owner of shares in Fannie Mae and Freddie Mac and the federal government over the latter’s decision in August 2012 to revise the terms of its conservatorship of Fannie Mae and Freddie Mac.  The original agreement stated that the U.S. Treasury would receive a 10 percent dividend on its 189.5 billion dollar injection of capital.  The revised terms gave all positive cash flows from Fannie and Freddie to the Treasury leaving little for the firms’ shareholders.  Granting a request from the government, materials produced under discovery in the case have been under seal.  Responding to a request by the New York Times the judge in the case has released two depositions.  In one the former chief financial officer of Fannie Mae said that she told Treasury officials before their 2012 decision that Fannie Mae would soon earn profits again and that she believes her briefing played a role in the government’s decision to alter the terms governing the conservatorship.  For some background on this issue you should read my Working Papers column in the Fall 2014 issue of Regulation in which I discuss two papers relevant to the issue.  In “Stealing Fannie and Freddie,” Yale Law School professorJonathan Macey argues that the decision by the Treasury to take all of the profits now earned by Fannie and Freddie erodes the rule of law and violates shareholder rights. In “The Fannie ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs