Preferred shareholders of Fannie Mae and Freddie Mac filed a class action lawsuit challenging the government's appropriation of their dividend, liquidation and related distribution rights.
This is one of a handful of cases filed this week by investors claiming the government is illegally seizing profits from the enterprises and simultaneously destroying shareholder holdings.
Acting on behalf of several investments funds, Boies, Schiller & Flexner as well as Kessler Topaz filed a suit that challenges the 2012 Third Amendment to the government's preferred stock purchase agreements that the U.S. Treasury and Federal Housing Finance Agency agreed upon.
The firms allege that the government's "unilateral amendment of the senior preferred stock agreements constitutes a 'taking' under the Fifth Amendment to the US Constitution requiring payment of just compensation."
Deemed the "Sweep Amendment," the Third Amendment changed the rules regarding the government’s investment in Fannie and Freddie. The firms want to stop the Treasury from enforcing the amendment to preferred stock purchase agreements, according to a release.