Pershing Square Capital Management, the hedge fund firm run by William Ackman, has sued the U.S. government, claiming that its stripping of Fannie Mae’s and Freddie Mac’s profit illegally short-changes investors in the mortgage companies’ common stock.
In a complaint filed Thursday with the U.S. Court of Federal Claims, Pershing is challenging the government’s “brazen” practice since 2012 of funneling virtually all profit from Fannie and Freddie into the U.S. Treasury Department’s coffers.
This will have created a $130 billion “windfall” by next month through the “confiscation of the entire net worth” of both companies, with an eye to winding them down, the complaint said.
“The net worth sweeps make plaintiffs — and all of the other common shareholders — ‘shareholders’ in name only,” said the complaint, which three retirees who own Fannie Mae stock have joined as plaintiffs.
The Treasury Department declined to comment. The Federal Housing Finance Agency, which is Fannie’s and Freddie’s conservator, did not immediately respond to a similar request.
Other investors, including hedge fund Perry Capital and Bruce Berkowitz’s Fairholme Capital Management, have also sued the government over Fannie and Freddie, which were bailed out in September 2008 amid mounting mortgage losses.
But those lawsuits have focused on the companies’ preferred stock, which threw off 10 percent dividends before they were eliminated in 2012. In contrast, Ackman’s lawsuit focuses on common shareholders.
General Electric confirmed that it is considering the sale of its historic appliance division, part of its effort to focus on selling more complex and profitable industrial equipment.
The confirmation came after Swedish appliance maker Electrolux released a statement Thursday that it was in discussions to buy the business from GE, which is based in Fairfield, Conn.
“GE is evaluating a wide range of strategic options for our appliances business, including discussions with Electrolux and other interested parties,” said GE spokesman Seth Martin.
GE has said it plans to sell businesses worth about $4 billion this year. GE spun off its consumer credit card division last month, sold NBC Universal last year and is gradually shrinking its large financial division as part of a strategy to concentrate on building and servicing large equipment such as aircraft engines, gas-fired turbines, medical imaging machines and oil and gas drilling equipment.
GE appliances are sold mostly in the United States, making it difficult to compete with more global competitors such as LG and Samsung, which have been expanding into the United States in recent years. Electrolux, based in Stockholm, owns brands such as Frigidaire, Westinghouse and Eureka.
— Associated Press
● Royal Dutch Shell has agreed to sell drilling rights in shale formations in Louisiana and Wyoming for $2.1 billion in two transactions. Shell will sell its Pinedale acreage in Wyoming to Ultra Petroleum for $925 million and for 155,000 acres in the Utica and Marcellus shale formations in Ohio and Pennsylvania. It will sell its Haynesville acreage in Louisiana to Vine Oil & Gas and the investment firm Blackstone for $1.2 billion.
● U.S. auto loans jumped to the highest level in eight years this spring, fueled by a big increase in lending to risky borrowers, according to a report by the Federal Reserve Bank of New York. The Fed’s data shows that the dollar amount of subprime auto loans — defined as loans to borrowers with credit scores below 620 — has nearly doubled since 2010. The automakers’ financing arms account for most of the increase in subprime loans. In the second quarter, the dollar value of their subprime loans was triple that of the banks.
● The Securities and Exchange Commission said it charged brokerage Linkbrokers Derivatives for taking profits of more than $18 million from customers by secretly manipulating the cost of securities trades processed by the firm. The New York-based firm, which ceased acting as a broker-dealer in April 2013, has agreed to pay $14 million to settle the charges, the SEC said in a statement. Brokers at the firm defrauded customers by promising very low commission fees, but charging fees that in some cases were more than 1,000 percent greater than represented, the SEC said.
● Coca-Cola is buying a 16.7 percent stake in Monster Beverage for $2.15 billion, with the world’s biggest soda maker hoping to benefit from the surging popularity of energy drinks. Analysts had suggested for some time that Coca-Cola might acquire Monster at a time when its flagship soda business is flagging in developed markets such as the United States. Monster, meanwhile, has cultivated a loyal fan base in part by focusing its marketing on skateboarding, snowboarding and other sports events.
— From news services
● 8:30 a.m.: Producer price index for July.
● 9:15 a.m.: Industrial production for July.