Hedge fund sues U.S. over Fannie, Freddie

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.

— Reuters

GE discusses selling appliance division

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

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