Shareholders yesterday applauded hedge- funder Richard Perry’s bold move to sue Uncle Sam for hoarding all the profits of mortgage giants Fannie Mae and Freddie Mac.
Preferred shares of the troubled mortgage financiers jumped yesterday after Perry, founder of $5 billion Perry Capital, slapped the Treasury Department with a lawsuit for seizing all of Fannie and Freddie’s profits, saying the move — enacted just last year — hurts private investors.
The complaint, filed in Washington federal court, also names the Federal Housing Finance Agency, which regulates the mortgage companies.
Both Fannie and Freddie’s preferred shares jumped on the news, with Fannie’s preferred T shares up 6 percent, to $7.85, and its preferred S shares up 5 percent, to $5.23. Freddie Mac’s preferred Z shares, meanwhile, jumped 9.2 percent, to $5.46.
At issue is the government’s decision last year to cancel a 10 percent quarterly dividend it had been paying itself to cover the $188 billion taxpayers spent to keep the struggling companies from going bankrupt in 2008.
The Treasury chose to keep 100 percent of the profits instead.
But the preferred shares have become a favorite of hedge funds and other speculators who seek to make a killing if the agencies are ever privatized.
In late May, Bruce Berkowitz of Fairholme Capital Management announced he had taken a roughly $500 million preferred-equity stake, joining Perry and fellow hedgie John Paulson of Paulson & Co.