Non-partisan seniors advocacy group 60 Plus Association, Inc., and several other groups and individuals have filed amicus briefs in the U.S. Court of Appeals for the District of Columbia Circuit on behalf of Perry Capital, the plaintiffs in a dismissed lawsuit against the government regarding the sweeping of GSE profits into Treasury.
Perry Capital, a New York-based hedge fund and one of the largest investors in Fannie Mae and Freddie Mac, sued the government in 2013, claiming the sweep of GSE profits into Treasury was illegal. The suit was dismissed in September 2014 and subsequently appealed.
Other groups or individuals who filed amicus briefs on behalf of Perry Capital include the National Black Chamber of Commerce, Investors Unite, Pershing Square Capital Management, Professor Jonathan R. Macey, Timothy Howard and The Coalition For Mortgage Security, Center for Individual Freedom, and Independent Community Bankers Of America, The Association Of Mortgage Investors.
In the amicus brief filed Monday in the appellate court, 60 Plus said it believes that Congress clearly defines the common law duties required of a conservator in the Housing and Economic Recovery Act (HERA) of 2008, which are: 1) to preserve the autonomy of the conservatee; 2) to be loyal to the conservatee; and 3) to act prudently to preserve and conserve the estate of the conservatee. These duties should apply to the Federal Housing Finance Agency (FHFA) as conservator of the GSEs since September 2008, 60 Plus contends in the brief, and that the district court validated an FHFA action (sweeping GSE profits into Treasury) that violates all three of these duties: 1) instead of preserving the GSEs' autonomy, FHFA was instead acting to wind them down; 2) FHFA benefited a third party, Treasury, to the detriment of the GSEs, therefore violating the duty of loyalty; and 3) failing to preserve the GSEs' estate by transferring all their profits to Treasury at a time when they knew the GSEs were regaining financial stability.
Perry Capital sued the government in June 2013 over the sweeping of GSE profits into Treasury, a practice that began in August 2012 when the so-called "Third Amendment" to the bailout agreement was enacted. The government bailed out Fannie Mae in 2008 with $187.5 billion; under the terms of the bailout, the government acquired 80 percent of the GSEs' common stock and a 10 percent dividend each year through senior preferred shares. Treasury amended the agreement in August 2012, however, and required that all GSE profits be swept into Treasury, a practice that Perry Capital and several other GSE investors claim creates a "windfall" for the government while shortchanging GSE shareholders.
Judge Royce Lamberth in the U.S. District Court for the District of Columbia dismissed Perry Capital's suit and a similar suit by Fairholme Funds in September 2014. The judge said he believed that the regulator for GSEs Fannie Mae and Freddie Mac, the FHFA, and Treasury had been given the power by Congress to use GSE profits as part of the Housing Economic and Recovery Act. Both Perry and Fairholme appealed the dismissal of the suits. In January 2015, a federal claims court judge revived a separate suit by Fairholme over the profit sweep.
To view a copy of the all amicus briefs, click here.