Judge rules against investors in gov't dispute

By Pete Yost, Associated Press | Posted - Sep. 30, 2014 at 4:11 p.m.



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WASHINGTON (AP) — A federal judge on Tuesday ruled against investors who are trying to collect billions of dollars in profits of government-chartered mortgage companies Fannie Mae and Freddie Mac.

The decision by U.S. District Judge Royce Lamberth to dismiss the investors' lawsuits was a victory for the government.

"There can be no doubt" that the investors understood the risks involved in investments in closely regulated companies such as Fannie Mae and Freddie Mac, Lamberth wrote, and therefore have no reasonable expectation of profiting.

During the recent mortgage crisis, the government pumped $187 billion into the troubled companies, which have since recovered and now have quarterly profits running into the billions.

Recovering money for itself, the government is collecting a dividend amounting to nearly every dollar of the companies' net worth. That leaves nothing for private investors who had put money into the companies when they faced collapse.

Investors had hoped lawmakers or the courts would force the government to give up rights to the earnings.

Among those suing the government are hedge fund firm Perry Capital LLC and mutual fund company Fairholme Capital Management LLC.

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Pete Yost

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