Court throws out two suits over Fannie, Freddie dividends

Fortune, By Geoffrey Smith

A U.S. federal judge on Tuesday threw out two suits from investors in Fannie Mae  FNMA -6.60%  and Freddie Mac  FMCC -7.37%  that aimed to stop the transfer of their profits to the U.S. Treasury, in what may set a decisive precedent for over a dozen similar actions.

Judge Royce Lamberth ruled that the government is entitled under the terms of a 2012 amendment to the two mortgage giants’ bail-out deals, to “sweep” the vast majority of their profits into the Treasury.

The suits had been brought by investors including hedge fund Perry Capital LLC and Bruce Berkowitz, the head of Fairholme Capital Management. Fairholme itself has a separate suit currently in the pretrial discovery phase, and Bill Ackman’s Pershing Square Capital Management LP also has a suit pending.

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