Judge Rules Fannie-Freddie Lawsuits May Continue
The government suffered a set-back Wednesday in its attempts to fend off lawsuits brought by a group of Wall Street investors over the treatment of Fannie Mae FNMA +5.14% and Freddie Mac FMCC +1.90%.
A judge in the U.S. Court of Federal Claims denied the government’s motion to stay proceedings in that court, according to two people familiar with the decision. Lawyers for the government had asked the Court of Claims to put the lawsuits on hold pending the appeal of a decision by a judge in the U.S. District Court for the District of Columbia that dismissed a similar group of cases last September.
Shares of Fannie jumped by more than 8% Wednesday morning. Shares of Freddie rose by more than 4%.
Wednesday’s decision means the plaintiffs, who include Fairholme Funds, will be able to continue to collect information from the government in hopes of bolstering their argument that the Court of Claims has jurisdiction over the cases.
The cases were brought by investors claiming to be wronged by the government’s sweep of nearly all of the profits of Fannie and Freddie. The plaintiffs argue that the profit sweep is an illegal “taking” under the U.S. Constitution. The Court of Claims hears cases against government.