Fannie, Freddie shares slump after investor lawsuits dismissed
Shares of government-controlled Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) plummeted on Wednesday, the day after a judge upheld the U.S. Treasury’s right to seize the mortgage finance companies’ profits.
Judge Royce Lamberth, threw out lawsuits brought by investors challenging the government’s decision to force the companies to sweep their profits into the Treasury.
In his decision, Lamberth said the “unambiguous” language of the law that paved the way for the government’s bailout of the two firms in 2008 gave the companies’ regulator and the Treasury the power to confiscate their profits.
In heavy trading, the over-the-counter common shares of both companies lost more than a third of their value, with Fannie Mae sliding to $1.70 and Freddie Mac dropping to $1.65, on volume of 142 million and 79 million shares, respectively.
The company’s preferred shares also dropped sharply, with each down more than 50 percent. Freddie Mac’s preferred “Z” shares slid to $4.34 on volume of 33 million. Fannie Mae’s preferred “S” shares slumped to $4.15, with about 43.6 million traded.
In a statement, Fairholme signaled it was not ready to let the matter drop. “We will vigorously pursue the enforcement of existing contractual claims and our inalienable rights of property ownership as guaranteed by the United States Constitution,” it said.
Source: Reuters- Fannie, Freddie shares slump after investor lawsuits dismissed
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