Fannie Mae and Freddie Mac seem to have recovered nicely since the government bailed the insurers out, but shareholders may not be given a chance to share in the wealth, as reported by Nasdaq.com.
Fannie Mae reported earnings of $1.3 billion and Freddie Mac of $227 million, but the profits will have to go back to the Treasury, which bought out the companies for $188 billion. Since they have sent $228 billion back to the Treasury so far, doesn’t that mean they should be paid back or at least be able to return some of the profits to shareholders? The problem is the money Fannie and Freddie are sending to the Treasury are considered as “dividends” and are not working off the balance of the debt. This issue is behind the lawsuits that hedge fund managers Bill Ackman and Bruce Berkowitz are filing against the government.
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Pershing Square’s Bill Ackman who is the main shareholder in Frannie and Freddie, has argued that the government can also benefit from letting the shareholders have their due, because the shares could be worth much more than their current value, and the Treasury could stand to gain by giving the company back to its shareholders.
