“In September 2008, the Federal Housing Finance Agency (‘FHFA’) placed Fannie Mae and Freddie Mac into conservatorship, and on behalf of each entity entered into a preferred stock purchase agreement (‘PSPA’) with the U.S. Treasury, under which Treasury received (a) senior preferred stock that would receive a 10% dividend on a principal value equal to $1 billion plus all amounts borrowed from Treasury by Fannie or Freddie, respectively; and (b) warrants to acquire 79.99% of the common stock in each for a nominal price. Under this arrangement, private shareholders in both had the right to receive dividends if and when Treasury received dividends in excess of its 10% senior preferred dividends – i.e., dividends on common stock it acquired through exercising its warrants.”
“In August 2012, FHFA and Treasury changed the PSPA dividend on Treasury’s senior preferred stock from 10% of the stock’s principal value to 100% of the net worth of Fannie Mae or Freddie Mac (minus a small reserve that would shrink to zero by 2018), in perpetuity. Under this arrangement, private shareholders in Fannie and Freddie could never receive any dividends no matter how much money they earned, as 100% of all dividends would have to be paid to Treasury. As a result, Treasury has taken roughly $150 billion more than it could have received under the original 10% dividend.”
1. “Did the Federal Circuit err in barring as ‘substantively derivative’ the claims of private shareholders of Fannie Mae and Freddie Mac for the Taking of their shareholder rights, and the transfer of 100% of their economic interest to the U.S. Treasury, without making a determination as to whether the private shareholders had identified a valid property right that they directly owned and that the government had taken?”
2. “Were the rights to future dividends and other distributions held by shareholders cognizable property rights protected by the Takings Clause?”
