Hedge funds lose bid to quash Fannie, Freddie profit grab

Washington

HEDGE funds largely failed in their legal challenge to the US government's capture of billions of dollars in profits generated by Fannie Mae and Freddie Mac after their bailout, sending shares of the mortgage guarantors plunging.

Perry Capital LLC, the Fairholme Funds and other big investors lost a bid to overturn a judge's ruling which said that they cannot sue the government over the dividend change. The change known as the "net-worth sweep" forced the companies to send almost all their profits to the US Treasury, leaving shareholders with nothing. The companies have been under government control since being bailed out during the 2008 financial crisis.

The funds may still be able to pursu…