Like many investors, Gary Hindes, who heads Delaware Bay, is bullish on Fannie Mae and Freddie Mac, the mortgage finance giants. He’s less happy about the Department of the Treasury’s decision to take nearly all the profits generated by the companies, which have been under government conservatorship since the 2008 financial crisis, rather than allowing them to build up capital reserves or pay dividends to outside shareholders. In August he filed suit in federal court in Wilmington, Delaware, claiming the government’s profit sweep violates Delaware and Virginia state laws that protect shareholder rights.
The suit pits Hindes, a former chair of Delaware’s state Democratic Party, against the Obama administration—and against his old Wilmington friend Joe Biden, who’s defended the administration’s role in helping the housing market recover after the 2008 crisis. “In January 2009, when the president and I were being sworn in, the housing market was in free fall,” Biden said in April at a Department of Housing and Urban Development conference. He rattled off a list of initiatives to reduce foreclosures and help homebuyers, and pointed to the rebound in house prices “buoyed in part by these efforts.”