The legal challenge to the government's bailout of Fannie Mae and Freddie Mac is not necessarily a slam-dunk victory, despite an apparent favorable legal ruling in a similar case, analysts at Keefe, Bruyette & Woods said Monday.
Hank Greenberg, the former head of insurance giant American International Group, won his lawsuit challenging the government bailout of AIG. But Greenberg's victory does not necessarily translate to certain victory for the challenge to Fannie Mae and Freddie Mac's bailout, KBW said.
For one thing, the government used different legal statutes to conduct their takeover of AIG and of the two GSEs. In the AIG case, the government bailed it out through the Federal Reserve Act. In the instance of the GSEs, the government wielded its authority under the Housing and Economic Recovery Act.
An additional consideration is that AIG did not operate under a federal charter. Both Fannie and Freddie operate under federal charters.
Finally, Greenberg may have won his case, but he was awarded no financial damages. That means investors in the GSEs are unlikely to win damages, even if their cases prevail.
