Westhus grew up in Massachusetts and competed on the Duke University swim team. He joined Perry in 2006 as an analyst from hedge fund Avenue Capital Group LLC, which invests in the debt of companies in trouble. He’d previously worked as a junior member of investment banking teams involved in company financing at Morgan Stanley and JPMorgan Chase & Co., according to a person familiar with his work history. He helped Perry profit by almost $2 billion betting against the performance of subprime home loans before the 2008 financial crisis.
Contrarian Strategy
Investments in Fannie Mae and Freddie Mac reflected the fund’s contrarian strategy. At the time, home-loan delinquencies had more than doubled, according to the Mortgage Bankers Association. Members of an investigatory panel created by Congress were discussing the companies only to argue about how much blame to assign them for the crisis.
Five months after Perry began buying Fannie Mae and Freddie Mac securities, Westhus visited a Treasury Department official to talk about the two companies, according to public records.
Fund founder Richard Perry, who has supported Democratic candidates, also met with policy makers to urge the survival of the mortgage companies, according to a person familiar with the discussions. Perry, who started the fund in 1988, is a Goldman Sachs Group Inc. alumnus and the nephew of former Bear Stearns Cos. Chief Executive Officer Jimmy Cayne.
Pressing Case
Perry brought on Julie Chon, a former senior policy adviser on the Senate Banking Committee, in 2012, who helped press Perry’s case in Washington. The firm failed to sway policymakers.
To take the case to court, Perry signed up former U.S. Solicitor General Theodore Olson, a partner at the Washington law firm Gibson Dunn & Crutcher LLP. Olson brought on Tony Fratto, a former spokesman for President George W. Bush, to spread the word about the merits of the case in the press.
The court clash between the U.S. and Perry, one of at least 18 legal skirmishes involving the two mortgage companies, is part of an effort that may determine how the country will finance home loans in the future.
The latest version of what might be called the Perry plan would start with the companies’ survival. Fannie Mae and Freddie Mac would keep profits rather than send them to the Treasury. It would also prohibit the companies from owning mortgages or bonds and create competition by setting up a common platform for turning home loans into securities, establishing an industry- funded reinsurer and raising the amount of capital the companies would be required to hold.