wind down Fannie Mae and Freddie Mac
The bill, written by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho), would replace the companies with a new federal mortgage insurer and move more of the risk to private capital. Among the amendments to the bill are two major changes, according to a MarketWatch report.
One amendment would prohibit guarantors of government-insured mortgage-backed securities from originating eligible mortgages. The other specifies that the bill won’t supersede court rulings that force Fannie and Freddie to send all their profits to the Treasury.
That last amendment could irk big investors. When Fannie and Freddie melted down, many hedge funds purchased stock in the companies for a song. Those investors are now pushing for a return to private ownership for Fannie and Freddie. Some hedge funds have filed suit against the government to challenge the current arrangement. Many groups are also lobbying against the Johnson-Crapo bill; if Fannie and Freddie were phased out, some big investors stand to lose a bundle.
A Senate panel will start work today on an amended version of a bill that would