Sen. Bob Corker took to the Senate floor Thursday afternoon to push for passage of a measure that would prevent the Obama Treasury Department from selling its stake in the bailed-out mortgage giants Fannie Mae and Freddie Mac and to call out investors who have bought shares in the businesses in the hopes that they would be released by the government.
“These wealthy hedge funds made a bet that Congress would fail to do its job, structural reform efforts would fail, and Fannie and Freddie would be recapitalized and released,” the Tennessee Republican said.
In that scenario, he said, the government-sponsored enterprises “would fall back into the system of private gains and public losses, lining the pockets of multimillionaires while leaving taxpayers on the hook.”
A measure authored by Corker that would prevent the Treasury from selling its stake in Fannie and Freddie without Congress’ approval was included in the omnibus spending bill that leaders hope to pass this week.
If it were passed, Corker, said, Congress would be telling “taxpayers that we are putting to bed the idea of returning to the status quo as an option.”
Thursday’s speech was the latest salvo in a long-simmering battle between some of Fannie and Freddie’s investors and lawmakers who have sought to replace the two bailed-out companies. Corker has been among the members of Congress most involved in trying to resolve the fate of Fannie and Freddie, which were taken into government conservatorship in 2008 and received $188 billion in taxpayer funds before returning to positive cash flow.
He teamed up with Sen. Mark Warner, D-Va., on legislation to reform the housing finance companies. Their bill, which failed to reach a vote in the Senate, would have shuttered the two businesses.
By preventing the Treasury from selling its stake in Fannie and Freddie until 2018 without congressional approval, the measure in the omnibus would increase the odds for a broad overhaul of the housing finance system. It would eliminate the possibility that the two businesses could be returned to the private sector.
That is what many of Fannie and Freddie’s investors want, although the Obama administration has been opposed to it. Among the shareholders are large hedge funds, including Perry Capital, Fairholme Funds and Pershing Square.
Corker on Thursday called the investors “Wall Street hedge funds” and urged his colleagues to resist their lobbying.
The fate of Fannie and Freddie has been in the news recently, even before it was known that the spending bill would include the language preventing their sale. Earlier this month, the New York Times published an article suggesting that Wall Street banks are attempting to “take over” the secondary mortgage market from Fannie and Freddie.
