WASHINGTON, March 13 The leaders of the U.S.
Senate Banking Committee's new legislative framework to wind
down Fannie Mae and Freddie Mac will not
determine whether their investors can share in the companies'
renewed profitability, the panel's top Republican said on
Thursday in a televised interview.
Private shareholders, including Perry Capital and Fairholme
Capital Management, had sued the government over Fannie and
Freddie's bailout terms. They claimed the arrangement that
sweeps the companies' profits to the U.S. Treasury without
paying down the government's stake in the companies is illegal.
The government-owned agencies own or guarantee 60 percent of
all U.S. home loans.
"They have filed suit right now in order to challenge the
way that the current conservatorship is managing the current
profitability of Fannie Mae and Freddie Mac," Senator Mike
Crapo, an Idaho Republican, told Bloomberg Television.
"We are not necessarily going to dictate the outcome of
that. That will be a decision that's made in the courts."
Crapo is co-sponsoring the bill with the panel's chairman,
U.S. Senator Tim Johnson. They planned to release a draft as
early as Friday.
The measure would replace Fannie and Freddie with a new
agency and create a housing finance system that provides a
government backstop only after private creditors take a hit.
Fannie Mae and Freddie Mac have received $187.5 billion in
taxpayer aid since regulators seized them in 2008 as loan
defaults drove them toward insolvency. They have since returned
to profitability and by the end of March will return $202.9
billion in dividends to the U.S. Treasury for the government's
Stockholders argue they should not be denied their fair
share in any remaining value in Fannie and Freddie after
taxpayers are compensated.
"There's a strong argument to be made that the
private-sector investors, if they rely on a private-sector
system, should be able to count on that," Crapo said in the