Millstein, now chief executive officer of his own turnaround advisory firm, Millstein & Co., said that would be better than liquidating Fannie Mae and Freddie Mac.
“If policy makers get the size or pace of a forced wind- down wrong, we will suffer a credit contraction, house prices will fall and the U.S. economy will once again be at risk for a recession,” he told the House Financial Services Committee April 24.
Millstein said he holds some of Fannie Mae’s preferred shares himself.
‘Makes Sense’
Still, President Barack Obama and lawmakers from both parties in Congress have called instead for winding down Fannie Mae and Freddie Mac.
“From the standpoint of the taxpayer, it could make a lot of sense to spin these back off to the public as much smaller, heavily regulated utilities,” Jaret Seiberg, an analyst at Guggenheim Securities LLC’s Washington Research Group, said in an interview.
“It’s a way to turn what could be a loss on the enterprises into a profit,” Seiberg said. “But that theory ignores the political reality that Fannie and Freddie are toxic and almost no one on Capitol Hill can advocate keeping them around.”
Corker in February introduced a bipartisan bill that would ensure Treasury can’t act without congressional approval to sell its senior preferred shares to private investors. Co-sponsors include Elizabeth Warren, a Massachusetts Democrat, Mark Warner, a Virginia Democrat, and Senator David Vitter, a Louisiana Republican.
About-Face
Vitter brought up the hedge-fund lobbying campaign during a hearing April 18. He asked Edward J. DeMarco, regulator of Fannie Mae and Freddie Mac, what he thought would happen if Treasury’s stake in the companies were sold off in the absence of a restructuring of the mortgage finance market. DeMarco said such an about-face would generate confusion.