Crapo said last week that courts should decide how the companies’ investors are treated.
Court Decision
“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,” Crapo, the Idaho Republican who is co-writing the bill, said in an interview with Bloomberg TV’s Peter Cook on March 13. “We are not necessarily going to dictate the outcome of that. That will be a decision that’s made in the courts.”
Hedge funds have lobbied Congress to re-capitalize the companies instead of winding them down. Senator Pat Toomey, a Pennsylvania Republican on the banking panel, is calling for a bill that includes “fair treatment” for investors.
It remains unclear whether the Johnson-Crapo bill can gain the support it would need in the next four months, before lawmakers’ attention shifts to midterm elections. A Democratic Senate aide said last week that the leadership is currently unenthusiastic about legislation that would eliminate the companies.
“All the sincere effort expended by the Senate Banking Committee simply confirms that there is no better alternative,” Fairholme Chief Investment Officer Bruce Berkowitz said in a statement on March 11. “Their core insurance businesses need to be restructured in a way that compensates and protects the taxpayer, not thrown away.”
In the House, a bill that would almost entirely privatize the mortgage market, written by Financial Services Committee Chairman Jeb Hensarling of Texas, hasn’t gained enough support for a vote of the full chamber. It is unclear whether the House would act this year even if the Senate passes a bill.