Fannie, Freddie shareholders lobby against U.S. housing reform bill
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[April 10, 2014]
By Margaret Chadbourn
WASHINGTON (Reuters) — A coalition of
investors in Fannie Mae and Freddie Mac on Wednesday launched an
effort to stop Congress from moving ahead with a U.S. housing
finance reform bill, arguing it would deny them a fair share in any
remaining value in the two companies.
The new tax-exempt group, Investors Unite, said it wants to protect
the rights of shareholders in the bailed-out mortgage finance
companies. It is holding meetings in Washington and sending dozens
of investors to Capitol Hill to promote its cause.
The group's formation is the latest sign of stepped-up lobbying
activity ahead of a Senate Banking Committee meeting later this
month on a bill that would abolish Fannie Mae and Freddie and
replace them with a new agency to back home loans.
The group opposes the bill because it would prevent the companies
from recapitalizing and compensating shareholders.
"I think it needs further study," said coalition leader Tim Pagliara,
the chief executive officer of CapWealth Advisors, a wealth
management firm whose clients own some 8 million shares.
The draft bill the banking panel will consider is silent on whether
or not private shareholders should share in any proceeds when the
companies are liquidated. The government seized Fannie Mae and
Freddie Mac in 2008 as they veered toward insolvency.
Another pro-shareholder group, the Coalition for Mortgage Security,
kicked off a separate national campaign on Monday.
That group, which describes itself as a grassroots organization, has
put out material mirroring the arguments of hedge funds and other
investors battling the U.S. government over a 2012 amendment to the
bailout terms for the companies.
The amendment requires the firms to sweep all their profits into the
U.S. Treasury and does not allow them to pay down the controlling
stake the government took when it rescued them.
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A number of private investors, including Fairholme Capital
Management and Perry Capital LLC, have sued over the change.
Investors and hedge funds began snapping up shares of Fannie Mae and
Freddie Mac more than a year ago hoping for a windfall.
Investors Unite is rallying against the same amendment, claiming it
illegally undercuts shareholders.
Pagliara told a news conference that government officials have been
misleading the public about the health of Fannie Mae and Freddie Mac
since they were taken over in 2008.
The companies received $187.5 billion in taxpayer support, but they
since returned to profitability and have sent $202.9 billion in
dividend payments to the Treasury.
U.S. attorneys have argued shareholders' claims are flawed because
there was no way for the government to know whether the companies
would return to profitability, much less how quickly.
(Reporting by Margaret Chadbourn; editing by Meredith Mazzilli)
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