Fannie, Freddie Wind-Up Bill Garners Paltry Support

May 16 2014 | 10:21am ET

Plans to shut down Fannie Mae and Freddie Mac—plans strongly opposed by their hedge fund shareholders—moved forward yesterday, but seems unlikely to go any further this year.

The Senate Banking Committee yesterday approved a measure that would wind the two government-backed mortgage giants down and replace them with a system of privately-financed mortgage insurers. But it did so with the support of only half the Democrats on the panel, making it unlikely that it will face a floor vote before the November elections.

And that makes it more likely that Fannie and Freddie will be restructured, rather than disposed of—a resolution pushed by Fairholme Capital Management and Pershing Square Capital Management.

During the financial crisis, the federal government took over Fannie and Freddie, providing the firms with $188 billion in bailout funds. That has led congressional leaders of both parties as well as the White House to favor their replacement with a system that puts fewer taxpayer dollars at risk.

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