A former Bill Clinton adviser and a Brookings Institute fellow said in a report being released Monday that the US should recapitalize mortgage giants Fannie Mae and Freddie Mac, and release them from government conservatorship in order to fund affordable-housing initiatives.
Such a change would likely be welcomed by Fannie and Freddie hedge-fund investors Bruce Berkowitz, Bill Ackman and Richard Perry, who have sued over what they say is the illegal expropriation of their property by the government.
Robert Shapiro, also a former adviser to both of the Obama presidential campaigns, co-authored the paper with Brookings Institute senior fellow Elaine Kamarck calling for the recap. It is a sharp rebuke to both Treasury and White House officials, who in recent weeks have publicly opposed a “recap and release” policy.
A battle within the Obama administration has led to some rethinking on the Fannie recap. But White House officials don’t want to appear to be caving in to hedge funds, even though the alternative would turn over the business to the biggest banks, according to sources close to the situation.
If the report’s proposals were to become federal law, it would end the sweep of profits to the government and raise more capital through stock offerings. It would also dilute the common shares.