Big crony gamble: Hedge funds lobby hard for privatization of Fannie Mae

A Photo of the Fannie Mae Sign

Generally speaking we are for things being private and as far from the hand of government as is feasible.  But right now some hedge funds are buying up preferred shares of Fannie Mae in hopes that the mortgage behemoths will be privatized. They are betting that the government will opt not to liquidate the entities but instead will seek private hands to take them over.

In other words, the taxpayer backstopped the government sponsored entity during the height of the economic crisis, but now Wall Street wants the lender now that things look better for the company. Socialize the losses and privatize the gains.

If the deal is structured right we are talking about a huge hunk of meat for Wall Street.

And who will act as consultants structuring such a deal? The hedge fund lobbyists. Given that the government will continue to set housing policy and manipulate the market where it can even with a “private” Fannie Mae, tax payers should be weary.


Paulson & Co. is among funds that met with members of the Senate Banking Committee and with staff members in the House of Representatives, said two of the people briefed on the matter. Claren Road Asset Management LLC and Perry Capital LLC also have lobbied, said those people and a third person. They spoke on condition of anonymity because the meetings weren’t public.

“There are funds that have taken very large positions, large hedge funds, and they are lobbying heavily,” Senator Bob Corker, a Tennessee Republican, said in an interview, declining to confirm any names.

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