President Barack Obama would reject proposals by hedge funds to recapitalize Fannie Mae and Freddie Mac, National Economic Council Director Gene Sperling said.
“I want to make clear, the Obama administration believes the risks are too great that this model would recreate the risks of the past,” Sperling said today in a Washington speech.
Sperling’s comments follow steps by investors Bill Ackman and Bruce Berkowitz to loosen the U.S. government’s grip on Fannie Mae and Freddie Mac, the mortgage-finance giants taken into conservatorship amid losses during the 2008 credit crisis. The two companies should be wound down and replaced with an entirely new housing finance system, Sperling said.
Ackman’s $12 billion hedge-fund firm, Pershing Square Capital Management LP, said on Nov. 15 that it had bought a 9.98 percent stake in the common shares of Fannie Mae that aren’t owned by the government, as well as a 9.77 percent stake in the Freddie Mac shares available to the public. That announcement was prompted by a proposal two days earlier from Berkowitz’s $10.5 billion mutual-fund firm, Fairholme Capital Management LLC, that it and other owners of the preferred shares buy the mortgage insurance business of the companies.