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Alternative Market Briefing

Hedge funds hoping to cash in on Fannie, Freddie Mac get lift from House bill

Friday, November 06, 2015

Komfie Manalo, Opalesque Asia:

Hedge funds who are seeking to cash in on their shares of Freddie Mac and Fannie Mae got their hopes high following a proposed legislation by South Carolina Republican Mick Mulvaney to release the mortgage giants’ debt from conservatorship, Bloomberg reported.

In his proposed bill, Mulvaney is asking the Feds to repay and release Freddie Mac and Fannie Mae’s debts after building up a 5% capital cushion. However, this early, insiders believe that the bill would face a hurdle as it is not expected to receive sufficient support in the House.

"What we’re looking to do is try to figure out a way to get Fannie and Freddie to build up some type of cushion to protect the taxpayer for so long as it exists," Mulvaney told Bloomberg. The congressman said that after the 5% capital cushion is achieved Fannie Mae and Freddie Mac must maintain a 10% buffer.

Hedge funds managers, including Bill Ackman of Pershing Square Capital Management and Bruce Berkowitz of Fairholme Capital Management are opposing the current set up in which the Treasury Department takes all of Fannie Mae and Freddie Mac’s profits above a minimum threshold. Releasing the mortgage giants from conservatorship will allow the hedge funds to share in the profits.

However, Michael Stegman, a top adviser to President Barack Obama on housing m......................

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