Sen. Mike Crapo (R-Idaho) joined Sen. Tim Johnson (D-S.D.) to unveil the broad outlines of a proposal that would wind down Fannie Mae and Freddie Mac, replace them with a new agency and shift some of the risk of mortgage losses to the private sector, The Washington Post reported yesterday. The lawmakers have declined to publicly discuss the details until they unveil their legislation, which could possibly happen today. But whether the companies are shut down or kept alive, the outcome of several investor lawsuits making their way through the courts will ultimately determine how much of the companies’ profit will go to investor groups. At issue is the arrangement that the government created when it took control of Fannie and Freddie at the height of the housing crisis in 2008. If the investors prevail in court and it is deemed that Fannie and Freddie have given all they need to give to the government, whatever is left over would be given to shareholders. The Treasury could collect some of the money with other common shareholders, and it would get first dibs. Fannie and Freddie have said that they expect to remain profitable, though not as profitable as they have been in the past few quarters. The Office of Management and Budget this week estimated that the companies could send $180 billion to the Treasury over the next 10 years.
