A hedge fund proposal for freeing Fannie Mae and Freddie Mac from U.S. control is poised to face stiff opposition from investors who say it risks wrecking the mortgage-bond market, Bloomberg News reported yesterday. The Moelis & Co. blueprint, which firms including Paulson & Co. and Blackstone Group LP sponsored, calls for raising tens of billions of dollars in capital for the mortgage-finance companies. The plan, released earlier this month, would also limit the amount of federal money available to offset any Fannie and Freddie losses to $150 billion. Fannie and Freddie package mortgages into debt securities that most investors treat as being fully guaranteed by the U.S. government, in part because the companies are currently under federal control. Some investors argue that capping taxpayer rescue funds, while releasing Fannie and Freddie to private shareholders like Paulson could upend the $5 trillion market for the bonds they issue.
