NEW YORK ( TheStreet) -- Jim Millstein, the restructuring guru who oversaw the Treasury's former 79.9% stake in AIG (AIG - Get Report), owns preferred shares of Fannie Mae (FNMA) and Freddie Mac (FMCC) on the view that the two government-sponsored enterprises should be recapitalized with private sector money -- a plan Millstein himself has been promoting.
Indeed Millstein and Phillip Swagel, a former Treasury official during the George W. Bush administration, have been the "leading voices," arguing for privatization of the GSEs, according to a March 20 report from CRT Capital Group's Michael Kim.
Millstein, who left the Treasury in February 2011, says he has spent the past year and a half formulating and promoting his plan to fix the U.S. housing market, which now relies almost entirely on government support.
"Any time anyone has asked me -- inside the Treasury Department on the couple of occasions they've deigned to talk to me and on the Hill -- I've always told people
Millstein says he told Swagel, a professor at the University of Maryland who testified before the Senate Banking Committee in February during a hearing on housing finance, about his investment when they co-authored an Oct. 12 opinion essay in The Washington Post arguing the Treasury should "restructure, recapitalize and privatize Fannie and Freddie's mortgage-guarantee businesses." Millstein's investment is not disclosed in the essay, however, and Swagel says he was not aware of Millstein's investment at the time of publication.
"My experience is that Jim is a really honest, straightforward guy. He and I could have different recollections on what he told me and what I knew, but that doesn't take away from my view of him," Swagel says. Swagel, who has published several papers explaining his thinking on housing reform, says he has "absolutely no investments in anything remotely related" to the issues on which he has been advocating. Millstein declines to say how much he has invested in Fannie and Freddie preferred shares, though he says the amount is something he "can afford to lose," adding it is "a total speculative bet." Millstein adds he has more invested in a house he built and hopes to sell. He believes that sale, like the rest of the housing market, would be adversely affected if government officials followed through with their apparent intention to wind down Fannie and Freddie.