This means that Fairholme, along with "thousands" of shareholders (voters) would be quite pleased to see the government's senior preferred shares in Fannie and Freddie converted to common shares. A similar action was taken for AIG, enabling the insurer to move past its bailout, the government and the Federal Reserve
both claiming significant profits
George isn't buying this argument either: "The [GSE dividend] sweep has helped improve the federal budget situation and money being paid to the Treasury is helping to fund government operations," he wrote. "At a time of sequestration, it would be politically difficult to stop the sweep and dividends while the government is cutting spending on some popular programs and furloughing some government employees."
The analyst also sees the scenario of Fannie and Freddie simply continuing to operate following a conversion of government preferred shares to common shares, as "politically unpopular."
"The political objection would be that hedge fund managers should not benefit to the detriment of taxpayers, the government, and government programs for the poor," he wrote. "Congress, especially Democrats, would find it difficult to explain to constituents why the government has to raise taxes or cut spending on programs like food stamps or Medicare while institutional investors are benefiting from the rescue of Fannie and Freddie."
-- Written by Philip van Doorn in Jupiter, Fla.