The Jumpstart GSE Reform Act, however, would prohibit the Treasury from selling its stake in the GSEs without the passage of legislation specifically instructing it to do so. Currently, Fannie and Freddie's profits are being swept into the Treasury. Until that changes, private shareholders will not see a cent, no matter how profitable the GSEs become. John Hempton, who manages a hedge fund called Bronte Capital, argues Treasury has trampled on the fifth amendment rights of private shareholders, which prohibit the taking of private property for public use without just compensation. I asked Frank if he believed the government takeover of the GSEs violated the fifth amendment. He started out by claiming responsibility for the takeover. "Let me, um -- confess -- involvement there," he said. "It's my bill under which that happened. I know there was this myth that we protected Fannie and Freddie. In fact it was under the Republicans until 2006 that Fannie and Freddie were left alone. One of the first things we did when we became the majority in 2007 was to put them into -- to give Paulson the power to do that and if you read the Paulson book
Frank then expressed regret over losses suffered by community banks that had purchased preferred shares in Fannie and Freddie shortly before they were put into conservatorship, though he noted they were given tax relief and added that the GSEs were in such dire financial condition the preferred shares would soon have been worthless.