NEW YORK (TheStreet) --Elected officials are finally speaking publicly about the fight between Fannie Mae (FNMA) and Freddie Mac (FMCC) shareholders and the Obama Administration, though what they are saying for the most part is this: leave it to the courts.
That is more or less the stance taken by Senators Bob Corker (R., Tenn.), Mark Warner (D., Va.), Mike Crapo (R., Idaho) in television interviews with this week.
The senators showed varying degrees of sympathy to shareholders in the mortgage giants, which include large investors like Fairholme Funds, Perry Capital and Pershing Square Capital as well as community banks and individual investors like consumer advocate and occasional presidential candidate Ralph Nader.
Nearly 20 lawsuits have been filed against the government, and they are expected to take years to resolve. Judge Margaret Sweeney in the U.S. Court of Federal Claims last month rejected the Treasury's motion to dismiss a high profile lawsuit by an investor group that includes Bruce Berkowitz's Fairholme Funds. This means the court case will move to the discovery phase, enabling the plaintiffs' lawyers to question government witnesses. That lawsuit takes issue above all with a 2012 amendment to the 2008 government conservatorship of Fannie and Freddie which changed the terms of the Treasury's investment. Instead of owing a 10% dividend to the government, the amendment changed the debt to all of the profits of those entities, minis a modest capital cushion.
Crapo who is working with Sen. Tim Johnson (D., S.D.) on a bill that would wind down Fannie and Freddie in keeping with the stated goals of President Obama told Bloomberg television Thursday, "there's a strong argument to be made that the private sector investors if they rely on a private sector system should be able to count on that. The response to that is the system was clearly moving into conservatorship & the taxpayers did put [$188 billion] into this and I honestly don't know how the courts are going to rule on this but the answer we get from the courts will then guide Congress as to how we move forward."