Updated to reflect reversal in shares late Monday morning and to add a new paragraph at the end to discuss last week's sharp selloff.
NEW YORK (TheStreet) --Fannie Mae (FNMA) and Freddie Mac (FMCC) shares remained volatile Monday as a bipartisan Senate Banking Committee bill to wind down the mortgage giants was unveiled over the weekend.
Fannie Mae common shares opened higher but moved into negative territory in late morning trading and were down 7.02% to $3.84 shortly after noon Monday. Common shares of Freddie Mac were down 6.08% to $3.86.
The proposed Housing Finance Reform and Taxpayer Protection Act of 2014, co-sponsored by Senate Banking Committee Chairman Tim Johnson (D., S.D.) and ranking Republican Mike Crapo runs 442 pages long and promises to eliminate Fannie Mae and Freddie Mac, which maximizing the return to senior preferred shareholders, i.e. the U.S. Treasury Department. It does not discuss the fate of common or junior preferred shareholders, many of whom have brought lawsuits against the government to claim a share of the profits of the mortgage giants.
The Johnson Crapo legislation builds on an earlier effort by Senators Bob Corker (R., Tenn.) and Mark Warner (D., Va.) and in consistent with the stated goals of President Obama, who said during a speech in Phoenix in August that he wants to wind down Fannie and Freddie. Nonetheless the proposal is expected to face considerable skepticism, including from key Senate Democrats Elizabeth Warren (D., Mass.) and Senate majority leader Harry Reid (D., Nv) as well as at least one Republican on the Banking Committee, Pat Toomey. Nonpartisan think tank the Urban Institute , on the other hand, appears to like the bill, according to a report Monday from Housing Wire.