2 LINKEDINCOMMENTMORE

WASHINGTON – Sen. Bob Corker's ideas for remaking the housing finance system have upset some usual political alliances.

For starters, a coalition of tea party groups, hedge fund investors and consumer advocate Ralph Nader, a trio not normally known for working together, fiercely opposes some of his housing proposals, which are now before the Senate Committee on Banking, Housing and Urban Affairs.

And the debate has laid bare, through emails, differences between Corker and a prominent Middle Tennessee Republican who also happens to be one of the senator's past political donors as well as a past bundler of campaign contributions — Tim Pagliara.

The Banking Committee on Tuesday was supposed to consider amendments to the bill, as well as vote on the whole measure, but adjourned after opening statements. Lawmakers are trying to rally more bipartisan support.

The legislation is modeled on the Housing Finance Reform and Taxpayer Protection Act, which Corker, R-Tenn., and Sen. Mark Warner, D-Va., co-authored in 2013.

It proposes to "wind down" or kill off the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac) within five years and replace them with a new Federal Mortgage Insurance Corp. The FMIC would require private lenders to put up capital equal to 10 percent of their home-loan volume in order to get a government guarantee on the remaining 90 percent.

Pagliara, chairman of CapWealth Advisors in Franklin, contends the bill makes it unlikely investors in Fannie Mae and Freddie Mac preferred and common stock will ever see dividends they should have been getting for several years. Since August 2012, the Treasury Department has kept all of the profits of the government-sponsored entities. Pagliara calls Corker's legislation an unconstitutional taking of property.

He also contends the bill is largely unnecessary — "a solution in search of a problem" — and is being rushed.

Pagliara has donated $7,700 to Corker since 2009, part of the nearly $20,000 he has given to Tennessee Republican politicians in that time, according to the Center for Responsive Politics.

But he said his outspokenness on Corker's bill explains why he found himself invited and then uninvited to a breakfast the senator held with constituents at Le Peep restaurant in Nashville on April 17.

In an email to Pagliara, one of Corker's campaign aides took note of some of his complaints about the bill.

"Tim — I inadvertently sent this (invitation) to you. After your words in print, I didn't think you would want to attend. My apologies," the aide wrote.

To which Pagliara wrote back: "I disagree with Senator Corker on housing reform. Is there something wrong with disagreeing with a United States Senator?"

He also protested Corker sending messages to him through clients of his firm.

Pagliara wrote to the aide: "I would also ask that if the Senator has any messages for me in the future that he deliver them personally. Continuing . . . the use of any of my clients as a conduit in this debate is unprofessional and reflects poorly on his leadership skills."

For all their differences, Pagliara keeps pictures that show him and Corker together — and smiling.

"Happier times," the financial adviser said.

In response, Corker's office said Pagliara's attendance at the breakfast was unnecessary since he had already visited the senator's office several times and made his views known.

On the dividend issue, Corker has no sympathy.

"Fannie and Freddie would not generate one dime of revenue without the government backstop," the senator said in a statement.

"Shareholders who feel they are entitled to profits from these entities, which were bailed out at taxpayer expense to the tune of $188 billion, are due their day in court as they have requested, and I do not believe we should conflate private investors' investment concerns with the importance of enacting sound housing policy in our country."

But joining Pagliara's complaints about the lack of dividends is Nader, himself a shareholder in Fannie Mae and Freddie Mack. In recent statements, Nader has said Congress, the Federal Housing Finance Authority and the Treasury Department have "exploited" Fannie Mae and Freddie Mac investors and "stuck them in financial limbo."

"Regardless of the outcome of deliberations on the structure of the GSEs (government-sponsored enterprises) Fannie and Freddie shareholders deserve a chance to recover some of the value of their stock," Nader added.

The longtime consumer advocate has said he welcomes hedge funds to his cause because of the legal expertise of their lawyers in shareholder matters.

And hedge funds are angry, having invested heavily in the two government-sponsored entities in recent years.

The American Banker, a trade publication, said several hedge funds are suspected to be funding various public relations campaigns against the bill, although the campaigns are not required to disclose donors. The publication said several hedge funds are already backing federal lawsuits related to the dividends.

Also in agreement is a who's who of nearly 20 conservative and tea party groups, ranging from Tea Party Nation to Americans for Tax Reform and the 60 Plus Association.

In a joint April 22 letter to the Banking Committee, they said the Senate bill "violates shareholder rights by empowering the federal government to keep (Fannie Mae and Freddie Mac) profits in perpetuity, even after taxpayers have been paid back."

And Pagliara recently formed a group himself, Investors Unite, which held a meeting of Fannie Mae and Freddie Mac shareholders on Capitol Hill earlier this month to emphasize that they include plenty of working-class Americans, not just wealthy hedge fund investors.

Contact Paul C. Barton at pbarton@gannett.com. Follow on Twitter @PaulCBarton

2 LINKEDINCOMMENTMORE
Read or Share this story: http://on.wbir.com/1kuiO4l