Why Paulson and Others Are Betting Big on Fannie and Freddie

Investors hope to see the mortgage giants move out of conservatorship.

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Although John Paulson could blame bad timing for his losses in gold this year, he faults Congress for thwarting his latest game plan: the privatization of government-sponsored Fannie Mae and Freddie Mac. Paulson & Co. is one of several prominent hedge funds that have bought junior preferred stock in the mortgage finance companies through over-the-counter trades in hopes that they would be listed again someday.

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