Consumer advocate Ralph Nader, CapWealth Advisor CEO Tim Pagliara and dozens of GSE shareholders from 20 states want GSE reform that guarantees shareholder rights, and reject Johnson-Crapo as unacceptable.

The shareholders want recapitalization and their shares before reform, and only after that should various reform measures be considered. That’s the position of Pagliara’s newly formed Investors Unite.

At the Washington Press Club in Washington, D.C., on Wednesday, the group discussed the devastating impact of the conservatorship of Fannie Mae and Freddie Mac, as well as the U.S. Treasury's "net-worth sweep" of dividends, that has left shareholders unpaid.

This situation would be codified by the Johnson-Crapo proposal, Pagliara said.

“The federal government – the Treasury, FHFA, and Congress – exploited and ignored the GSEs’ shareholders with zombie stock, and stuck them in financial limbo. The GSEs were required to pay above-market 10% dividends on Treasury’s investment, while many of the Wall Street banks that were bailed out with TARP money were required to pay dividends half of that rate,” Pagliara said. “On top of this, the shareholders of their bailed out banks were preserved and given a chance to participate in their financial recovery. The federal government provided funds to help stabilize AIG and Citigroup, both of which had investors who were allowed to benefit from the recovery of these companies. It should be no different when it comes to the GSEs’ shareholders, who, in addition, are useful to the U.S. Treasury in keeping the GSE liabilities off the government’s books.”

Investors Unite opposes not just Johnson-Crapo but the whole of the current terms of Fannie and Freddie’s bailout agreement with the government that forces the firms to send all of their profits to the U.S. Treasury Department.

“Taxpayers, consumers and shareholders should have serious reservations about (Johnson-Crapo.) It does not sufficiently protect taxpayer dollars from being devoted to another bailout…And it leaves far too many regulatory decisions up in the air, and without a baseline, thereby leaving the replacement agency to become prey for the bank’s corporate law firms to write their own rules,” Pagliara said. “The legislative proposals in the Senate and the House do not adequately anticipate the greed and power embedded on Wall Street in its incentive structure. And without laying out a strict regulatory structure, they seem to wrongfully assume that private capital will regulate itself. Do we really want to give even more power to the ‘Too Big to Fail’ banks that were principally responsible for this crisis to begin with?”

Pagliara said the GSEs were certainly not blameless for transgressions similar to the larger ones committed by the Wall Street crowd prior to the financial crisis in 2008. But, he argues, to eliminate them and unravel this intricate market further, Congress could be opening the door wide for runaway corporate exploitation.

“We aren’t arguing that the GSEs should be maintained as is; but instead urged they be regulated strongly to prevent their previous missteps and abuses,” he said.

In a statement, the coalition said it’s seeking “full restitution,” and also wants to amend a current bipartisan proposal in the Senate that would eventually eliminate Fannie and Freddie.

The group had several shareholders speak at the Press Club, telling their own stories of having their savings and investments in the GSEs taken by fiat, explaining that they were ordinary, middle-class shareholders and investors, not fat cats trying to take advantage of the GSEs.

Shareholders seem to be primarily focused on the fairness of the issues. In general, most of them believe that taxpayers should be paid back under the original terms of the conservatorship agreements or some other reasonable method of accounting.

Elizabeth Harrison of Washington, D.C., a shareholder since 2008, said she has felt the ups and downs of owning the stock. She compared the current situation to Alexander Hamilton's decision to repay debt holders from the Revolutionary War to maintain and establish confidence in the financial system of a new United States and Woodrow Wilson's nationalization of the railroads for the First World War, noting that after the Great War, the railroad companies were returned to the shareholders.

Antonia Burger and Wendy Hottman of Toledo, Ohio bought into the companies several years ago and said they believe the government should not take 100% of the profits and the current system has turned to "communism."

Bill Badgley of Southern California, handed out business cards that read, "Release, Re-list to NYSE, Restore Profits, Uphold Rule of Law!"

Since most analysts agree that none of the proposed four GSE reform measures – Johnson-Crapo, Corker-Warner, the PATH Act, and the HOME Forward Act – will make it out of committee to the floor before the November elections, groups like Investors United and others hope to undercut support for the reforms until GSE investors get restitution.