A Senate proposal for winding down Fannie Mae and Freddie Mac slammed the share prices of the two government-owned mortgage agencies over the last two days, but big investors aren't running away yet.Shares of Fannie and Freddie fell 12 percent and 17 percent, respectively, on Wednesday [March 12], one day after Senate Banking Committee leaders agreed on a framework for a bill to draw down the lenders.The sharp decline has hit big-name hedge funds, which jumped into the once-failing companies as the housing market rebounded. These include William Ackman's $12 billion Pershing Square Capital Management, Fannie Mae's biggest shareholder.Despite this week's losses, several investors said they plan to stay the course, acknowledging that they were aware they had invested in such volatile stocks.Senate Banking Committee Chairman Tim Johnson, a Democrat, and Senator Mike Crapo, the panel's top Republican, outlined a framework for legislation on Tuesday [March 11] after months of talks that included input from the Obama administration. They said they intended to introduce a bill soon.But several hedge fund managers, which often lock up their wealthy investors' money for years and therefore have the ability to stick with investments for a long time, said they would be patient and wait."There are a lot of details to be worked out, and there was no secret that Congress was planning to do this," said one investor who owns hundreds of thousands of shares and asked not to be identified by name.Fannie Mae's share price fell 49 cents on Wednesday to $3.54 a share on 124 million shares traded on OTCMarket. Freddie Mac ended down 68 cents at $3.36 a share on volume of 61 million shares.Fannie and Freddie, which own or guarantee 60 percent of all U.S. home loans, provide a steady source of mortgage funds by buying loans from lenders and packaging them into securities that they sell to investors with a guarantee.Their central role in the mortgage market led the government to bail them out to the tune of $187.5 billion during the 2007-2009 financial crisis. Lawmakers want to make sure taxpayers are never on the hook again.Bruce Berkowitz of Fairholme Capital Management objected to the plan to wind Fannie and Freddie down. His fund ranks as one of the three shareholders in each company."What happened before 2008 was the result of regulatory and management failures, accelerated by political meddling. These failures continue today," Berkowitz said."Privately owned Fannie Mae and Freddie Mac are irreplaceable. All the sincere effort expended by the Senate Banking Committee simply confirms that there is no better alternative," he said in a statement.Other large investors include Capital Research Global Investors and Seamans Capital Management.Pershing Square has been largely mum on its Fannie and Freddie investment, with Ackman declining to answer questions about it at an investment conference where he discussed every other bet.Investors like Ackman, who shorted Fannie and Freddie six years ago, are essentially making a political bet. In addition to anticipating that politicians' plans might be changed significantly, there is something else that keeps them optimistic: lawsuits filed by both Fairholme and hedge fund Perry Capital.The investors argue that it is illegal for the government to take all the companies' profits. Some investors expect the lawsuits to prevail and for billions of dollars to eventually come back to the companies.Indeed, Republican Senator Pat Toomey of Pennsylvania, in a letter Friday [March 7] to U.S. Treasury Secretary Jack Lew, signaled support for getting some cash to Fannie and Freddie shareholders. Toomey said he wants legislation to be "mindful of investors in addition to other considerations."Shares of Fannie and Freddie are both down more than 30 percent on the week, not long after both hit their highest levels since 2008.February's rally in the shares helped Pershing Square gain 7.4 percent, putting it up nearly 12 percent on the year, handily beating the average hedge fund's 1.4 percent gain, investors in his fund said. Pershing owns 115 million shares of Fannie and 64 million of Freddie.This month's losses on Fannie and Freddie are going to hurt Ackman's fund."His marks are going to stink for the month," said David Tawil, whose Maglan Capital invests in distressed securities. He said his fund might buy stakes in Fannie and Freddie after lawmakers' language on the proposal is clarified.Even though the proposal seems to harm equity holders, investors in Freddie and Fannie debt could come out winners.The difference in yield on Fannie Mae and Freddie Mac bonds over Treasuries shrank broadly on Wednesday, on the view that the Senate plan would assure the government's guarantee of their existing debt. The yield gap between five-year Fannie Mae notes due February 2019 over five-year Treasuries narrowed 0.005 percentage point to about 0.15 percentage point.