What did it mean to investors when Freddie & Fannie shares jumped (27% and 21%) and their trading volume for both was the highest since late October?
Not much. The most recent political news is that the White House has granted the former GSEs a blank check — no cap on aid. (Hence, why they are now former GSEs). That was the cause of their share price rally. But what does this mean for the companie’s future?
Nothing good. It signals that Uncle Sam will likely use the firms — the government owns 80% of both — to intervene further in the housing market.
Here’s Tom Petruno with the details:
“But whatever additional federal money flows into Fannie and Freddie would almost certainly come at the expense of shareholders' remaining stake. The government now owns 80% of both firms.
The administration is supposed to announce its long-term strategy for Fannie and Freddie in February. The companies' losses could continue to balloon if, as some analysts suspect, the White House were to seek to use the companies to support new mortgage-forgiveness programs that would help struggling homeowners.”
One other factor Petruno notes: “The pay packages the Treasury announced Thursday for the companies' chief executives consisted exclusively of cash compensation; no shares were offered.”
Likely outcomes? The two firms actual value falls to zero . . .
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Source: Fannie and Freddie shares soar, but for no good reason Tom Petruno LA Times, December 28, 2009 | 3:37 pm
http://latimesblogs.latimes.com/money_co/2009/12/fannie-mae-freddie-mac-stocks-obama-treasury.html
“It signals that Uncle Sam will likely use the firms "” the government owns 80% of both "” to intervene further in the housing market.”
blanket principal and rate redutctions for all loans associated w/ purchases within the peak bubble period- whether requested or not w/ no qualification required so liar loans can get in on the action!
possible?
It’s a crime (and utter farce) that these two garbage bins are still publicly-traded “companies”.
us gubment will come out in feburary and announce, they are taking over the mortgage market, only way to control home prices, which is there goal or states and counties will take a tax pounding
Don’t those of us who made prudent purchases — reasonably priced homes within our personal budgets — feel like fools?
@BR: We do. We do indeed. Why bother being responsible? We constantly reward just the opposite everywhere you look in our culture today. It’s beyond sad.
An article that uses ‘calpers’, ‘ethics’ and ‘rules’ in the same sentence. ——–
Calpers tightens ethics rules for board members
CHICAGO (Reuters) – The California Public Employees’ Retirement System Board , the largest U.S. public pension fund, has tightened policies governing board members’ involvement in investment decisions, it said on Tuesday.
that’s a tough one BR..
matters, I suppose, if one, actually, “looks in the Mirror” while shaving..
but, really, it doesn’t matter, as long as the FedRes is the center of our Monetary Universe, Chumpy, who overextended on a NINJA pay-option ARM to cram his ego into home-debtorship, is, merely, a distraction.
or, differently, there are Branches, and, then, there is the Root.
“uni-lateral disarmament”, or not..
On a related note, started reading the book “Lords of Finance”. I guess I’m a little surprised by just how things haven’t changed all that much with people since back in those days. We keep repeating the same mistakes over and over again. Of course, they aren’t “mistakes” if you’re one of the “chosen” in this country and elsewhere. They’re not only perfectly planned, but mighty acceptable.
~~~
BR: My favorite Friedrich Hegel quote: “The only thing we learn from history is that we learn nothing from history.”
BR-
The way I see it the USG will do anything and everything possible to defend asset prices- period. And the USG can and will use its power if necessary- regardless of public opposition- think confiscation of gold in the ’30’s as an example- and internment of all Japanese during WWII. If it needs to – to shore up finances- the USG will make penalties for withdrawals from IRA’s and 401k’s 100% and make purchases of treasuries mandatory in any retirement account.
Legal? Fair? Does it matter?
Come on Barry they’ll just do another 1-20 reverse split and the clowns will still trade it.
Get Lanny Davis on the TV and blame the shorts.
It looks as though FNM and FRE are being set up as the “bad bank” to hold as many RRE assets as possible so that they do not have to be recognized. Now we have to wonder where they are going to offload the CRE assets to…?
@lb: To their little sister, Ginnie, perhaps?
“It looks as though FNM and FRE are being set up as the "bad bank" to hold as many RRE assets as possible so that they do not have to be recognized.” lb, above
good point~ yes, they’re Laundromats..
The plan is working to perfection…give the illusion that we dodged a bullet so corporate insiders can get out…they have been selling at eleveated levels since the market low. (scroll down on the link below to see the chart). Doubt they will announce any bank failures this week (New Year’s Eve)…but next week there should be 7 or so, then 5 a week. Funny how banks only close on Friday evenings.
http://online.barrons.com/public/page/9_0210-instrans.html
manny @ 2:45-
all part of the new “bailout culture”
some ugly precedents have been set- I guess we can look at it as the culmination of the sense of entitlement Americans have developed over the last generation-
failure? please – we are entitled to success or at the very least do-overs-
mulligan anyone?
Climate Gate gone, commenters return… coincidence ??
Excellent commentary, BR. Any idea what nonsense they will use to try to rescue the “Prime Jumbo” Crowd ?
“those of us who made prudent purchases feel like fools”
Doesn’t this help to prop up the value of your home? I think the real fools are those who were prudent and did not buy…
“Doesn't this help to prop up the value of your home?”
value is meaningless if your home is unencumbered and not used as collateral-
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