The Future of Freddie & Fannie

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picflight_IHB

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Last 2 weeks FRE and FNM had quite substantial gains after hitting their 52 week lows. Probably short sellers buying.





Can someone who is an experienced investor, trader shed some light on how these two companies will perform in the next 6-12 months.

What do you think their stock will be?





<blockquote>China will be more cautious in the near term buying U.S. agency debt like that of Freddie Mac and Fannie Mae given the recent troubles at the two mortgage finance giants, Merrill Lynch said in a report released on Monday.</blockquote>


<a href="http://uk.reuters.com/article/governmentFilingsNews/idUKN2848732020080728">http://uk.reuters.com/article/governmentFilingsNews/idUKN2848732020080728</a>



Thanks
 
Here is another article about FRE & FNM.



<a href="http://www.bloomberg.com/apps/news?pid=20601213&sid=aoVek8MgifKE&refer=home">http://www.bloomberg.com/apps/news?pid=20601213&sid=aoVek8MgifKE&refer=home</a>
 
[quote author="picflight" date=1217314649]Here is another article about FRE & FNM.



<a href="http://www.bloomberg.com/apps/news?pid=20601213&sid=aoVek8MgifKE&refer=home">http://www.bloomberg.com/apps/news?pid=20601213&sid=aoVek8MgifKE&refer=home</a></blockquote>
I just hope the gov't doesn't buy any stock and just provides a funding safety net for these two. I can totally see these being turned into gov't owned entities which should lower mortgage spreads. I would stay clear of these two stock and most all other bank stocks.
 
IMHO...



Freddie & Fannie will end up nationalized and the shareholders will be left holding the bag.

Short or steer clear.
 
[quote author="Anonymous" date=1217378715]Fannie Mae's Political Immunity

http://online.wsj.com/article/SB121728651034091275.html?mod=opinion_main_review_and_outlooks</blockquote>


Great article, thanks for posting the link.
 
I just read the solution to the problem of Fannie and Freddie's bad debts.





There is someone on CR with the plan:



<blockquote> Speaker73 writes:

I'm waiting for the mortgage debacle costs to add up to the total national debt, and we seem to be 10-20% of the way. Might as well add the mortgage costs to the national debt, because the country is insolvent anyway.



If Citi and BOA can do a writedown, the US Government surely can do the same thing, right?



I completely agree. This whole financial crisis is completely overblown. Like Citi and BoA, the US Government has tons of assets. Citi has sold some of theirs, and BoA has liquidated some of theirs. Like those visionary institutions, the U.S. government just needs the unlock the hidden value of some our most undervalued assets.



Let me give you an example. Japan owns a whole ton of our govies. Biggest owner in the world, if I'm not mistaken. I think we all know we have a snowball's chance in hell of ever making good on the debt. But why go through the whole tiresome rigamorale of threats, defaults, global depression and the inevitable world war, when some creative deal-making could clear everything up?



Perhaps we could convince the Japanese to tear up that silly old pile of debt in exhange for some minor U.S. asset. Ideally, it would be something small and sentimental. Something that wouldn't be missed by most Americans. Say, maybe, Hawaii.



Or maybe the Louisiana Purchase could become the Lousiana Resale.



I'm sure Russia would love Alaska back.



And don't even get me started on the value proposition of breaking up some of our so-called territories. Guam alone should be worth a couple years of deficit spending.



The great news is that America would be unlocking the value of undervalued assets, our debt woes would be fixed immediately, we probably wouldn't have to sell another state for at least 25 years, and perhaps most importantly, the IBs would all make some tidy fees on the transaction.



They say that in Chinese, they use the same word for "crisis" and "opportunity". Surely such clever linguists can think up a good name for Puerto Rico.

Speaker73 | 08.03.08 - 1:05 am | # </blockquote>
 
U.S. Senator Jim Bunning, addressing Ben Bernanke and Hank Paulson


Second, the Fed is asking for more power. But the Fed has proven they cannot be trusted with the power they have. They get it wrong, do not use it, or stretch it further than it was ever supposed to go. As I said a moment ago, their monetary policy is a leading cause of the mess we are in. As regulators, it took them until yesterday to use power we gave them in 1994 to regulate all mortgage lenders. And they stretched their authority to buy 29 billion dollars of Bear Stearns assets so J.P. Morgan could buy Bear at a steep discount.




Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed. Instead, we should give them less to do so they can do it right, either by taking away their monetary policy responsibility or by requiring them to focus only on inflation.




Third and finally, since I expect we will try to get right to questions in the next hearing, let me say a few words about the G.S.E. bailout plan. When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turns out socialism is alive and well in America. The Treasury Secretary is asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed's purchase of Bear Stearns' assets was amateur socialism compared to this.




And for this unprecedented intervention in the markets what assurances do we get that it will not happen again? None. We are in the process of passing a stronger regulator for the G.S.E.s, and that is important, but it allows them to continue in the current form. If they really do fail, should we let them go back to what they were doing before?




I will close with this question Mr. Chairman. Given what the Fed and Treasury did with Bear Stearns, and given what we are talking about here today, I have to wonder what the next government intervention in private enterprise will be. More importantly, where does it stop?
 
Prediction re. Fannie and Freddie: Paulson is going to bail out his buddies in the banking community at the taxpayer's expense on the pretense of protecting <em>our</em> financial system from collapse, and will let the shareholders eat it. Pimco and the IBs will profit immensely from the bail out. And no one in the MSM will ask Paulson where the US gov will find the money to bail out, (insure), Fannie and Freddie.
 
No need to wonder about Freddie and Fannie anymore, <a href="http://www.nytimes.com/2008/08/24/business/24gret.html?_r=1&ref=business&oref=slogin">Gretchen is on the case</a>. She <strong>even</strong> went to the Fannie website to research

her article. Now, that's the kind of investigative reporting one would expect from the <em>NY Times!</em>
 
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