Friday, January 22, 2010

Frank to Recommend Replacing Fannie Mae, Freddie Mac (FNM; FRE)

UPDATE: "Fannie Mae is Deer Nuts (FNM)"
Original post:
Fannie is down 6 cents at $1.01; Freddie is down a dime at $1.21. On January 6 we posted "A Warning for Fannie Mae and Freddie Mac Shareholders: Lessons From Alternative Energy Investing (FRE; FNM)":
Freddie's trading down a couple cents at $1.41, Fannie's down 3 at $1.12....
...Now that we have the government explicitly saying that the profit-seeking part of the weird old quasi-public mission is history there is no reason to own the stock....
Emphasis in original, I can't put it any more bluntly than that.
From Bloomberg:
Representative Barney Frank said his committee will push to replace Fannie Mae and Freddie Mac, seized by regulators almost 17 months ago, with a different model for U.S. mortgage financing.

“The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said at a hearing in Washington today. “That’s the approach, rather than a piecemeal one.”

Fannie Mae and Freddie Mac, the largest U.S. mortgage- finance companies, have received $110.6 billion in taxpayer- funded aid since regulators took over the government-sponsored enterprises in September 2008 after determining they had inadequate capital to deal with a rise in mortgage defaults.

Treasury Secretary Timothy F. Geithner said in an interview yesterday that he doesn’t think Congress will be able to pass legislation restructuring the companies until next year.

“We are committed to propose a set of detailed reforms beginning this year,” Geithner said in an interview on “PBS NewsHour.” “I don’t think we’re going to be able to legislate that until that process can start until next year, because it’s just a complicated thing to get right.”

“But we are completely supportive and agree completely with the need to make sure that we take a cold, hard look at what the future of those institutions should be in our country,” he said in the interview....MORE

From the Wall Street Journal:

Fannie Mae, Freddie Mac Should Be Eliminated, Frank Says

From MarketBeat:

Barney Frank: Fannie, Freddie Bye Bye

“As I believe, this committee will be recommending abolishing Fannie Mae and Freddie Mac in their present form and coming up with a whole new system of housing finance.”

Such a salvo from U.S. Representative Barney Frank (D., Mass.) sent shares of the government-sponsored (and government-controlled) housing entities lower this morning.

That Fannie and Freddie are a mess of misplaced priorities, culminating from years of public/private influence, is no secret. That the two companies — which went into Federal conservatorship in September 2008 — continue to trade publicly is an even larger conundrum....MORE

A few years ago a friend sent me a news story about some exurbanites who were complaining about a cattle feeding property. The owner of the feedlot said "This big cattle operation didn't sneak up on these people in the middle of the night. We've been here a long time, they just chose to ignore it for their own reasons. The manure's always stunk"

I have the same feeling about the former GSE's and their common shareholders, see links below.

That MarketBeat headline got me singing "Na Na Hey Hey Kiss Him Goodbye". Here's Bananarama's cover:

Another tune that came to mind was "Banking Queen":


Jan. 21 (lots o'links): Nightly Business Report: "The President's Plan for Fannie Mae & Freddie Mac" (FNM; FRE)

Jan. 5: Rep. Barney Frank: Lenders Fannie and Freddie now a 'public policy instrument' (FRE; FNM)

Dec. 29: Fannie Mae, Freddie Mac exec pay suggests stock worth nothing (FNM; FRE)