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What happens to Fannie Mae/Freddie Mac?

Posted by LT1 on 7/13/2008 at 1:31 PM | 24 answers | 1159 views
Anyone care to guess how this plays out?

Two Things seem painfully obvious.

1. Neither can survive on thier own

2. Failure of either is not an option

It also seems to me that a government bailout will go over like a lead ballon to taxpayers/voters and this is an election year. Not to mention all the mutual funds/institutions, etc who would see their stock go to zero. Yet, without FNM/FRE the real estate market would litteraly implode and thats not an over statement by any means.

If, and I emphasize IF, FRE cannot sell the $3 billion tomorrow this is going to come to a head rather quickly, imo. Also, just my opinion, but the fact they're maeeting on Sunday to dicuss Plan B tells me they're worried they can't place the paper.

I'm trying to talk myself out of shorting/buying puts on both these stocks with the intention of holding for zero. Someone stop me before I do something stupid:)


Gee that didn't take long.

Treasury to increase credit line to Fannie, Freddie
Fed to extend discount window to Fannie, Freddie
Paulson says Fannie Freddie must be saved
Treasury gets authority to by Fannie, Freddie stock
Paulson says Fannie Freddie must be saved
Fed to extend discount window to Fannie, Freddie
Treasury to increase credit line to Fannie, Freddie

Everyone please remain calm and follow the flashing signs to the nearest exit. LOL!
What about IndyMac? Does anyone think of macaroni cheese with all this talk about Mac this and Mac that? It just sounds like "Easy Mac."

And does anyone know what was up with these weird names, Fannie and Freddie? Was this someone's idea of a joke? Were they drunk at the time?
IndyMac been a goner for ages and a sign of things to come.

As for the names, I think it's so bored trader's can make wise cracks to pass time like, "FNM longs taking it in the fannie" or "looks like freddie just f'd fannie".

This is all getting so stupid. So far nothing the Fed/Treasury or anyone else has done has made a damn bit of difference. It just makes it worse.

Friday they didn't need help at all. They didn't have a capital problem. In fact, according to Dodd, they were over capitalized! Can you believe this sh*t?

The truth is and always was they can't make it on their own. So now we all know what smart people have known for months. Gee, I feel so much better knowing the two companies that underwrite 80% of the housing market can't raise cash without the gov't giving it to them. I mean how bad are things when we can't even hoodwink a few Arab nations, drunk on oil money, to invest a few billion for kicks?

And, if FNM/FRE can't raise cash, whats going to happen to all the regional banks at the bottom of the food chain that need more money? Afterall, C, BAC, WB, LEH, MER and all the other big dogs have to come first. They can't save 'em all.
What a gift!!!

Mega huge day and it's only 10am..Wheeeeeeeeeeeeeeeeeeeeeeeeee
Good for you! I think I would have said the same thing at 10AM. I'm getting whipsawed today. It's like every other day lately: It isn't over till it's over and I have no clue how it's going to end up (for me.)
Master of the obvious here - the names are nicknames. They are the short versions of their real names:

Fannie Mae = Federal National Mortgage Association. Get it FNMA? This was established in the 1930's

Freddie Mac = Federal Home Loan Mortgage Corporation. established in 1970 - the nickname just followed the Fannie Mae one...
Thks 444. Hope you day worked out. Mine was over by 10:15 and all my soldiers came home unharmed. They even brought back friends too..LOL!

Mrs DNA, thank you for the definitions. You get 1 point for accuracy, but I still like my explanation better:)

Anyone else notice how quiet it is around here lately? I haven't gotten to scold some idiot value investor for weeks, how boring! Toad where are you? LOL!..just kidding.

Anyway, I will for that last time(I promise) tell anyone reading to STAY AWAY FROM FINANCIAL STOCKS! They're all lethal to your money. Plus, every morning they go up just know an army of smart people like me will short them into the red. It's almost just a reflex at this point.

Oh, and if you have money in a regional bank, follow the stock. If it goes below $5 it's time to make a withdrawal if you get my drift.
Does anyone understand what Fannie Mae and Freddie Mac actually do for a living? "Between them too, they guarantee 50% of the mortages out there" is what I typically see written in the news articles. But what does that mean exactly? if a borrower defaults then Fannie Mae or Freddie Mac are the one picking up the tab, not the bank who made the loan? And who, if anyone, guarantees the other 50% mortgages?
Only have a minute. So many stocks to short, so little time:)

Bank makes loan

Bank sell loan to FNM

FNM pools loan and sells them to idiots, um, I mean investors.

If no one will buy the crap, um, I mean mortgage, then FNM has no money to buy loan from bank, so bank can't lend money to poor people to buy houses.

Btw, FNW holds 50% of all loans. They buy 80% of all new loans because no one else will.

No FNM no new mortgages. No new mortgages = your house is worth next to nothing.

Have a wonderful day!
Weeeeeeeeeeeeeeeee..It's raining money!!!!!!!!
Can the financials go any lower right now?

Maybe it's time to start selling everything else?

God forbid could we actually bounce, even for just two straight days?

Time to chill and see how it plays out for yours truely.

Btw, you should be very pissed off at the people who caused this mess. If you own a home or held onto financial stocks they've set you back years. And they're not done yet by a long shot.

p.s. Rhoa give me stock pick I'm running low on ideas. Your BAC, NUE and ACAT calls were golden. Send me your picture too. I want to add it to Wikipedia under contraian indicator:)
I got my CD's out of Indymac in May.. They came out with an online mma paying 3.85%, then dropped the <10K rate to 1.4%.. I figured they were trying to just float by for a while..

Glad I didn't short WFC yesterday.. :) Go ahead, lay it on me!
Good for you. Chalk one up for smart people:)

I'm glad you didn't short WFC either, although shorting yesterday would have worked had you not held overnight. Then again, holding any financial overnight long or short right now is not wise imo.

I did short WFC today and lost .35 so no biggie. I even went long FRE intraday not once but twice--I love stress I guess..haha!

When it was all said and done just a small up day and back to cash by the close.
I wish the government would bail me out when I gamble....
p60..the big difference is 15 years ago the gov't was still somewhat sane and didn't believe in manipulating the stock markets in broad daylight. But when you have a gov't that says if you buy one sector(oil) we will fry you and if you sell one sector (financials) we will fry you whats a guy to think? That sure doesn't sound like free markets I'll you that much.

Durant your spot on. Apparently we no longer believe in capitalism and free markets. Today we practice capitalism when things are good and socialism when things go bad.

I'm beginning to think this all ends far worse than I ever imagined. Once they pump up the financials your going to see these banks selling more stock like crazy to raise equity. In the end I believe the markets will prevail and if they do look out.

Americans should be rioting in the streets right now, but very few even have a clue whats taking place.
Hmmm. On the 15th LT1 you wrote "Only have a minute. So many stocks to short, so little time:)"

You would have shorted financials, and you would have lost all your families money, lol.

Keep ringing in that Armageddon that you run in your head. The world is ending, and the market is going to "implode".

I welcome you my dear friend, for you and the army of speculators (oops I mean, "Short Sellers") to bring down the prices so I, that stupid value investor which you have scolded, can aquire all my favorite stocks at wonderful bargains.

Specifically in the case of BAC which is (I know you love short term changes) up approximately 60% since the posting of the completely unknowledgeable quoted statement at the beginning of this post.

Its funny because the short term gain could be lost tomorrow, which I hope. I don't care about short-term, but I know you do.
But hey, I wish everyone thought like you. It would make me very rich. Lets here it for you and you army!

Again, only have a second so i'll be straight to the point


Big talk for a little kid isn't it?

And yes I did short financials on the 15th and 2 hours later posted "its raining money".

Go home little boy, just cuz the market has bounced doesnt mean squat for me or your pos BAC call. Or your NUE and ACAT calls for that matter. God I hate little retards like you. Makes me want to go to the nearest campus and beat the crap out of the first nerdy looking kid I see.

Now give me a pick and help me make money or go away.
So im sitting at Karate class watching my kids and it hits much you want to bet Rhoa showing back up just marked the top of this rally? LOL!
Nah, im waiting for it to come back down.
Could be a while. All news is good news for now. Although your always so wrong in your timing maybe this is THE bottom? Well, then again, I highly doubt that.

Hope the financial owners take advantage of this. Not often u get a doover. Nobody I know wants to get involved on the short side there right now though. Why bother?

CHeck out RCL today, textbook example of the tip I gave you on SHLD. Just wish I would of held longer but didn't want to get greedy plus had a large AAPL position working at the same time.

Wish it was always this easy.
Well I guess it's all but offical now; The US taxpayer, YOU, will bail out Fannie and Freddie.

The good news is it's only suppose to cost 25 Billion! The bad news is the Iraq war was supposed to only cost 50 billion.

As of yet there is little concern on the part of taxpayers it seems. I presume thats because most people are too busy working and trying to survive to even notice let alone understand what it all means. When they do "get it", and they will, I suspect they're not going to be happy. But at the end of the day there is no other choice.

The real shame is that no one actually responsible for causing the problem in the first place will suffer it seems. In a just world, Greenspan, Mozillo, and 100's of other bankers, lenders, regulators, would be lined up and shot in the head in public.

Personally, I liked the ending to Enron #1 a lot better than the sequel-- at least a few people died even if "we" didn't get to off them ourselves.

Then again, Bear Stearns paid for my kids college and FNM, FRE, BAC, LEH, MER, WM, WB, TMA and others have made for a nice year. So I guess I shouldn't bitch.
As predicted on 7/19 right here for my friends;

"Once they pump up the financials your going to see these banks selling more stock like crazy to raise equity."

Welp, guess we can add John Thaine of Merrill Lynch to the list of lying, no good, scumbags in charge of our financial institutions.

Gee, John, last week when you released those horrific earnings you said MER had plenty of capital. Less than a week later your deluting sharholders by 1/3 of thier investment plus selling 30 billion of CDS's for 6.9 billion???? CDS's which you Mr Thaine said last week were worth 11 Billion and not for sale.

For the love of god let's pray this asshole is lying because if he's not then that means things are so screwed up not even the companies themselves know what they've got. If thats the case hide the women and children and prepare for combat.

quote of the day stolen from another website:

"The market is always trying to steal your money. Case in point, had you bought into the "this is the final bottom" fiasco last week, you find yourself today pondering the very meaning of life and why the stock market is even worth your time."

LOL! IS king!
Barron's reports FNM/FRE shareholders will lose everything:

Barron's reports that if Fannie and Freddie fail to raise at least $10 billion in fresh capital, the administration is "likely to mount its own recapitalization, with Treasury infusing taxpayer money into the enterprises. The infusion would take the form of a preferred stock with such seniority, dividend preference and convertibility rights that Fannie's and Freddie's existing common shares effectively would be wiped out, and their preferred shares left bereft of dividends." But wait, there's more.

The White House also wants to exact vengeance on Fannie and Freddie's management. It will replace management, limit their investments, and sell their assets before reselling them to the public or merging them with other GSEs. In particular, Barron's writes that "Treasury would install new management and directors at both, curb the GSEs' sometimes reckless investment and guarantee operations, and liquidate in an orderly fashion the GSEs' troubled $1.6 billion in on-balance-sheet investments. Then the companies could be resold to the public without their explicit government debt guarantees, or folded into government agencies like Ginnie Mae or the FHA."

Sorry Bill "King of the Value Trap" Miller..LOL!

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