Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets
By Dawn Kopecki
Oct. 11 (Bloomberg) -- Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.
Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performin
Stocks on Wall Street sold off into Friday's close following a vote by the House of Representatives to approve the Treasury Department's $700 billion bailout package .
The three major indices finished near their session lows. The Dow Jones Industrial Average , previously up as much as much as 313 points, ended down 157.15 points, or 1.5%, at 10,325.70, and the S&P 500 gave back 15.04 points, or 1.4%, at 1099.24. The Nasdaq lost 29.33 points, or 1.5%, to 1947.37.
Friday's performance marked a discouraging end to an ugly week. In five days of tradin
The top executives at AIG , Freddie Mac , Fannie Mae , Lehman and Goldman Sachs pulled down more than $2 billion in pay over the past five years according to a new analysis by a professor at San Diego State University’s Charles W. Lamden School of Accountancy, Dr. David DeBoskey .
Henry Paulson, who in his current role as Treasury Secretary is pushing for a bank bailout, accounts for $82 million of the total. That was his
Freddie Mac Sells Bills At Higher Rates-Reuters Monday, 22 Sep 2008 10:14am EDT
Reuters reported that Freddie Mac's $2 billion two part bill sale was sold at higher interest rates compared with the last week's sales of the same maturities. Freddie Mac sold $1 billion of three-month bills due December 22, 2008 at a 2.450% rate, compared with a 2.100% rate for $1 billion of the same maturity bills sold on September 15. Freddie Mac also sold $1 billion of six-month bills due March 23, 2009 at a 2.810% rate, versus a 2.350% rate for $2 billion sale of the same mat
Bill Grosses comment will mark the beginning of the end for the GSE's (see my earlier post). Knowing that an ability to access the credit markets is the life blood of companies like FRE and FNM, I have given Bill Gross's (regarded as the Warren Buffett of bonds) comments more thought. I am now predicting that both FNM and FRE will be taken over within the next 6 mos by the US GVT. This will very likely cause the equity of both companies to become worthless.
Bill Gross's comments below
Bond manager Bill Gross wants to spread the bailout wealth. Gross says in a
Downside Profit Expectation: "$2.5 to $3 per share, depending on where you short it.
It is likely that this stock will dip below the aforementioned downside target. However, I'll be conservative and simply be satisfied with the bulk of the short-term down swing, and leave some profit on the table. If you're a day trader, you can probably even capture that potential additional downside gain, but I am too lazy to bother. Not that I cannot day trad...
Thinking of investing in finacial stocks. Consider Bil Gross's comments first.
Bond manager Bill Gross wants to spread the bailout wealth. Gross says in a commentary posted on the Pimco Web site Thursday that the government must “open up the balance sheet of the U.S. Treasury” to support Fannie Mae ( FNM ), Freddie Mac ( FRE ) and, in a new twist, “Mom and Pop on Main Street U.S.A.” as well.
Gross has previously said he believes the Treasury will have to assist Fannie and Freddie in any efforts to raise new capital. His Pimco Total Return bond fund has major p
Bloomberg's“Fannie, Freddie Preferreds Batter Sovereign, Midwest” takes a closer look at the impact of Fannie Mae (FNM) and Freddie Mac (FRE) preferred stock on regional banks. Banks had liked the GSE preferreds because they can count as regulatory capital and give the banks a tax break. Now the banks face large write downs or possibly total losses on the preferreds, and they might have to raise more capital as a result. Worst case scenario is some banks face such a capital shortfall they might be forced out of business.
Let’s look at the impact of nationalization with the current common eq
Funny how the more things change, the more they stay the same. I thought about writing a piece about the state of things but then I remembered, I wrote the exact same piece I wanted to post today 5 weeks ago
Once again I reiterate what I've been saying over and over - I'd be short Freddie Mac (FRE) (and up 40% in 2 days) if I could be. I'm on the opposite side of this trade from Bill Miller who I truly wonder will be forced to resign after this move [Aug 13: Bill Miller Continues to Boggle Me - Increasing Stake ...
Barron's is portraying a "curtain call" in store for shares of Fannie Mae (FNM) and Freddie Mac (FRE), which fell over 20% each Monday on concerns of insolvency. Barron's suggested that the government would be likely to bail out the two government sponsored entities [GSEs], wiping out its equity holders, preferred, common and even subordinated debt holders. Both of these stocks are near multi-decade lows and have dropped over 90% since 2007.
There is a concern over Fannie Mae's ability to withstand further losses in their sub-prime, Alt-A, and interest only loans.
Government officials are likely seeking to avoid a full-fledged takeover of the companies, said Bert Ely, an Alexandria, Va.-based banking industry consultant and a longtime critic of Fannie and Freddie. More likely, he said are less-sweeping moves to calm rattled debt investors.
Those include having the Federal Reserve or Treasury Department lend to the companies. A government purchase of shares, he said, is "the step of last resort."
Brian Faith, a Fannie Mae spokesman, said in an e-mailed statement that the company "continues to exceed our regulatory capital requirements ...
Lost in this month long Kool Aid rally off the July 15 lows is the danger that is Freddie Mac(FRE) and Fannie Mae (FNM). Just a month ago we had one of those emergency Sunday evening announcements that now comes every quarter as we reward risk taking institutions with our tax dollars [Jul 13: And Here We Go]. When things go well, they keep the gains and CEOs laugh to the bank. When things go bad, we cannot let any major institution fail - hi Bear Stearns (BSC). This is one time when the inability to short is really going to cost us - while one could argue Bear was a surprise in how qui...
We have been saying to steer clear of the Fannie/Freddie duo for quite some time now. It’s good to see that Barrons seconds our thoughts as they put out a pretty hard-hitting piece in their weekly issue over the weekend. A bounce in those stocks was inevitable, but it appears that it was short-lived and it’s finished.
This little blurb from Barrons says it all and underscores our bearish views on the companies:
The balance sheets of both companies have been destroyed. On a fair-value basis, in which the value of assets and liabilities is marked to immediate-liquidation value, Freddie would
"The almost inevitable government recapitalization of Fannie Mae and Freddie Mac will likely wipe out investors—and management," Barron's magazine says.
Assuming their assets were liquidated now, based on their fair-value reporting, Freddie Mac's (FRE) net worth would be -$5.6B, while Fannie Mae's (FNM) would fall to just $12.5B, from $36B at year-end.
I WOULD NOT BE SHORT THESE TWO
- THEY ARE OPENING FED WINDOW AND THAT IS ONLY IF THEY NEED IT. I THINK THEY HAVE ENOUGH CASH FOR NOW
BE VERY CAREFULL FOLKS ON THIS
My New Buddy Freddie
- I think this is a great long term play. The stock has been discharged from the operation theatre, though still bruised up.. its on it's way to recovery
FNM/FRE - I am 100% not short these stocks.
- FNM/FRE - The Fed has intervened and basically made it hard to stay short these things. While ultimately they will both be at zero, unless the Fed rea...
Closing out my Short on FNM and FRE
- I am closing my short positions in Fannie Mae and Freddie Mac just because the easy money has been made but I still wouldn't not touch the equities in
More bad news for the financial sector
- Bond manager Bill Gross wants to spread the bailout wealth. Gross says in a commentary posted on the Pimco Web site Thursday that the government must ...
FRE
FRE
Assuming their assets were liquidated now, based on their fair-value reporting, Freddie Mac's (FRE) net worth would be -$5.6B, while Fannie Mae's (FNM) would fall to just $12.5B, from $36B at year-end.
