Fannie And Freddie Investors Unite In Washington DC

Apr. 9.14 | About: Fannie Mae (FNMA)


Shareholders came to DC to represent themselves.

Government has overreached their constitutional power.

Regulators have breached their fiduciary duties to shareholders.

On April 8th, a contingent of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) shareholders descended on Washington DC. They followed the call of Tim Pagliara, Chairman & CEO of CapWealth Advisors, and Ralph Nader, a well-known consumer advocate. They came to voice their concerns to Congress over housing finance reform and their rights as shareholders.

The following are selected notes from recordings and interviews with shareholders as they arrived, mingled with other shareholders, and got settled in before meetings on Capitol Hill.

Elizabeth Harrison of Washington DC, a shareholder since 2008, has felt the ups and downs of owning the stock. Having done her research, she's willing to wait for the government to come to their senses. She compared the current situation to Alexander Hamilton's decision to repay debt holders from the revolutionary war to maintain and establish confidence in the financial system of a new United States and Woodrow Wilson's nationalization of the railroads for the first World War. She says that "after the war was over he handed [the companies] back to shareholders."

In regards to delisting of the stock from the NYSE, Ms. Harrison said, "it just made me sick." She also mentioned she is willing to hold her shares another five years, if it comes down to that.

Antonia Burger and Wendy Hottman of Toledo Ohio bought into the companies several years ago and said they believe the government should not take 100% of the profits and the current system has turned to "communism."

Bill Badgley of Southern California, handed out business cards that read, "Release, Re-list to NYSE, Restore Profits, Uphold Rule of Law!" He also added that shareholders, including community banks, were told to buy these stocks. James Lockhart, the former regulator, was one of the biggest proponents of buying the companies' equity, he said.

Edy, a shareholder from Irving Texas, placed his hope in the court system. He said, "if the court cannot straighten it out, there is something wrong with the United States."

Duncan Macleod, a CPA from Richmond Virginia, said the Deferred Tax Asset "probably should have always been on the books" and that it was an "arbitrary decision" to take them off the books. He also believes the loss reserves were way in excess of what they should have been. This implies that the companies were forced to take more loans from Treasury than they ever needed. She strongly believes in the companies and calls them "good for America."

In all of the discussions, shareholders seem to be primarily focused on the fairness of the issues. In general, most of them believe that taxpayers should be paid back under the original terms of the Conservatorship agreements or some other reasonable method of accounting. They believe a 100% net worth sweep of profits is something akin to communism, or at the very least, an overreach of powers. There is a high amount of optimism and hope being placed in the court systems, as a possible avenue to right what they perceive is a serious wrong.

Not a single member of this group identified themselves as a fund manager. Many of these people said this was one of the only stocks they owned and they felt a moral imperative to stand up for shareholders now. Wednesday morning, they will go to meet their representatives.

Disclosure: I am long FNMA, FMCC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.