Fannie's Last Five Quarters Show Need for Breakup

Sometimes a picture or - in this case - a picture of a financial statement can tell a story (a dismal story) of a thousand words:

 

Click the Image For a Larger Version

 

Quick highlights (or lowlights) of the last five quarters:

 

Losses and Expenses Prior to Tax Treatment (more or less operating losses):  $30.1 Billion

Credit Related Expenses: $13.3 Billion

Tax Treatment Benefits: $6.4 Billion

Net Losses: $7.5 Billion ($9.4 Billion over the last four quarters)

Closing Share Price on August 8, 2007: $64.75

Closing Share Price on August 8, 2008: $9.05/share

YoY Share Price Decline: 86.02%

 

Aside from the 86% decline in share price, the number that jumps out me the most is the $30.1 billion losses prior to tax treatment and extraordinary items.

 

Now imagine (if you would) a world where Fannie was 1/5 the size it is now, thereby significantly reducing its potential negative impact on the economy, credit markets, etc. Considering the performance of the past five quarters and the fact that there is always a risk of it happening again even if FNM survives this fiasco, how can any sane person not be in favor of breaking these companies up?

Comments

[348s:]

And what do you suggest as their replacement?

2008 Aug 12 11:00 AM

[lsully999:]

Citigroup has an even larger loss - and is a fraction of the size of Fannie; so on a relative basis, Fannie is out performing Citigroup.

I agree with 76s' general premise. Let's say you break these entities up into 5 separate companies; each company than has a loss equal to 1/5 this amount. What's the difference ?

The solution is to - esentially - turn them into a utility, and regulate the heck out fo them.

2008 Aug 12 02:57 PM