Fannie, Freddie: Who Benefited, Who Lost [Housing Tracker]

Travelers Reveals Holdings In Fannie Mae, Freddie Mac. “Travelers Cos. (TRV), the second-largest U.S. commercial insurer, held $12M in debentures and $7M in preferred equity from Fannie Mae and Freddie Mac at the end of Q2. Travelers had $73.2B in invested assets as of June 30. Insurers are disclosing their stakes in the two companies after the U.S. Treasury stepped in this week to prevent their collapse. First American Corp., (FAF) the largest U.S. title insurer, said Tuesday that it will write down the value of its $37.9M in holdings of Fannie Mae and Freddie Mac preferred securities, reducing third-quarter earnings.” (Hartford Courant, Sept. 11)

Big Fund Firms Among Top Holders In Sinking Stocks. “AllianceBernstein Holding LP (AB), which invests $675B… ranked as the top shareholder in Lehman Brothers (LEH)… owning 65.6 million shares, and Fannie, where it owned 134.2 million shares, at the end of June… AB was the third biggest Freddie holder with 41 million shares… Fidelity Investments, the world's biggest mutual fund company with $1.5T invested, [was] the third largest investor in Lehman and the fourth biggest owner at Fannie. At Freddie, Fidelity ranked in 10th position. Capital Group… was the second biggest investor in Freddie and the third biggest in Fannie. Legg Mason (LM)… held more Freddie shares than anyone else, while Legg's ClearBridge unit was the second biggest owner of Lehman stock.” (Guardian UK, Sept. 10)

Four at Four: Next Disaster, Please. “Forcing index-fund managers to sell shares of Fannie Mae and Freddie Mac after those managers have ridden those shares to 90% losses (or more) amounts to adding insult to injury… Now that Standard & Poor’s has announced the deletion of the mortgage guarantors from its index… the $1.25 trillion index-fund industry has to sell those shares. Howard Silverblatt, S&P index analyst: Those managers own about 11.36% of Fannie and Freddie’s shares, while another group of index emulators potentially owns an additional bit of the GSEs… S&P companies need to have a market cap of $5B to stay in the index; as of yesterday Freddie had a $614-million market cap.” (WSJ, Sept. 10)

Fannie Mae And Freddie Mac Rescue Nets $1.7bn For Bill Gross. “Star bond manager Bill Gross has netted $1.7bn (£968m) in profit after betting against Fannie Mae and Freddie Mac. Mr Gross, who manages Pimco's Total Return Fund, was an ardent critic of the two mortgage firms… Mr Gross's fund took significant positions against Fannie and Freddie, moves that paid off on Monday, leading to the fund increasing in value by $1.7B- 1.3% of its total assets.  He had shifted the fund away from corporate bonds and US government securities into mortgage debt in recent months and held 69% in mortgage debt on Monday morning.” (Telegraph UK, Sept. 10)

Fan & Fred Get Another Pass -- This Time From The NYSE. “With their stocks below $1 since the government seized control Sunday… The NYSE’s rules say they should be booted off the exchange floor and should trade only in all-electronic markets. But the NYSE is allowing the shares to stay on the floor until at least Monday, even as penny stocks that may ultimately be worthless. The exchange said it believed that "the market will substantially benefit from having the most available liquidity and the greatest number of venues in which investors can trade the securities of Fannie Mae and Freddie Mac…” (LA Times, Sept. 10)

Wells Fargo to Take Hit on $480 Million of GSE Preferreds. “Wells Fargo & Co. (WFC) said after market close on Monday that it will record other-than-temporary impairment and take a non-cash charge to earnings for its investments in perpetual preferred securities issued by Fannie Mae and Freddie Mac… The bank was among major preferred equity shareholders at both GSEs.” (Housing Wire, Sept. 8)

                                     

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Comments

[cptlgn:]

I am a long-time investor in preferred stocks for income in retirement.Now that the federal government has made my FNMPrS investment worthless,where do I apply for financial assistance to pay my retirement expenses?

2008 Sep 11 09:10 AM

[believeItOr...:]

cptlgn you bring up a very good point!!! In fact, taking this a bit further, most people are F'd and don't even know it... the full exposure to the CMO in pensions such as Calpers have not even been fully disclosed...

This temporary float up (manipulation) of the market is so insiders can make the appropriate bets and either cash out, or make the losses of the funds under management less than would have been... DO NOT GET IT TWISTED. At the end of the day, middle class are holding the bag with no retirement and no value in their homes...

2008 Sep 11 11:09 AM

[sumosama:]

Sorry, Fidelity is privately held. It is not FFFL.

2008 Sep 11 01:11 PM

[SA Editor J...:]

Oops, thanks for picking up on that. Removed it.
- Judy

2008 Sep 11 01:37 PM

[OnW:]

I still can't believe that the guys at F & F were buying these junk mortgages. Shouldn't they have known they were below standard?

2008 Sep 11 05:11 PM

[bearfund:]

User, they were "accomplishing their public mission" of making residential real estate a crowded trade, setting it up for a huge collapse. It was their duty to buy junk mortgages as long as the borrowers promised that they really really wanted to own that house.

2008 Sep 11 11:54 PM