Tom Armistead

Whose Freddie Investment Thesis Is Right?

GSE shareholders are partners with the US Government, placing their personal wealth at risk to further the social goal of increased homeownership. I have been stunned to hear some commentators suggest that the companies should be "confiscated" by the Federal Government. SInce when does Uncle Sam confiscate the assets of his partners? Are assets used to foster increased homeownership being used to commit a crime, that they should be confiscated?

The Barron's article is puzzling to me: the author, Jonathan Laing, has done some very accurate and factual articles on the likes of ACA and MBI, but the article on FNM and FRE struck me as a hatchet job.

Like many relics of the New Deal, FNM was funded on a "pay as you go" basis. Mark to market accounting applies a draconian liquidation value to going concerns, totally missing the value of future profits. Like any other relic of the New Deal, it is a political target. The scheme is, to create a crisis, do a power grab on FNM and FRE, nationalize, then privatize. It's the final goal that drives the crisis.

Does anyone remember when Alexander Haig declared himself in charge? When power grabs go to far, they encounter resistance. Anyway, I like the odds at today's prices.