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  • Fannie Mae And Freddie Mac Congress Has A Motive 2 comments
    Jul 4, 2013 10:40 AM | about stocks: FNMA, FMCC, GM, AIG

    Recently there has been a lot of press around the bipartisan bill Senators Bob Corker, a Tennessee Republican, and Mark Warner, a Virginia Democrat have been drafting. The overall plan in short form is to unwind Fannie Mae and Freddie Mac over a period of 5 years. This would then hold the U.S. treasury liable for all existing mortgage guarantees. Currently Fannie Mae OTCQB:FNMA and Freddie Mac OTCQB:FMCC are reporting record profits. Together they hold roughly 80% of the mortgage market which equates to over 5 trillion dollars. Since the massive government bailout in 2008 which totaled $189.4 billion dollars. Fannie Mae and Freddie Mac have paid back $131.6 billion and are on track to pay back the full amount of $189.4 billion by the end of the year. Another important thing to note is that Fannie and Freddie have recorded record profits this year. The timing of this bill is no coincidence, why now. Fannie Mae has existed as a viable and solvent entity for 70 years until 2008. During the financial crisis of 2008 General Motors GM and American International Group AIG both experienced financial downfall of similar proportions. Both of the entities also having over 70 years history of long standing solvency, however Senator Corker is not drafting bills to wind them down. Why are bills of this nature being drafted, that is the real question we have to ask ourselves, who is the beneficiary?

    The Motive

    In the government bailout plan for Fannie and Freddie the government is able to retain all profits of both corporations indefinitely. This includes all profits even after the $189.4 billion is paid back, meaning no profits are ever returned to any shareholders. Fannie and Freddie so far this year have paid back $59.4 billion with more to come. With the housing market on the rebound, home prices sky rocketing, these dividend payments will continue to flow in to the treasury and will increase over the next 5 years. Specifically to quote a statement from Timothy Mayopoulos CEO of Fannie Mae in an inclusive interview with Bloomberg he said "we expect remain profitable for the foreseeable future". Do the math on what Congress stands to gain over the next 5 years of dividend payments, it exceeds $100 billion. Congress in the past has been known to fall short on meeting deadlines. My suspicion is that the Fannie and Freddie wind down will be no different. In this particular case it will pay not to meet the deadline.

    The other rare occurrence that further proves out this motive is the bipartisan effort. While Democrats and Republicans do not fully agree on how to wind down these two entities, they do agree on the dissolution of Fannie and Freddy. Again the important question is why? Who is the beneficiary? The answer is again simple the government. With both parties looking to cut the U.S. deficit, what better way than to keep the single largest private contributor Fannie and Freddie "alive" and under their control.

    Disclosure: I am long OTCQB:FNMA, OTCQB:FMCC.

    Stocks: FNMA, FMCC, GM, AIG
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  • Palenque
    , contributor
    Comments (395) | Send Message
     
    Guys please lets not forget that the first point of analysis should be this: THE CONSERVATORSHIP IS NOT LEGAL . If you want to invest in Fannie or Freddie you must read the complaint filed at the Federal Court by law firm Hagens Berman & others. In this complaint you will find out why the conservatorship was imposed by force and so all the three amendments signed by the conservator ( acting director Edward Demarco) are NOT VALID. In plain English : it is just a ROBBERY to the shareholders. Not only usurious its a robbery! . The Court will stop it and the Treasury will have to negotiate with the shareholders . This is America not Cuba ! Former Treasury Secretary Henry Paulson was the main person behind this conservatorship and he confess in his book " On the Brink" how he had to "build" a case in order to put Fannie and Freddie under conservatorship because legally he couldn't. They did it in order to use F n F as a bad bank (a trash bin) where they unloaded all the toxic assets of the big banks . Ok Paulson and his fellows ( Barney Frank and Ben Bernanke) saved the global financial system, but now it is time to return FnF to the shareholders and they should do it because it is the easiest and cheapest way out for the government. Also is the best thing for the American people , otherwise the mortgage rates in the future will be decided only by "the Wall St gang".
    I doubt that the government will negotiate with the shareholders until they receive the order from a Federal Court , but this order will came out sooner or later.
    The Bill of Senators Corker and others that proposes the wind down of FnF is just an instrument to put pressure in the negotiation. This Bill will be trashed. According with Congress
    this Bill has 2% chance of passing Committee and 0% chance of being enacted . Check it here http://bit.ly/18F34YB

     

    Fn F have been in business for 70 years and will be in business for another 70 years (at least)

     

    Initial Price target of Fannie Mae $19.80. In the very unlikely case that Fannie ends liquidated investors will receive shares of the new corporation equivalent as Fannie's at $16.50
    If you are a serious investor you should read six articles : two by Bryndon Fisher and four by "user 12736991" .
    Just Google Bryndon Fisher and "user 12736991" , read this articles and you will have intelligent information that can make a difference in your investment account.
    7 Jul 2013, 02:40 AM Reply Like
  • s404n1tn0cc
    , contributor
    Comments (120) | Send Message
     
    A wise guy once said.."Buy the dip sell the rip"

     

    Disclosure I am in and out of FNMA.OB, FMCC.OB. for the next 5 years. HAHAHAH
    11 Jul 2013, 04:16 PM Reply Like
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