Seeking Alpha

Hedge funds pitch takeover of Frannie

  • The closest thing to a cash offer from the private sector to help reorganize housing finance in this country, a number of hedge funds have proposed converting their $34.6B of preferred stock of Fannie Mae (FNMA) and Freddie Mac (FMCC) and helping to underwrite a $17.3B rights issue.
  • "We plan to put up real money, this is not just a trade,” says one member of the group, which says the plan brings in private capital while leaving taxpayers with legacy mortgage guarantees from which they can profit as housing continues to recover.
  • It remains to be seen if politicians agree that a group of hedge funds taking over the GSEs meets their idea of private capital.
  • "This trade reminds me of the adage, buy them for a good time but not a long time,” says one skeptical hedge fund chief. "The guarantee business is a great business,” says one of the group. “You can’t get rid of Fannie and Freddie.”
Comments (2)
  • OlesenTVYouTube
    , contributor
    Comments (3) | Send Message
    The 2012 profit sweep amendment to the Senior Preferred Stock Purchase Agreement would make a deal like this an extension of the unconstitutional conditions that most shareholders in the companies are currently fighting in court to have rescinded.


    They would make more money fighting to end the conservatorships of the companies.
    13 Nov 2013, 08:11 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9626) | Send Message
    Congress agreeing to the demands of hedge funds right before the mid-terms is utterly improbable.
    13 Nov 2013, 10:18 AM Reply Like
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