Fannie Mae (FNMA +6.1%) and Freddie Mac (FMCC +6.1%) preferred shares are up sharply as Bruce Berkowitz takes to CNBC to talk up his recapitalization plans for the GSEs. The Fannie Mae Preferred S series (the most popular vehicle) is ahead 9.7% to $9.70 - in a recap, these would get paid at par, or $25, and Berkowitz is talking about a time frame of June 2014.
"We helped before with AIG, it can work with Fannie and Freddie."
Other preferred shareholders with whom Berkowitz is trying to garner support include Blackstone, Perry Capital and GSO Capital. His plan is to purchase and recapitalize the mortgage-guarantee business of the GSEs and turn them into state-regulated bond insurers with no federal perks. The nearly $5T in assets and liabilities currently managed by Fannie and Freddie would remain with the government.
Treasury and FHFA officials have previously said such ideas are DOA. "Some people are forgetting a little history," chides FHFA chief Ed DeMarco to those who assume recent nice results from Frannie mean their problems are solved.