Frannie bets a puzzle to many

"When you talk to anybody in Washington, there is an almost universal view that Fannie (FNMA -3.1%) and Freddie (FMCC -1.5%) should be a part of the past, that it is a broken model, and also that private investors in Fannie and Freddie shouldn’t realize any returns from those investments," says PIne River's Colin Teiccholtz, scratching his head over anyone owning stock in the two as a play on them being privatized.

"We've looked at it," says Avenue Capital's Marc Lasry. "I think you’re making a bet that you’re going to be able to force the government to do something.”

It's "a puzzle to me," says an investor in Bill Ackman's Pershing Square. "If you think the Target board is hard to convince of a policy change, you have got to believe you’re really taking on a tall job to try and influence the government."

Taking a break from talking Herbalife, Ackman - who recently disclosed near-10% stakes in the common of both Fannie and Freddie - says he's not supportive of Bruce Berkowitz's recap plan (which would be of benefit to preferred owners like Berokowitz, but not so much for owners of the common)

MBS trader Deepak Narula calls the common stock of Frannie an option which should rise any time chatter about privatization picks up. "Whether the option is worth anything in the short run is immaterial.”

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Comments (9)
  • David Sims
    , contributor
    Comments (805) | Send Message
    This is why the equity has value. Congress would need to Amend this document and nullify the opinion of James Madison.

    22 Nov 2013, 03:16 PM Reply Like
  • Iansboat
    , contributor
    Comments (2) | Send Message
    It'd seem like fascism for the Government to persuade either side. If it has value, then it seem like part of our economy. Also, it should pay back all the money it owes by the end of first quarter 2014. This is faster than all car companies combined, even though it was 5 times as much. Last, the safeguards that have been put in place have nearly eliminated the bad practices that GOVERNMENT told Fannie Mae to make. Those small banks that the government wants Fannie Mae to sell back those mortgages were the same ones who sold them in the first place at the behest of then Pres Bill Clinton. Chase, Wells have had to pay back billions to Fannie/Freddie. It seems like the best solution is the Government to get out, and allow privatization.
    22 Nov 2013, 03:58 PM Reply Like
  • David Sims
    , contributor
    Comments (805) | Send Message
    If you count the value of the warrants, they could pay back all the money simply by converting senior preferred to common and selling the common shares. Unfortunately, they've drained the companies dry of capital.
    23 Nov 2013, 08:40 AM Reply Like
  • thombiz
    , contributor
    Comments (7) | Send Message
    I'm pretty sure the Fed is going to do everything possible to screw the shareholders out of the value of their shares. They may try a reverse split on the common shares, say1 to 100, or they may exercise their warrant to purchase common shares for $0.00005 per share which essentially makes each common share worth $0.00005. Then they'll dress it up as good government protecting the taxpayers from the scourge of shareholders.
    22 Nov 2013, 03:58 PM Reply Like
  • King Rat
    , contributor
    Comments (1819) | Send Message
    You've got to love all the noise spewed by people who make a living selling misinformation.
    Let's analyze this:
    1) are Fannie and Freddie profitable?
    2) do Fannie and Freddie look to be profitable in the future?
    3) what has the government done regarding liquidations in the past?
    4) what concurrent actions hint at possible leanings?


    Fannie and Freddie have a combined balance sheet over $5trillion and leveraged 1000s to 1. That's over 40% of the US mortgage value. Politicians who realize that will
    A) not be able to resist the temptation to get involved
    B) get involved
    C) make a huge profit on that involvement
    and D) be exempt from insider trading laws


    Coincidentally, the Federal Reserve keeps buying up $1trillion QE per year.


    I mean the most recent time there was any outrage about a company as exists over Fannie and Freddie was over the BP oil spill in April of 2010. Remember how politicians were going to bankrupt BP, set an example for all to see about corporate profits, sacrosanctity of the environment, blah blah blah? Except for those same politicians who bought into BP at 50% off and made a fat profit... history will repeat as always.
    22 Nov 2013, 10:13 PM Reply Like
  • Chez le Bart
    , contributor
    Comments (15) | Send Message
    The courts, and only the courts should decide the issue. The government is not an impartial arbitrator, receiving billions in funds from their role. In the current "fiscal environment" I'm skeptical whether it is possible for a rational, reasonable decision to be rendered that would be fair to the parties concerned.
    22 Nov 2013, 10:21 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11311) | Send Message
    The "experts" claimed that an investment in F&F common and preferreds was "crazy" when the commons traded ~40¢ and the preferreds were sub-$3.


    So what do they know?


    And regarding Washington's intentions about keeping all of the profits for congress...


    The only people in DC whose opinions on this matter I will listen to are the judges.
    23 Nov 2013, 10:44 AM Reply Like
  • fsquared_8790
    , contributor
    Comment (1) | Send Message
    The government has done such a stellar job with health care lets give then housing. Only Republicans like Cooker are stupid enough that with abortion and public prayer are willing to take nationalize health card and housing before an election.
    26 Nov 2013, 08:20 PM Reply Like
  • Samuel Chan
    , contributor
    Comments (28) | Send Message
    Conservators have no right to move the gains to the Treasury and they did it unlawfully. The profits must be paid back to the tax payors. Reform and restructure are just a matter of waisting time and money. The simple way to get things better is to set up a more effective monitor system.
    25 Dec 2013, 12:49 AM Reply Like
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