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Will Ackman's Plan for Fannie Mae Backfire?

Finally a grown up in the room. Hopefully you can entice others out from under their chairs.

The Upside of Falling Bank Stocks

Our financial trading system is incredibly opaque. I wonder how you can tell that falling financial service equity prices is a sign of prudent hedging and not simply pile-on hedge funds and traders pushing prices down because they can, not neccessariy because they should be brought down?

Frankly, except for the financial press telling us all (often and shrilly) how bad financial balance sheets really are, I'm not at all sure how any rational investor can tell what's really going on. Stock prices for most banlks are trading at a fraction of book value - either management is lying about what they think is going on, or market participants are clubbing all baby seals in reach simply because they have been able to make all seals look like babies, even if some of them in fact are still grown-ups.

Shorting is never a pretty process, but between the elimination of the uptick rule and the lack of enforcement of the requirement to actually locate stock to borrow, the process has become downright ugly and threatens to bring down the entire system. Think about it - why save money when saved wealth invested in the markets can be destroyed by others at will without any apparent recourse? Maybe the low US savings rate is the only rational response to this brutal phenomenon.

Saving Fannie and Freddie

Wall Street has been trying to kill Fannie and Freddie for years. If they succeed, it will ultiamtly lead to a fragmented and expenseive mortage market with no central well understood set of rules, since the notion of "conforming loans" will dissapear without financial heavyweights to enforce the rules.

Make no mistake, a Wall Street victory in the name of free enterprise will spell the death nell for the form of widespread mortage-fuled homeownership that has lifted vast swaths of America up into the middle class over the past 80 years.

Congratulations, financial economists!