lsully999

Fannie, Freddie Common Stock Is Now A Call Option

I grow weary of these articles which tend bash Frannie and Freddie.

Let's assume everything you (and the "Professor") say is true; so what ?!? [Frankly, the article touches so many things - the exact point is somewhat ellusive.]

First of all, to most people who are actually "in the trenches", "fair value" is a meaningless construct - unless you are going to liquidate a company (in which case, fair value would probably over state value). For some reason, "Going Conern" is a concept which somehow seems to have gotten lost in the shuffle.

"Fair Value" might make sense if you are valuing marketable securities; it makes absolutely no sense when attempting to value a 30 year-ish mortgage portfolio in the worst "down" market in 80 years. If you assume the housing inducstry will eventually recover (and if you do not - this is all a meaningless exercise) the "true" value of these portfolios is almost certainly more than the "Fair Value". [And, of course, if you believe that is true, then you purchase those "options" !]

And for the life of me, I simply do not understand why people are so against the Federal Government doing whatever it can to save these institutions; do you really want them to fail, really. [If you do, you lack any credibility.] As near as I can tell, most people appear to be upset that a few executives may have made a little too much money and/or lobbied a little too much on behalf of their company. Talk about throwing the baby out with the bath water ! Good lord; get real.

As a republican, it pains me to say it: but at base line, we really want these companies to behave like utilities; we want them to provide a basic, fundamental service at the best price, further to overall policy objectives and macro-economic constraints. Believe it or not, the recent "bail-out" package put in place certain regulatory oversight which would facilitate such a transition. It's a middle of the road solution which probably makes the most sense. More rational rhetoric will discuss the path upon which we get from here to there.