MattDC

Fannie, Freddie Bailout To Wipe Out Equity Holders?

C'mon, openly nationalising brings the outstanding obligations on book. What then happens when $5T is added to the national debt? [Sound of crickets...]. It's not like the ratings agencies can now stand by and do nothing; much burned, much incentive perhaps even to cut early, across ratings classes. So AAA comes off T-bonds and ... you tell me?

Anyhow, it's a mixed picture on Fannie/Freddie. Their stock may have come down 22% and 25% today (acc to Bloomberg), from current low base, but the volumes traded are tiny - less than a tenth of the July 10-13 panic period. I'm not saying there aren't problems or risks, or that low volumes are misrepresentative of price discovery, but barring a new and triggering announcement it looks like a steady worsening of the capital structure rather than a cataclysmic one. That may come, but not on current data, such as it is.

Malkiel and Google Fan, I'd be hiring lawyers, not issuing high ambition claims. But that's just me. I don't think decades of systematic disenfranchisement of minority shareholders is going to bear your suggestions fruit. Reminds me, there's got to be a market opportunity for the thousands of Wall Streeters fired and now advising litigants, no?

M