This morning cutesy-pie named “Freddie Mac” (FRE) scared investors with the news that the company’s third quarter loss was just a smidgen over $2 billion, and that they might cut their dividend for the first time ever - by as much as half. Freddie Mac is Federal Home Loan Mortgage Corporation, own of two giant government sponsored entities at the very center of the mortgage storm. Fannie Mae (FNM), or Federal National Mortgage Association, is the other.
Both stocks opened down sharply this morning – continuing a slide that started a few weeks ago but well after the mortgage market started melting earlier this year.
Investor’s confidence in the wonder twin’s power to avert trouble amidst the collapsing lesser giants like Washington Mutual (WM) and Co untrywide (CFC) could best be summed by CNBC’s David Faber on "Squawk on the Street” this morning at the opening bell:
…don't know if we have a bid/ask [for Freddie] but it’s looking below $26 dollars a share down over $11... It’s not like Freddie is going to get taken out here or anything in terms of any problems. The government will be there at some point."
Perhaps the government will “be there at some point” when things go awry, but does that mean the government will support the shareholders of Fannie and Freddie? Would there not be outrage by taxpayers (some renters surely) stuck paying hundreds of billions to support the mortgage market – a crisis of S&L bailout proportions – AND shareholders including Fannie and Freddie executives with millions worth of stock who drove the car off the cliff?
In the great real estate bubble, all roads eventually lead to Fannie and Freddie. This may be bad news for shareholders of many large cap value funds with big Fannie or Freddie stakes, notably two Weitz offerings: Weitz Value (WVALX), down 1.38% today, or Weitz Partners Value (WPVLX) down 1.18% on a day the S&P 500 was up slightly.
Will The Government Bail Out Fannie and Freddie?
This morning cutesy-pie named “Freddie Mac” (FRE) scared investors with the news that the company’s third quarter loss was just a smidgen over $2 billion, and that they might cut their dividend for the first time ever - by as much as half. Freddie Mac is Federal Home Loan Mortgage Corporation, own of two giant government sponsored entities at the very center of the mortgage storm. Fannie Mae (FNM), or Federal National Mortgage Association, is the other.
Both stocks opened down sharply this morning – continuing a slide that started a few weeks ago but well after the mortgage market started melting earlier this year.
Investor’s confidence in the wonder twin’s power to avert trouble amidst the collapsing lesser giants like Washington Mutual (WM) and Co untrywide (CFC) could best be summed by CNBC’s David Faber on "Squawk on the Street” this morning at the opening bell:
…don't know if we have a bid/ask [for Freddie] but it’s looking below $26 dollars a share down over $11... It’s not like Freddie is going to get taken out here or anything in terms of any problems. The government will be there at some point."
Perhaps the government will “be there at some point” when things go awry, but does that mean the government will support the shareholders of Fannie and Freddie? Would there not be outrage by taxpayers (some renters surely) stuck paying hundreds of billions to support the mortgage market – a crisis of S&L bailout proportions – AND shareholders including Fannie and Freddie executives with millions worth of stock who drove the car off the cliff?
In the great real estate bubble, all roads eventually lead to Fannie and Freddie. This may be bad news for shareholders of many large cap value funds with big Fannie or Freddie stakes, notably two Weitz offerings: Weitz Value (WVALX), down 1.38% today, or Weitz Partners Value (WPVLX) down 1.18% on a day the S&P 500 was up slightly.