Don’t bet on a revival of Fannie Mae and Freddie Mac.
By Daniel at 7 August, 2009, 11:27 pm
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“No Second Act for Fannie and Freddie” By Peter Eavis - WSJ
Shares of the government-sponsored mortgage giants soared in the past two days, sparking renewed interest in their futures. Since penny stocks like these often move wildly, the rally could mean little. After all, both companies are showing huge losses and have, between them, required $85 billion of taxpayer assistance to stay solvent. In reporting second-quarter results on Thursday, Fannie said it would need another $10.7 billion to maintain solvency.
The stocks are worth pennies for good reasons, including the big dividends paid to the government on preferred shares it got as part of last year’s rescue. Also, warrants issued to the government have heavily diluted the companies’ share-counts. Freddie’s is up fourfold from last year, for instance.
There is little chance this will change soon. The departing head of Fannie and Freddie’s regulator said last month he didn’t expect the government to get back all of its $85 billion. That implies little for other stakeholders.”
The full article is at:
http://online.wsj.com/article/SB124961038125713321.html
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