Go figure: In the midst of a deep selloff, a bullish rumor seems to have been planted that would allow for the rescue of Fannie Mae (FNM) and Freddie Mac FRE).
It turns out to have been shite:
"Federal Reserve has not had any discussions with Fannie Mae and Freddie Mac about access to direct loans from the central bank, Fed spokeswoman Michelle Smith said.
"Federal Reserve officials are following the situation closely,” Smith said in a telephone interview today. "However, there have been no discussions” with the companies “about access to the discount window,” she said.
Shares of the two largest U.S. mortgage-finance companies plummeted this week on concern they don’t have enough capital to offset losses from the mortgage meltdown. The discount window offers direct loans to commercial banks at an interest rate that’s now 2.25 percent, a quarter point above the Fed’s benchmark rate.
Chairman Ben S. Bernanke and his colleagues opened the discount window to investment banks at the time of the collapse of Bear Stearns Cos. in March to alleviate the credit crisis."
These bullish bull$%*# rumors end up costing investors real money. Remember the story about Buffett buying Bear Stearns? That made the rounds, including all of the financial television channels, Forbes, etc., sending the stock to $126.
I am waiting for Jamie Dimon to call for an investigation over who started that enormously expensive, money-losing false rumor.
About Those Companies Brought Down by Rumors . . . (July 11, 2008)
Buffett to Buy Bear? Bull$%*# ! (September 27, 2007)
Fed’s Bernanke tells GSEs discount window open
Reuters, Fri Jul 11, 2008
‘Fed Says No Talks With Fannie, Freddie About Loans
Bloomberg, July 11 2008
Bernanke told GSEs they can use discount window: report
Reuters/Marketwatch, 3:10 p.m. EDT July 11, 2008