Fannie versus Freddie

I got an email from a Journalist asking why Fannie Mae (FNM) was trading at 71 cents (soon to be zero), while Freddie mac was trading at 80 cents (soon to be zero). 

My answer?

"The management at Freddie is vastly superior to that of Fannie . .  . also, from what I understand, the accounting standards at FRE are far more rigorous than those used by FNM."

<Sarcasm mode off>

What's been said:

Discussions found on the web:
  1. LALA commented on Sep 8

    BR just fell in love with you!

  2. Aristotle commented on Sep 8

    AXA, which holds large amounts of FNMA, FRE and Lehman lost $1.5 to 2 billion today on the market value of those stocks and the stock is up about 10%. I don’t get it?

  3. Stuart commented on Sep 8

    08 SEPTEMBER 2008

    Word For The Day: State Capitalism

    State capitalism, in its classic meaning, is a private capitalist economy under state control. This term was often used to describe the controlled economies of the great powers in the First World War.

    In more modern sense, state capitalism is a term that is used, sometimes interchangeably with state monopoly capitalism, to describe a system where the state is intervening in the markets to protect and advance interests of Big Business. This practice is in sharp contrast with the ideals of free market capitalism.

  4. HCF commented on Sep 8

    Today’s market action is equivalent to a shot of heroin to the system. Instant euphoria, but inevitably a crash down from the high. Do investors really believe that 30 yr. mortgages dropping to 6.0% from 6.5% means a sudden influx of buyers of overpriced RE?

    Ummm, no… Renters like me are going to wait until the knife hits the ground before even considering further action…

  5. N! commented on Sep 8

    There is one more letter in Freddie (7) versus Fannie (6)! Who needs fancy models and PhDs to figure this out!!

  6. Ed Miller commented on Sep 8

    Please use quotes around the word “journalist” when discussing such a person.

    Which brings up an important point — Just
    where did all the real journalists go?

  7. Winston Munn commented on Sep 8

    Don’t sugarcoat it, Jim. Tell us what you really think.


    “America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions,” (Jim)Rogers said.

    This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I’m not quite sure why I or anybody else should be paying for this,” Rogers told “Squawk Box Europe.”

    Now that you mention it…

  8. patient renter commented on Sep 8

    Ahh, tell Gretchen Morgenson to just leave you alone!

  9. Steve Barry commented on Sep 8

    Haven’t had a chance to chime in all day. But I am quite happy personally. The Dow rallied 2.6%…I am 200% short…and I made over 1% today? Can you spell Q-I-D? Tomorrow, the 10 day MA on market put/call will be pressured lower as 10 days ago a big number printed. Dollar rally continues, helping my purchasing power and killing Nasdaq profit growth.

    As for F&F, I believe this was done NOT to bail them out. They probably were not in imminent danger of collapse. It was done so that they would not have to be net sellers of mortgages, which would send rates higher and delay a housing rebound. So a subtle distinction…it was not a bailout, but a scheme to make housing recover sooner. Of course it will fail. it is Bush’s attempt to save a bit of his legacy.

  10. MikeBC commented on Sep 8

    Steve Barry, there’s a lot less radical things Treas could have done if stopping net selling of mortgages by F&F was the only issue.

  11. donna commented on Sep 8

    State capitalism? Isn’t that called fascism? “Socialism for the rich” seems like fascism to me!

  12. Namazu commented on Sep 8

    Was it the same guy who republished the announcement of United’s bankruptcy filing from 4 years ago?

  13. Winston Munn commented on Sep 8

    Isn’t the sole underlying reason for this manipulation to create an alternative haven for MBS that no one is willing to purchase?

    • Fannie and Freddie will increase their mortgage-backed securities portfolios through the end of 2009. (Treasury is initiating a temporary program to purchase GSE MBS).

    • Treasury purchases the mortgage-backed securities from the firms; no word about any derivatives or swaps owned by the two;

    The GSEs will expand their MBS portfolios and then Treasury will purchase the MBS from them? Why? There is not that much demand for new loans. Why expand? My guess is that these will turn out to be the level 2 and 3 assets for which there is no market.

    They will no longer be fearful of marking to market – they have been marked-to-Marx.

  14. pmorrisonfl commented on Sep 8

    I agree with Winston, though I wish I did not. As John Mauldin points out, someone, most likely many banks, large and small, seems to be holding the ‘Old Maid’ in a way they can’t get rid of it. It’d be convenient if all the people who made $400,000 loans on $150,000 houses would return that money, but it isn’t going to happen. Making the $250,000 x unknown hundreds of thousands /scarcasm/obviously can’t/scarcasm/ be left to the markets, or the firms who made these deals.

  15. Winston Munn commented on Sep 8

    If you adjust your tinfoil hat just so, you also get the fuzzy picture of FASB 157 having been delayed for a year in order to create time for the level 2 and 3 assets to be offloaded to the Fed and the Treasury before the books are opened for inspection.

    And the final big question, will the MBS purchases be via a Treasury swap or will the Fed have to monetize?

  16. Mark E Hoffer commented on Sep 8


    with this: “My guess is that these will turn out to be the level 2 and 3 assets for which there is no market.”, I think that’s the answer(correct) that will never darken the pages of the MSM.

    Also, OOC, what do you think the level of the DJIA would be if ‘Caines were availed to CNBCEurope as a substitute for CNBCa la Kernan/Kneal?

  17. George commented on Sep 8

    Hey they yield over 100% at this price, to bad the dividend is gone……

  18. Ritchie commented on Sep 9

    Barry: a minor note on your HTML coding…

    sarcasm stuff goes here…

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