Wednesday, July 09, 2008
fannie, freddie tagged again
UPDATE: freddie settled at 10.26, fannie 15.31. across the curve notes:
In my opinion the market’s relentless hounding of Freddie and FNMA stock indicates a collective belief that the fundamental manner in which these companies do business is about to be altered. I am not sure if that is today or tomorrow but the ever efficient market is discounting that possibility as we speak.
It is also interesting that the debt has barely budged. That speaks volumes and in the background we can hear the choir chanting soto voce,”Bear Stearns”. I think that the market expects that the nationalization of the GSE will follow the template of the Bear Stearns takeover. In that case the shareholders were thrown (aggressively) under the bus and debt holders survived. I think that will be the outcome here, too.
I wrote facetiously yesterday that the government takeover legislation of FNMA and Freddie Mac would be the first piece of legislation signed by President Obama in January 2009. It is beginning to look as though that might be the final act of the lamest of lame ducks, George Bush.