This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Who's Profiting From Fannie and Freddie?

NEW YORK ( TheStreet) - A lot of people lost a lot of money when Fannie Mae (FNM) and Freddie Mac (FRE) were placed into conservatorship: Roughly 20,000 entities -- mutual funds, pension funds, banks and individual investors -- were registered as holders of the common stock alone.

But since the government has taken so long to come up with a plan for their future, a handful of speculative traders have made a killing in the aftermath of their collapse.

On Wednesday, Fannie and Freddie's regulator officially announced that they would delist from major exchanges . Edward DeMarco, acting director of the Federal Housing Finance Agency, explained that the decision was made because of minimum pricing requirements and "curing deficiencies" -- in other words, a lack of liquidity in the stocks.

The FHFA's directive "does not constitute any reflection on either enterprise's current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," he added.

Phew -- that's reassuring. One might have inferred that the government was actually taking a stand.

DeMarco's statement seems to miss the point. The two firms haven't consistently met exchange requirements since entering conservatorship. Everyone's still waiting for the government to sketch out what the "future direction" is, and have been doing so for more than 19 months. In the meantime, their operational performance is widely considered to be atrocious: Fannie and Freddie have lost more than $107 billion since the start of 2007, because of unprecedented stress in the mortgage markets they support.

The New York Stock Exchange (NYSE) notified Fannie Mae on Nov. 12, 2008 that it had failed to meet requirements for continued trading. Fannie didn't regain compliance for nearly a year, because it traded consistently under $1. But it has been failing to meet that level, once again, since May.

Fannie Mae and Freddie Mac vs. Big Banks

When the Treasury Department announced plans to effectively acquire 80% of the GSEs in September 2008, their shares were already under heavy pressure. Since then, the firms have lost about $70 billion in market value, which doesn't include the wiping out of privately-held preferred shares.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AIG $54.93 0.24%
AAPL $130.42 1.26%
FB $80.41 1.07%
GOOG $555.48 2.13%
TSLA $207.19 1.68%

Markets

DOW 18,214.42 -10.15 -0.06%
S&P 500 2,110.74 -3.12 -0.15%
NASDAQ 4,987.89 +20.7530 0.42%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs