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Wall Street Whispers: Pink-Sheet Politics

"We probably will get a slightly altered version of the status quo," said Schnare. "And that won't help the American populace very much."

The reason, according to various sources, is that the government needs Fannie and Freddie too much to let them go. The two entities now control a wide majority of the U.S. mortgage market, keep rates low to foster a housing recovery and since the government has stood behind the GSEs so far, the impact of stepping away could be more dire than mortgages.

"If the government in any way stunned investors in GSE debt, it would halt their ability to sell Treasury debt," noted Ely.

Still, at some point, the government has to let everyone know what's going on with Fannie and Freddie. It's likely, as Schnare suggested, that not a whole lot will change -- Treasury Secretary Tim Geithner indicated that the government will remain involved in the mortgage market, but simply change its GSE guarantee to an explicit one. But if not much is changing, what's taking so long to say so?

Meanwhile, Fannie and Freddie's essentially worthless shares had been bouncing around on the New York Stock Exchange, where speculative traders have had a field day. Instead of coming up with a comprehensive plan for Fannie and Freddie, their regulator, the Federal Housing Finance Agency, recently placed the two stocks -- which had long been threatened for disqualification by the NYSE -- on the pink sheets. They now trade as FNMAS.OB and FMCC.OB rather than FNM and FRE.

-- Written by Lauren Tara LaCapra in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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