This Day On The Street
Continue to site
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

Fannie Mae, Freddie Mac 500% Price Appreciation Or Bust: Bove

In his latest update on Federal National Mortgage Association OTCBB:FNMA, Richard Bove of Rafferty Capital Markets examines the implications of the winding up of Federal National Mortgage Association OTCBB:FNMA, and its sibling Federal Home Loan Mortgage Corp OTCBB:FMCC, in the event politicians in Washington have their way.

Read about ValueWalk's previous coverage on this issue here.


Washington's 'too-big-to-fail' fears

Earlier this month, National Economic Council Director Gene Sperling said President Barack Obama would reject proposals by hedge funds to take over Fannie Mae and Freddie Mac. "I want to make clear, the Obama administration believes the risks are too great that this model would recreate the risks of the past," he said. He clarified that their size and infrastructure would enable the two GSEs to stifle competition and raise entry barriers within the securitization market. “All of us should fear that we could re-create a duopoly that the market would perceive as too-big-to-fail market entities with an implicit government guarantee, the core of the failed GSE business model we are trying to replace,” he said.

Hedge funds investors such as Bill Ackman and Bruce Berkowitz have acquired substantial chunks of the publicly available common and preferred stock in the two companies and have proposed to take over their business.

Bove on the implications

Bove's research finds the practical realities of the mortgage finance business make the government's proposed actions untenable. The simple fact is that the 20/30-year FRMs, essential elements of America's housing finance industry, would cease to exist in the absence of buyers such as Freddie and Fannie.

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FNMA $1.77 2.91%
FMCC $1.57 -0.63%
AAPL $93.24 -0.41%
FB $117.81 -0.21%
GOOG $701.43 0.82%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs