Fannie Mae, Freddie Mac: What You Need to Know

Go behind the takeover headlines with TheStreet.com
Author:
Publish date:

Updated from September 8

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

are now under government control.

Do you need help making sense of it all?

Go behind the takeover headlines with the following insights from

TheStreet.com

.

Tuesday, September 9

From

Stocks Surrender All Mortgage-Bailout Gains

:

"There continues to be no tolerance for negative rhetoric, no matter what the source," said

Ted Weisberg

floor trader at Seaport Securities. "Nothing seems to work, and whatever happens seems to have a 24-hour life cycle at best, and

then we're back to the underlying trend, which seems to be neutral at best."

Dirk Van Dijk

director of research at Zacks Equity Research said that the government bailout of Fannie Mae and Freddie Mac over the weekend was probably necessary, but investors should not pretend it was a good thing. "Anybody who thinks we're totally out of the woods because of this was ... delusional," said Van Dijk, who foresees more pain for financial-services companies as the housing market and global economy continue to deteriorate.

Read the full version of

Stocks Surrender All Mortgage-Bailout Gains

.

Plus, don't miss these updates:

Stocks Off to a Shaky Start

(9:44 a.m. EDT),

U.S. Stocks Search for Direction

(10:30 a.m. EDT),

Pending Home Sales Fall Again in July

(11:11 a.m. EDT) and

Financial-Sector Woes Put Stocks on the Retreat

(3:25 p.m. EDT).

From

Fannie, Freddie Bailout Is Not a Cure-All

:

Gerard Cassidy

RBC Capital Markets analyst said the situation will improve only with time as banks filter through issues not only with housing, but other bad debts like non-residential construction loans. He estimates that will take two to three years' worth of further losses on the part of homeowners, lenders and investors.

The biggest losers so far, of course, have been shareholders of Fannie and Freddie, who each saw their equity value plunge more than 82% to below $1 a share on Monday. Some analysts predict further drops, with price targets as low as 25 cents, "sell" ratings galore and downgrades from major credit-ratings firms.

Larger, stronger, more diversified banks will come out ahead. But the one question that remains -- and likely won't be answered for months or years -- is whether taxpayers will be winners or losers in this equation.

A Congressional Budget Office report in mid-July gave a 50-50 estimate that the bailout would cost taxpayers $25 billion, with a 5% chance that it could reach up to $100 billion.

Read the full version of

Fannie, Freddie Bailout Is Not a Cure-All

.

On

MainStreet

:

What Fannie-Freddie Bailout Means to Tax Payers

Monday, September 8

From

Asia Ends Higher on Fannie/Freddie Rescue

:

Asian stocks closed higher Monday, stocks in Europe are rising and U.S. stock futures indicate a higher opening for markets in the U.S. after the U.S. Treasury and Federal Housing Finance Agency announced a plan to temporarily take control of faltering mortgage giants Fannie Mae and Freddie Mac.

Japan's Nikkei 225 Stock Average closed up 3.4% to 12,624.46, while the Hang Seng index in Hong Kong closed at 20,692.75, a rise of 3.8%.

The FTSE 100 in London rose almost 4% to 5,439.80, and the DAX in Germany rose 3.4% to 6,335.89.

Read the full version of

Asia Ends Higher on Fannie/Freddie Rescue

.

Cramer: This Takeover's Biggest Winners (Video)

Jim Cramer names the winners and losers in the government's takeover of Fannie Mae and Freddie Mac. Cramer's winners include banks such as

Wells Fargo

(WFC) - Get Report

,

Bank of America

(BAC) - Get Report

,

Wachovia

(WB) - Get Report

and two others.

To watch the video, click the player below:

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Plus, don't miss

Time to Delist Fannie and Freddie

on

TheStreet.com TV

.

From

Market Springs to Life on Fannie, Freddie News

:

U.S. stocks were roaring higher Monday after the U.S. government said it would take over mortgage giants Fannie Mae and Freddie Mac.

On Sunday, the Treasury Department and Federal Housing Finance Agency said they would temporarily seize

Fannie Mae and Freddie Mac

, replacing the mortgage giants' CEOs, buying

preferred shares

of the companies and offering additional

capital

support as Fannie and Freddie wade through increasing home-buyer defaults.

The two government-sponsored entities -- which have issued more than $5 trillion in

mortgage-backed securities

and credit -- are central to the health of the U.S. home-lending market and are lynchpins of the financial sector.

Investment bank

Morgan Stanley

(MS) - Get Report

aided the government in its takeover of the firms.

Although news of their takeover was buoying the major indices, shares of Fannie and Freddie were getting destroyed. Fannie and Freddie were in a free fall, down 84% and 76%, respectively. Citigroup downgraded the stocks to sell from buy, and Lehman revised its rating on the pair to equal weight from overweight.

Read the full version of

Market Springs to Life on Fannie, Freddie News

.

Plus, don't miss these updates:

U.S. Stocks Edge Off Mortgage-Bailout Highs

(midday) and

Stock Market Locks In Mortgage-Bailout Gains

(after the closing bell).

From

Cramer: The Fannie/Freddie Bailout's Good News

:

...here is what I have to say about the

Treasury

plan:

It is what I have been calling for. It is what I have wanted. So I can't turn around now, even as I have been the world's most vocal critic of the Treasury, and that it's bad.

I will first put, in plain English, what I believe this plan will help do (the operative word is

help

, as opposed to

hinder

).

1. It will help stop the root of all financial evil right now, house price depreciation.

2. It will make mortgage money cheaper and more readily available.

3. It will slow the rate of foreclosures.

4. It will, if done right, not cost the taxpayer anything and could actually return money to Treasury through the preferred and common stock that the government is buying.

Now, let's try to pick each one of these apart...

Read the full version of

Cramer: The Fannie/Freddie Bailout's Good News

. (Related:

Cramer: Fannie, Freddie Takeover Changes the Game

)

Plus, don't miss

Cramer: This Takeover's Biggest Winners

on

TheStreet.com TV

.

From

Bolling: Watch for a Builder Rebound

:

The U.S. government's takeover of Fannie Mae and Freddie Mac may attract foreign investment into our housing markets, our real estate and our financial institutions. This could be the catalyst for a rebound in the sectors that have been hit hard lately.

Take this with a grain of salt: I am a trend trader and love buying stocks, commodities, real estate, concert tickets, anything, as they are making new highs. I have a clear "trader's lean" toward buying strength. It has served me well for many years.

Read the full version of

Bolling: Fannie-Freddie Deal May Boost Builders

.

TheStreet.com TV Rewind: Cramer: Fix Fannie Fast (Video, Aug. 21)

Jim Cramer says the government needs to move on Fannie and Freddie by the weekend.

To watch the video, click the player below:

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Plus, don't miss these related videos on

TheStreet.com TV

:

Cramer: The Only Real Future for Fannie, Freddie

(Aug. 19: Cramer sees no hope for the GSEs' common stock. The solution we need is the Mortgage Resolution Trust.),

Cramer: What a Fannie/Freddie Recovery Means to You

(Jul. 14: Things will get a little better for homeowners, but giving these mortgage backers money is no solution to the housing mess, says Cramer.),

Cramer: Fannie and Freddie, Game Over

(Jul. 10: Cramer discusses insolvency vs. bankruptcy and why these companies desperately need recapitalization.) and

Cramer: Take Fannie and Freddie Common Stock Off the Table

(Mar. 6: The equity of FNM and FRE seem to be on the verge of being wiped out, says Cramer.)

From

Call Fannie-Freddie Deal What It Is: A Seizure

:

The business media, as The Business Press Maven never tires of pointing out, too often plays stenographer to authority -- whether that authority is a CEO or the government. And this is rarely more apparent than when reporters -- whether by simple choice or lazy default -- parrot the chosen, obfuscating, self-justifying phrases that authorities, who might do nothing else right, tend to always excel in.

The

Financial Times

did just that when remarking that Fannie and Freddie were going to be placed in a "conservatorship." Uh, dudes, they are being nationalized. A conservatorship is something you put a public garden in. Here, you and I are footing the bill on a whole lotta losses. What is it, more than $12 billion combined since last summer?

Read the full version of

Fannie and Freddie Seizure Misrepresented by Media

.

Plus, don't miss

They Just Don't Get Fannie and Freddie!

on

TheStreet.com TV

.

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.

This article was written by a staff member of TheStreet.com.