Fannie and Freddie Surge Continues - TheStreet



) --

Fannie Mae



Freddie Mac


are trading higher on unusually large volumes for a third straight day.

Shares of Fannie Mae were up 9.73% to $1.24 on volume of 64 million in early afternoon action, surpassing the issue's trailing three-month average daily volume of 42.3 million. Freddie Mac's stock was almost 10% higher at $1.58 on volume of 356 million, again better than its corresponding average of 25.5 million. Those prices represented a 35% gain in Fannie Mae's stock since Thursday's close and a 42% gain for Freddie Mac shares. Both stocks, however, remain below the 52-week highs they reached in August.

This latest trading surge seems to fly in the face of a

Bloomberg News report

that the Federal Housing Finance Agency, which regulates Fannie and Freddie, is considering asking the U.S. Treasury to increase the size of the $400 billion safety net that it has provided to the nation's largest housing lenders. The report says Freddie and Fannie have drawn down $111.6 billion of the total in less than a year.

Fannie and Freddie shares were mostly left for dead following their rescue by the government in September 2008 and are widely thought to be worthless. The lenders owe the government nearly $100 billion between them,

according to an August story in The Washington Post

. Still, the stock prices of both companies rallied inexplicably in August and September on surges in volumes, as did shares of other seriously troubled companies like


(C) - Get Report



(AIG) - Get Report

, and


(MBI) - Get Report

. Even shares of bankrupt companies like

Lehman Brothers



Washington Mutual


came to life during that period.

Freddie and Fannie bulls range from fast money traders, such as optionsMONSTER co-founder Jon Najarian, to Bronte Capital chief investment officer John Hempton, who

contributed a thoughtful series on Fannie and Freddie in August

arguing the outlook for shares of mortgage lenders is not nearly as hopeless as many people reflexively assume. Responding to the report,

Chairman Jim Cramer called Fannie and Freddie shares

"decent spec."


Written by Dan Freed in New York


Here's the Hempton series


And Cramer's take.

>>See our new stock quote page.