Sperling Says No Nein To Private Recapitalization Of Fannie And Freddie (Same Day As Reid)

Confounded Interest ^ | 11/24/2013 | Anthony B. Sanders

[whitedog57]

As many are painfully aware, the mortgage giants Fannie Mae and Freddie Mac collapsed in price from Q4 2007 to Q4 2008. Fannie Mae stock was trading at $60.81 on September 28, 2007 and fell to $1.71 by September 30, 2008. That is quite a drop.

But Fannie Mae’s equity is now at $2.73 while Freddie Mac’s is at $2.52 per share. Both started showing signs of life in March 2013, spiked on May 28th, fell again, but has regained upward momentum since September.

Who is in the running to purchase Fannie Mae and Freddie Mac and provide private market recapitalization? Hedge funds, including Perry Capital.

The architect of the Corker-Warner GSE reform bill, Bob Corker (VR-TN)*, thinks that hedge funds make sense to take over Fannie Mae and Freddie Mac: “It works hand in glove with my plan,” Corker says in interview. “It only works in a reformed world.”

The problem with hedge funds taking over Fannie Mae and Freddie Mac is that the White House has said no. Gene Sperling, Fannie, said at an Urban Institute conference that private recapitalization is a no-go.

The Urban Institute conference was chaired by Laurie Goodman, the former Amherst Securities prinicpal reduction cheerleader who has taken her message to Washington DC. This conference was where Gene Sperling unleashed his harpoon of “no cooperation with the private sector” over Fannie Mae and Freddie Mac.

This conference occurred on the same day that Senator Harry Reid (D-NV) declared the nuclear option on Senate debate, clearing the way for Mel Watt (D-NC) to be approved as FHFA Director.

Let’s see. Sperling speaks at the Urban Institute that same day that Harry Reid clears the way for Mel Watt to be approved as FHFA (and Fannie/Freddie regulator). At a conference hosted by Laurie Goodman, the reigning cheerleader for principal reductions and HARP expansion.

Pure coincidence? Or is this a signal that the Obama Administration wants to keep Fannie Mae and Freddie Mac in conservatorship so they can facilitate principal reductions, HARP expansion and keeping conforming loan limits elevated (e.g. “Brad Pitt” mortgages in Los Angeles).

And you wonder why Ed Demarco, an actual regulator who did a tremendous job as FHFA Acting Director, is being replaced by Watt, a Congressman with no regulatory experience?

Now, Fannie Mae and Freddie Mac common shares are still trading about $2 and their preferred shares are trading in the $15 range. So, there is still some option value in Fannie and Freddie coming back to the market.

But only after Mel Watt drains their balance sheet with principal reductions, HARP expansion and lower guarantee fees.

[whitedog57]

This is the biggest rig job and assault on taxpayers I have ever seen. These people are criminals.

[Zhang Fei]

Ackman is betting $400m on this possibility. I think he’s about to lose his investors’ collective shirt on this bet.