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I read this as more of a positive article then the title suggests, its basically telling the public how many big names with BIG money that are invested in this. What's your take?
I think there's still room to move up before that however.
It's an opinion article.
so since we have a high above the ascending triangle does that mean that the breakout to the upside has already begun?
Nvm I'm dumb :p
How does this chart work?
What website allows you to view monthly or long term (10 years or more) stock charts?
Welcome to 'MURICA!
Correction?
Pop that 5$ cherry fannie you can do it!
Fannie Mae, Freddie Mac: Govt Profit Of $238 billion
by VW StaffMarch 04, 2014, 4:17 pm
Dick Bove works through the numbers as he takes issue with the most recent WSJ article on the Fannie Mae , Freddie Mac saga
Rafferty Capital Markets’ Richard X. Bove continues his commentary regarding the Fannie Mae saga, taking issue with a recent Wall Street Journal article.
Once Again We Disagree With the WSJ
In Monday’s edition of the Wall Street Journal the following claims are made:
The profits that being reported by the Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are due to the government subsidizing their borrowing costs.
If these companies were systemically important banks they would require substantially more capital.
Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) may still owe the government $116.8 billion in bailout money.
Bailout Money
Let’s start with the last point first and work our way up the list. The table below provides the numbers related to the bailout.
Fannie Mae Freddie Mac Bailout
The amount the Treasury invested in Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) in millions.
The amount repaid to the Treasury by these companies.
The cash profit on the investment.
Unrealized security values.
The current value of the senior preferreds.
The current value of the warrants owned by the Treasury at market.
Total unrealized security values.
Total profit on the bailout investment.
Potential additional profit if Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are returned to the investment public.
Not shown in the table is that the government can collect $22.5 billion a year in dividends on this investment, forever, if it does not request a repayment of the outstanding senior preferreds.
These are the easily calculated monetary benefits that the taxpayer has received through its rescue of Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). However, the real benefits are well beyond this amount:
Mortgage Savings
There are $9.8 trillion dollars in residential mortgages outstanding. The interest rate on these loans is below market because the funding advantage that the GSEs obtain is passed along to the homeowner in the form of lower mortgage rates. Assume a 10 basis point savings and the cost reduction to taxpayers who own homes is $9.8 billion per year; no Fannie Mae and Freddie Mac,no savings.
The Wall Street Journal believes that the interest rate subsidy Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) receive is 280 basis points. If one assumed that this is what is passed along to consumers the savings they get on their mortgages is $274 billion.
Housing Prices
Setting aside interest rate subsidies for the moment, if there were no GSEs there would be no 20 and 30 year fixed rate mortgages. If you question this statement call any 10 banks you would like and ask if they would make such loans without the ability to sell them to Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). If you get the answers I do you will find out fairly quickly that they will not.
So let’s play with numbers. The median price of a single family home sold in the existing home market is $195,000. The median household income is $51,017. If that household were to buy the median priced home today; put down 20%; and pay the current Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) mortgage rate of 4.43%, on a 30-year fixed rate loan, the monthly cost of that home would be 18.4% of the household’s gross income. Assume that this same household bought the house with a 10-year adjustable rate mortgage at the average mortgage rate of the past 20 years. This household would be paying 41.3% of gross income and would not be able to obtain a qualified mortgage.
Now let’s flip the numbers. Let’s assume that the household in question is willing to pay up to 40% of its gross income to buy a house. Using the fixed rate mortgage and the current mortgage rate, plus assuming a 20% down payment, the maximum price affordable would be $425,000. Using a 10 year adjustable rate mortgage at the average mortgage rate of the past 20 years the maximum price that can be paid is $190,000.
I will let you the reader play with the numbers but I think that the point is clear. The taxpayer saved himself a very sizable amount of money by keeping Fannie and Freddie around. One can make a compelling case that the economy also benefitted meaningfully by keeping Fannie and Freddie alive and this also aided the taxpayer significantly.
The numbers are very clear. The taxpayer did not bail out Fannie and Freddie; s/he bailed out him/herself. By doing so the taxpayer also pocketed hundreds of billions in profit; saved the value of his/her home; and prevented a greater route in the housing market. It was a win by any measure except the ones used by the Wall Street Journal.
Fannie Mae and Freddie Mac Require More Capital
Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are not banks. They are not being regulated by any of the banking authorities. They do not have access to the Federal Reserve discount window. Making the assumption that they are systemically important and placing them under Basel III regulations has more impact than simply requiring Fannie and Freddie to obtain more capital. It also implies that any sizable financial company must be placed under Basel III. Of course, demanding that these companies be better capitalized creates more math the end result of which is lower housing prices and a weaker economy.
What Do We Want?
This leads back to the first point. Do we want Federal agencies that help subsidize mortgage costs or not? If not then Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) should be eliminated. If we do then these companies should be nurtured returned to the public and allowed to grow. They cannot grow under the conditions established by the Treasury. They will go away and all of the benefits to the housing market and economy will go with them. This is what the Wall Street Journal wants. Is it what the American public really wants?
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-govt/
What does today's candle mean?
Show us evidence of your statement please.
Europe follows US not the other way around
The fact the response came so quickly and took the "bait" makes one think that of conspiracy thoughts
Fannie’s Profits May Be Fleeting
By John Carney
Mortgage firm's Washington offices Reuters
The profits keep piling up at Fannie Mae. But when dealing with such a political animal, bullish investors shouldn’t count on the gains ending up in their pockets.
Nearly two weeks ago, Fannie reported record earnings of $84 billion for 2013 and has racked up eight consecutive profitable quarters. Its fellow mortgage giant, Freddie Mac, last week also reported a banner year, with earnings coming in at $48.7 billion. Such profits have spurred a cadre of fund managers to argue the U.S. should, and eventually will, allow the two to exit their conservatorships and operate independently.
Such hopes already have led to big gains for both preferred and common stock in Fannie in the past year. They are up 505% and nearly 16-fold, respectively.
Some well-known funds, such as Perry Capital and Fairholme Capital Management, have even sued the U.S. government to overturn a 2012 change to terms struck when Fannie and Freddie became wards of the state in September 2008. The revision mandated all the firms’ profits be paid out to the government as opposed to a previous dividend of 10% on its holdings of senior preferred stock.
William Ackman’s Pershing Square Capital Management said last November that it had purchased $400 million of common stock of Fannie and Freddie. He recently said he thinks the Supreme Court will strike down the profit sweep and, as a result, shares could trade at 10 times current prices.
But even if fund managers are right legally, the upside may be more limited than ebullient share prices imply.
For starters, consider Fannie’s 2013 profit: A huge part, $45.4 billion, arose from the reversal of a write-down of deferred-tax assets. An additional $14.6 billion was due to gains that aren’t easily replicated.
Put those aside and Fannie earned about $24 billion. About half that, though, resulted from the firm’s ability to borrow at low rates because of its government backing. Fannie paid $10.27 billion on the $499.7 billion of long-term debt it held on average last year, a rate of just 2.06%. Meanwhile, its $529.9 billion portfolio of mortgages and mortgage-backed securities generated interest income of $22.12 billion.
Absent government backing, Fannie’s borrowing costs would be far higher. Without it, Moody’s Investors Service would give Fannie a below-investment-grade, or junk, rating. The average interest rate of a comparably rated corporate bond is about 4.8%. At that higher funding cost, Fannie would be looking at a loss of about $2 billion.
Fannie’s other big source of income is its mortgage-guarantee business. This generated about $12.3 billion of income last year, excluding loan-loss releases, on about $3 trillion of single-family and multifamily mortgage guarantees. This is the business that Fairholme Capital and other fund managers see as most attractive.
Again, though, this business is so profitable only because of government support, something the firm doesn’t pay for. Yet the bailout agreement envisioned the government levying a fee for what is effectively reinsurance. While its size was never determined, the fee was waived in the 2012 change to the bailout terms.
So, should the government’s profit sweep be struck down, Fannie may have to compensate taxpayers for their backing. That would take a bite, possibly a big one, out of the mortgage-guarantee results.
Then there is the question of Fannie’s capital, or lack of it. Although it isn’t a bank, Fannie would be considered a systemically important financial institution. That could lead regulators to require it to hold far higher levels of capital than in the past. Gauging just how much under new, more stringent rules isn’t clear-cut. There is the question of how to gauge the riskiness of its assets given a government backstop.
If its guarantees and mortgage holdings were treated in the same way as those of private banks, Fannie likely would need about $155 billion in capital. If it received a more preferential risk weighting reflecting government support, it would need a bit more than $60 billion.
The answer likely would lie somewhere between those bounds. And the firm, like too-big-to-fail banks, also may have to meet leverage requirements that don’t risk-weight assets. In that case, the capital goal posts might move to between $96 billion or $160 billion, depending on the leverage-ratio-threshold applied.
Say, then, that it needs to raise about $100 billion of capital in total. That wouldn’t be impossible, but it would be a long haul.
If Fannie were to keep generating $12 billion or so of core annual earnings—a generous assumption because recent results benefit from its government backing and from being in the sweet spot of the housing-market cycle—it could take about eight years to reach that level. And that is supposing there are no housing downturns during that time.
Even then, Fannie would still need to repay the $116.8 billion in government bailout money it received. That could take another 10 years.
Ultimately, Fannie’s fate is a political question. That could lead to an outcome that favors private-sector shareholders. But they can’t assume the firm’s return to profitability guarantees they are on the road to riches
http://stream.wsj.com/story/markets/SS-2-5/SS-2-469620/
Referring to the last paragraph in the statement?
Go bac!
Actually he has not been.
you know that was the weekly right?
Ditto, and agreed
Fannie always fills it's gaps
Is 0.5 pps a good share price per valuation?
Look at the weekly, it'll make you feel better
Weekly PSAR(0.01,0.1) flipped
Most shares are locked up
Anyone find any info on this?
Fairholme Funds, Inc. et al v. USA
Deadline for USA to respond to response to Motion for Discovery and Continuance to Permit Discovery
Good post, I agree!
Fannie Mae has exploded on twitter. Tweets about Fannie Mae have gone up considerably
February 24, 2014:
Fairholme Funds, Inc. et al v. USA
Deadline for USA to respond to response to Motion for Discovery and Continuance to Permit Discovery
You should read what he said again. He was talking about the warrants that the govt holds
A weird writer. Doesn't seem like he has all his facts straight. After the 1818 part I couldn't but laugh a tad bit