Fannie Mae-No Politics (FNMA)

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Bove takes issues with Carney view on Frannie

Apr 10 2015, 12:26 • SA Editor Stephen Alpher

The WSJ's John Carney has repeatedly ignored securities owned by Treasury in his calculations of the government's return on investment in Fannie Mae (OTCQB:FNMA +2.7%) and Freddie Mac (OTCQB:FMCC +2.8%), writes Dick Bove.

The senior preferred securities held by the U.S. have 10% coupons, says Bove, making them worth far more than their combined $189B in face value. If allowed to trade on the open market, they could go for a 75% premium, putting their value at $331B.
Then there's the warrants - the Treasury owns 7.2M of them (Fannie and Freddie combined). Carney values them based on the current market prices of the GSEs, but they would be worth tens of billions more under fairly conservative assumptions were Fannie and Freddie released from their conservatorship.

Adding it all up, Bove finds the government with a profit of $416B on its $189B investment, and he believes the Grassley inquiry is aimed at getting past a lot of the hyperbole and finding out the facts.

Previously: Carney: Grassley letter not indication of support for GSE lawsuits (April 9)

Previously: FRBNY: Fannie and Freddie have not yet repaid bailout (March 25)