There are two fundamental positions on the future of the GSEs.
1. Eliminate both GSEs and open up the private mortgage-backed securitization market to a host of smaller companies.
2. Modify the GSEs but do not elminate them.
The Republicans want the first.
The Democrats want the second.
Demarco wants the first and is the go to boy for the Republicans.
The Obama adminnistration is against DeMarco and unsuccessfully tried to replace him.
That beat goes on.
The uncertainty about the future of the GSEs as independent companies raises fear and uncertainty in investors looking for long term investments. And why should market makers risk owning and trading up the price in stocks that could drop uncontrollably in price and demand with a decision and news to end the GSEs? So one possible reason why pps is not off the hook is the fear and uncertainty generated when asking the question before investing: Why invest in a company that may be eliminated by government fiat?
In all ways the GSEs are viable, profitable companies. The common shares should be have risen to at least 20.00 per share by now. For example look at Suntech, a bankrupt, cashless company with low pps. But the mere rumor that Warren Buffet would invest in it sent pps flying.
Being under the conservatorship, suffering the continuing uncertainty about the final fate of the GSEs and perhaps inside info on what will happen is holding back both long term investors and market makers from going with demand for higher pps. Without many long term investors, MMs, day and swing trading is all that is left.
All that is needed to reverse the absurdity of the GSEs low pps for the common shares is the word that the GSEs certainly will not be eliminated and that they will be released from the conservatorship at some future date. That will end the speculative aspect of the common shares that are under warrant.
That is all that is needed.
That word is held up by the ever battling stupidly partisan Washington politicans.
In the meantime, as we wait for that word, FNMA and FMCC will perodically rise up and then fall as it has done over the past 5 years. The pressure is on to deliver the word.
