Fannie Mae-No Politics (FNMA)

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Fannie, Freddie soar; banks shrug off downgrade

11:22 AM ET | Marketwatch
NEW YORK (MarketWatch)--Fannie Mae and Freddie Mac dominated financial stocks yet again on Friday, leaping for the third day in a row after a hedge fund titan disclosed big investments in both companies. In other financial stocks, American Express was up after reporting a lower percentage of bad loans, and downgrades from Moody's barely affected banks like Goldman Sachs and Morgan Stanley. Fannie Mae was up more than 10%, and Freddie Mac was up more than 9%, after Bill Ackman's Pershing Square Capital Management LP said it had bought stakes of nearly 10% in both. That came on top of big gains on Wednesday and Thursday, fueled by news that mutual-fund company Fairholme Capital Management had offered to buy parts of the companies. The bailed-out mortgage giants are still under government control, though, and have been given no clear game plan for how they might earn their freedom. Some observers think proposals from private investors are a long shot - though they do elevate the debate about what to do with Fannie and Freddie to a more public stage."However remote," said Nancy Bush, bank analyst and founder of NAB Research, "hope springs eternal."Pershing Square, most recently known for accusing Herbalife Ltd. of being a fraud and making a failed investment in J.C. Penney Co. Inc. , said Fannie and Freddie's shares had room to grow. It also indicated that it might enter discussions with the companies' management, board and shareholders, as well as the federal government. Elsewhere, American Express Co. was up about 1%, after reporting that its annualized default rate fell in October, down from both September and August.Investors yawned at the news that Moody's Corp. had cut the holding-company ratings of J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Bank of New York Mellon Corp. All four banks were up in morning trading. The downgrades had been widely expected, and the opinions of the ratings firms carry less weight with many investors compared with before the financial crisis. Javier Martin-Artajo, a banker accused of trying to hide J.P. Morgan's London Whale trading losses, told a court in his native Spain that he did not want to be extradited to the U.S., according to a Reuters story citing an unnamed source.