essentially no chance for Federal National Mortgage Association (Fannie Mae) (OTCMKTS:FNMA) to create any real shareholder value, up until now. It is pathetic and damn-near criminal that the U.S. government, or treasury, bailed out banks, automakers, and the mortgage giants Fannie Mae and Freddie Mac during the recession, yet refuses to set the latter free from government conservatorship. Why? Because GSEs like Fannie Mae have returned more than $255 billion to the treasury by the government sweeping their net profits despite only spending $187 billion to bail them out.
Common sense suggests there must be a free market solution and a plan to get GSEs out of government conservatorship, but why would the Treasury want that when it can essentially drain Fannie Mae and Freddie Mac of all their capital? Prior to last year, that’s exactly why the likes of FNMA stock traded well under $2/share and was nothing more than a speculative bet that private investors would one day win in court to free the company from government conservatorship.
Nonetheless, that’s “why” FNMA stock and FMCC stock stayed beaten down for so long. However, the catalyst that has caused FNMA stock to more than double over the last six months is President Donald Trump’s selection of Steven Mnuchin as Treasury Secretary. Mnuchin co-owned the former IndyMac, OneWest Bank, and has said on many occasions that freeing Fannie and Freddie from government conservatorship is a top priority.
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