Fannie Mae: It Is Bob Corker Versus Bill Ackman

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Fannie Mae: It Is Bob Corker Versus Bill Ackman
Fannie Mae

After Senator Bob Corker’s surprise call for Americans to short Fannie Mae (FNMA) and Freddie Mac (FMCC) during an interview with CNBC’s Rick Santelli on Wednesday, in a new twist, Bill Ackman revealed that Political Alpha has circulated a new research note on the GSEs that could signal a shift in the Obama administration’s handling of the GSEs.

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“Multiple sources have confirmed that the White House has reached out to the housing finance community to understand better its options on what to do with the GSEs after conservatorship,” according to Andrew Taylor, director of research at the investment intelligence agency. There’s already been rumours by various hedge funds that Obama’s team wants to privatise the GSEs; is this the beginning of the end?

Perhaps Obama’s team is coming around to the Republican senator from Tennessee’s camp, who was quoted on CNBC saying “people should just short it, because it’s major BS.”

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“The Administration is in the very early stages of looking at various options to end the GSEs conservatorship. This is a major shift in thinking as it would entail ending the GSE profit sweep allowing Fannie and Freddie to begin to retain capital. We have been told the Administration is not close to deciding how to proceed,” said the Political Alpha note.

This follows on the heels of the latest litigation that arose from the Treasury Department’s 2012 profit-seeking takeover of Fannie Mae and Freddie Mac. On Sept 30, Judge Margaret Sweeney of the Court of Federal Claims agreed to the the plaintiffs’ demands in Fairholme Funds vs. United States to file all materials classified as “protected information” in relations to Fannie Mae and Freddie Mac. This essentially forces the administration to disclose the internal dealings behind the takeover they’ve been trying to suppress.

Corker on Fannie Mae

In Corker’s controversial CNBC interview, he changed tack and said the Republican-led Congress is “inept” and cannot be trusted to take up GSE reform, and in fact, many are no longer interested in reform as they were in 2008. But many on the hill and on the street are beginning to think he has a personal business interest in winding down the GSEs. Congress cannot act because without the GSEs, the housing market could crash and there’s just no substitute for the GSEs.

What do we know so far? The GSEs need to “pay back” what’s been invested by the government so far, which is $132 billion. They “may” need to pay interest on this at a rate that the government incurs to borrow from the public market. But then would the government have to pay them for their services in stabilizing the financial markets and creating liquidity in the market? There’s just too many unanswered questions left: was the SPSPA agreement needed and lawful when cheaper credit was already available from the fed? Did the conservatorship violate the fiduciary duties to shareholders? Are 80% equity warrants still valid?

Perhaps what we’ve seen this week is the two camps hunkering down for a big fight, with Corker dumping the stock while Ackman pumps them up. The ongoing legal battles could shed a light on what’s to come this season.

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11 COMMENTS

  1. By “irk” do you mean the thousands of people that have invested in the GSEs on their own or through hedge funds? The teachers? The firemen? Police? And others? All of whom have money invested through a hedge fund.to make their retirement better? All of whom you are saying should just get a big f you and lose everything because of your ignorant view of hedge funds. Is that who you’re talking about?

  2. Our USA does not nationalize, confiscate or expropriate private property. Fannie and Freddie did not cause the crisis, read the detailed government reports. FnF did not need bailout or hostile takeover, it was forced on them by ex-Goldman CEO & Treasury Sec Paulson “for the greater good”. Sure the money injected was used to buy under Government direction toxic loans off TBTF banks. Fact is bank held mortgages defaulted 4x more than FnF mortgages.

    Corker? He’s singing the same old song, whistling Dixie into the wind. FnF supported the system in time of need. They’ve been nationalized and all profits expropriated in perpetuity, many of us who have studied this in detail see it as clear violation of the Constitution and state and federal law. Let the judges decide.

    The $250 Billion FnF have repaid on the $132 B injected is AFTER tax. And as FnF injected badly needed liquidity into the system in 2008-09, they more than did their part fending off recession.

    Time to release, recap and cancel the warrants taken by force. And protect working and middle class access to affordable 30 year mortgages.

  3. We live in a time when elected officials don’t give a damn about those that voted them in. In all these years of democracy, this is where we are now. Time to change the system.

  4. You shouldn’t be concerned about getting it out of the hands of hedge funds or anyone else who actually paid for their stock. Be concerned about what the government took form us without just compensation. But if you really want I will sell to you or your government or anyone else the 50k shares I still own for 100 USD each.

  5. Partisan Porker has committed Financial Terrorism against the people of and the United States of America! Porker would that be too much powder up the nose? You 80’s bad news throwback. Does Porker have personal incentives? Never a fan.

  6. The GSE’s were taken and put under government control, that’s not free enterprize. The government can’t take the high ground as the example to follow, considering the debt at has inccured

  7. The GSEs have no business in the equity market. If we, the taxpayers, want to privatize the GSEs, it better damn mean we, the government for the people, buy the remaining 20% and get it out of the hands of the hedge funds, wall st., and their irk.

  8. Senator Corker has used his position to influence the buying and selling of stock by openly telling people to sell stock short. The Senator and the government are suppose to be controlling the companies to return to provide liquidity to the housing market. Senator Corker has comitted an illegal act and should be punished.

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