Fannie Mae: More Controversy Over Bob Corker’s CNBC Appearance

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Fannie Mae: More Controversy Over Bob Corker’s CNBC Appearance
Fannie Mae

We’re not the only ones stunned by U.S. Senator Bob Corker’s call on Wednesday for investors to “short” shares of Fannie Mae and Freddie Mac.

Yesterday, Bethany McLean, Vanity Fair Contributing Editor, and author of Shaky Ground: The Strange Saga of the U.S. Mortgage Giants, went on CNBC to say Corker’s comments on companies in which he is actively engaged in shaping policy on were, in a word, “crazy.”

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“Can you imagine the outrage on the right if Elizabeth Warren said you should short ‘short JP Morgan?!?’ People would go crazy,” she said.

Here’s a link to McLean’s interview, which we recommend viewing if you haven’t already.

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It seems clear now that Corker appeared on CNBC in part to beat back a rumor, which he supposedly thinks was started by hedge funds, that the government was considering taking the GSEs public in an IPO. But he used the appearance to promote his bona fides as a champion of the taxpayer.

But as McLean pointed out, and as we have noted, the interests of taxpayers and investors are actually aligned on this issue. That’s because, if the Fannie Mae and Freddie Mac were taken public, the warrants the government currently owns in the companies would be worth hundreds of billions of dollars. Yes, investors in those companies would benefit in an IPO but, because the government owns warrants for 80 percent of Fannie Mae and Freddie Mac stock, it would be a good deal for taxpayers, too.

In a post Wednesday, we noted that it was unprecedented for a Senator to go on television and recommend shorting a particular stock, especially when that Senator is heavily engaged in promoting legislation that would affect the company involved. Years ago, CNBC created conflict of interest of guidelines for commentators and analysts. The guidelines are quite detailed, and state that commentators, “… must also disclose any other conflict of interest on the part of you, your household members or your firm.”

We’re betting that Senator Corker wasn’t required to fill out the CNBC disclosure forms before his appearance yesterday. But even if one allows that he appeared as an elected official and not as a regular market commentator, his comments strayed far afield from legislation and policy and were totally inappropriate.

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2 COMMENTS

  1. it seems clear to me that him being so upset about it to publicly say that you need to short it and the rumor is bs an accuse the hedge funds of starting the rumor is what is bs. the hedge funds wont do nothing to jeopardize the litigation at hand in exposing the corrupt dealings the government did to take over two public companies and stealing their money even today. corker must of either been promised the moon if he could get them wound down and he is losing ground as we speak or he is not in the loop and he is lashing out. who knows but as far as holding down the price of the stock they might be doing that. over a million shares were bought in last 5 min of trading today. mmm i might bet that those buying the last few days are insiders an the rumor will come out as true as soon as they are through buying

  2. It is time for Senator Corker to resign his position on the Senate Banking Committee. He is so obsessed with hurting four or five hedge fund managers that he is ignoring what he should be doing. Instead of doing what is right for the country he is on a spiteful vendetta against a few hedge fund managers who happen to disagree with his position. Mr Corker it’s time to relax and fish for a while, you will probably feel a lot better.

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