Fannie, Freddie Crash After Bill Unwinding GSEs Passes Hurdle

Tyler Durden's picture

David Stockman blasted the GSE-profiteers just last week but the manic run-up in the stocks of Fannie Mae and Freddie Mac has abruptly come to an end as the FT reports, the US Senate banking committee on Tuesday released a highly anticipated plan that would maintain government backing of mortgages but wind down the GSEs. Not a great day for Mr. Ackman - who owned 10% at last filing.

The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.


WSJ has more:

The top Democrat and Republican on the Senate Banking Committee said they had reached agreement on the broad outlines of a bill to overhaul Fannie Mae and Freddie Mac and the nation’s $9.9 trillion mortgage market, drawing a strong statement of support from the White House. The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.


The agreement announced Tuesday between Sens. Tim Johnson (D., S.D.) and Mike Crapo (R., Idaho) follows closely on the work of a proposal released last year by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.).


“There is near unanimous agreement that our current housing-finance system is not sustainable in the long term,” Mr. Johnson said in a statement. The current arrangement, in which Fannie and Freddie are backing nearly three in five new loans while under government control, is “unacceptable,” Mr. Crapo said. Their proposal “provides a balance between providing broad access to mortgages while protecting taxpayers from losses.”

As a reminder from Bloomberg:

Activist fund manager Bill Ackman described his investment in mortgage giants Fannie (FNMA) Mae and Freddie Mac as the most interesting since he acquired a stake in General Growth Properties Inc. in 2008.


Ackman’s Pershing Square Capital Management LP said on Nov. 15 that it had bought a 9.98 percent stake in the common shares of Fannie Mae that aren’t owned by the government, as well as a 9.77 percent stake in the Freddie Mac shares available to the public. The firm may seek talks with shareholders, management and the government, which owns almost 80 percent of the agencies since bailing them out.


“Fannie Freddie is a little more dynamic situation where the opportunity for profit is to make multiples of your money, if you can come up with a solution to a problem that has vexed Congress and the Treasury I think since the crisis,” Ackman said in an interview today with Bloomberg Television’s Stephanie Ruhle. “This is the most interesting investment I’ve seen since my investment in General Growth. (GGP)”

At this rate it may also be the worst investment since Herbalife:

But the tell? Certainly octo(or nona)genarian cartoon analyst Dick Bove telling Fox Biz last week it is going to $18.

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Nikki Alexis's picture

Mr. Ackman needs to get on the inside with Buffet and the other criminals

optimator's picture

C'mon, you don't believe he still has the shares!!

Levadiakos's picture

Forget Ackman. As long as Jamie's bonus is safe, nothing else matters.

Vampyroteuthis infernalis's picture

Did I read this right. Private mortgage insurers will take losses before the gov't? This can't be right. We never do things in the correct manner anymore.

TexasAggie's picture

If you own some of the shares; however, if uncle warren, JP Morgan GS own shares, the government will still pick up the loss.  so if you suddenly find soe shares in your acct, be very, very leary.

Ying-Yang's picture

"Dick Bove telling Fox Biz last week it is going to $18."

Bove... a nickname for someone thought to resemble an ox in some way, for example in being fat or patient.

Thus Dick Bove is an ox penis.

SAT 800's picture

Sometimes the Senate makes preliminary moves like this just to find out how much they're going to get paid to change the legislation. they are crooks, you know.

doctor10's picture

LOL!!!The same "minds"-and I use that term loosely- that created the mess are now going to fix it?


this is utterly pathetic

somecallmetimmah's picture




Rainman's picture

Housing must be getting ready to tank hard. This bill will tank it even harder.  

NihilistZero's picture

I disagree timmah.  This will happen as it was the plan all along.  When the greater fool lemmings who bought between mid 2012 and now default gubemnet and the Big 4 banks don't want to be anywhere near this stuff.  the last 5 years was all about transfering the housing loans and inventory to lemmings and specuvestors.  QE and ZIRP are over in 2015 and the echo bubble will likely be fully popped.

NotApplicable's picture

It has to happen. But only because it is the next smoke and mirror trick in the "Save our Ponzi" series.

ParkAveFlasher's picture

Johnson, Crapo, and Corker  ... just gonna let that dangle out there.

Ban KKiller's picture

Don't forget Mr. Mudd, formally of Fortress Investment Group before he got fired, who ran Fannie Mae into the ground. Don't worry...FIG now owns another criminal outfit of lying assholes, Nationstar Mortgage, LLC. This company specilizes in stealing homes with illegal foreclosures. Yeah, fuck them...

artless's picture

"Johnson, Crapo, and Corker  ... just gonna let that dangle out there."

Best. Comment. Period.

NoDebt's picture

I am BUYING some of those pigs (, GSEs).  Starting right now.

steelhead23's picture

Isn't this an electino year?  Why, yes.  Yes it is.  I'm throwing in with NoDebt, the big boys, the same big boyz whose payin the bills for the political campaigns, will make damned sure this bill fails.  I'm betting on it.  Wouldn't surprise me if Ackman is buying at 3.5

WarPony's picture

Just buy the m-f'ng dip.  It's just politics and an election year.  The lenders are going to cushion the first 5-10% of a blow ... ha ha ha ha ha

starman's picture

taxpayers to the rescue!

Belrev's picture

pro-Russian vs pro-Western protesters clash in Ukraine - funny video

McMolotov's picture

"It will not show 5th anal!"

"Drive them pissing rags to the Polish border! Shawky sales!"

Thanks, Google Translate.

ejmoosa's picture

Best way to get the current yet unacknowledge loosses of the GSEs off the books and out of the public eyes is create some new behemoth that has no track record.


And of course we will blame Bush....

kchrisc's picture

"The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered."

Translation: New name, same corruption. LOL

slightlyskeptical's picture

Wouldn't it be easier to just rewrite the rules for Fannie and Freddie to include lender particpation on any new financings and be done with it?

This will be the end of the mortgage market as private lenders will not take any risk if they are responsible for losses down the road. if you are subprime you can just forget about it or come up with 30% down and pay 10%+. 

A few years down the road the governement will have no choice but to just move the mortgage market into a non-profit government run it should be. Conservatives better be careful what they hope for.

buzzsaw99's picture

This is a screw job to sell off the agencies to the tbtf for a song. The gubbermint still takes all the losses but now they get none of the profit.

Devotional's picture

"Capitalism", where government guarantees mortages. 


buzzsaw99's picture

"Capitalism", where government guarantees executive banker bonuses.

strangeglove's picture

Dr. copper vill safe Us!

scubapro's picture


'federally insured mortgage securities'??  like fha and va?   why is the govt inthe mortgage business?  govt backing only misprices the risk and when downturns occur taxpayers are milked.   

ebworthen's picture

100-1 that 100% of CONgress critters sold any shares they owned or shorted the hell out of it yesterday.

ElixirMixer's picture

The stock shouldn't even exist. Everyone that owns this stock deserves to be wiped out. I hope everyone in Congress is shorting this stock. Then we would know for sure how this one will end.

IREN Colorado's picture

Private companies are capable fo handling this without Gub'ment interference. Oh, some people won't be able to buy but some people shouldn't buy real estate (like those that can't afford it?).



Remington IV's picture

The Senate will fuck this up

Ban KKiller's picture

Wind them down? What happens to all the "notes and mortgages" they own "beneficial" rights to? Oh yeah, shithole companies like those lying assholes at Nationstar Mortgage, LLC will snap them up.  Not with a legal chain of title but the corrupt judges don't care. Yeah... fuck you Nationstar Mortgage, LLC,

Bitter, who me? I am living in my home for free ( taxes, insurance and upkeep not withstanding) thanks to Nationstar Mortgage, LLC a total fuck up company. They make great enemy as they are...did I say it already... they are corrupt and stupid. 

I like being a taker and a freeloader....took a while to figure it out. 

venturen's picture

someone please explain why the taxpayer guarantees bonuses at the institutions? Why the heck does the taxpayer guarantee other people's mortgages? It is like a giant nightmare where wall street just keeps stealing the money as it moves back and forth

artless's picture

Why the heck does the taxpayer guarantee other people's mortgages?






And the so-called "greatest generation" that fuct this country up to the hilt by allowing what was national socialist LITE to become what it is today a permanent accepted total socialist/fascist/police/welfare state/military industial complex empire.

Thanks, grandpa.

Oh and fuck you.

Xrated's picture

Anyone tried to get a conventional mortgage lately? I am an Underwriter for a TBTF, you have to submit stool samples, sperm and egg and a hair folical drug test  to get a cash out refi.

People write and complain and bitch to the OCC my Bank policies are screwed up, but Fannie and Freddie call all the shots. One missed felony, pregnency, job loss or a dotted i, we buy the mortgage back.