Barrons: The Endgame Nears For Fannie and Freddie

[marmar]

The Endgame Nears For Fannie and Freddie
By Jonathan R. Laing


IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac. It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses. Barron's first raised the possibility of a government takeover of Fannie ...


http://online.barrons.com/article/SB121884860106946277.html?mod=mktw

[On the Road]

1. That is Not the End of the World

Hopefully, the investors will be wiped out, the companies will continue operations, and the federal government won't have to foot that much of the bill.

[aquart]

2. "Hopefully the investors will be wiped out." Hopefully?

Who would those "investors" be, exactly? While I appreciate your wistful "hope" that the free market will do its business, I'm just going to mention that the free market regulates by death. "Wiping out" investors isn't something anyone should be hopeful about.

[On the Road]

3. The Point of the Article

was that FNMA and FRMC are slowly going belly up. The 'hopefully' refers to the fact that it is more desirable for investors to pay the price than for taxpayers to bail them out.