Bankruptcy

Another Sign of the Times

By mcbride

 In yet another sign of the economic times in which we live, Fannie Mae and Freddie Mac are to be de-listed. This news alone is no shock: the companies have been on the government life line for some time now. However, it is worth recalling that not so many years ago, five at most, ownership of Fannie Mae (for example) was part of every typical conservative stock portfolio. It was considered a safe, reliable stock with a strong dividend. It was not sexy, but it was always good to own. On Oct. 12, 2007, that stock traded at $66.04 and was about to make its fifth dividend for that year, a 50 cent one, which was a .95% return. To look at a ten year chart (see,

Here is a quote taken from a Sept. 16, 2008 article of the WSJ: “AIG’s bailout caps a tumultuous 10 days that have remade the American financial system. In that time, the government has engineered rescues that insert it deep into the housing and insurance industries, while Wall Street has watched two of its last four big independent brokerage firms exit the scene. The U.S. on Sept. 6 took over mortgage-lending giants Fannie Mae and Freddie Mac as they teetered near collapse. This Sunday, the U.S. refused to bail out Wall Street pillar Lehman Brothers, which filed for bankruptcy-court protection and is now being sold off in pieces. That same day, another struggling Wall Street titan, Merrill Lynch

http://online.wsj.com/public/quotes/main.html?type=djn&symbol=mer & Co., agreed to sell itself to Bank of America http://online.wsj.com/public/quotes/main.html?type=djn&symbol=bac Corp.” (See, http://online.wsj.com/article/SB122156561931242905.html  .)

“The move to delist the shares isn’t a surprise. The crash in the housing market has pounded Fannie Mae and Freddie Mac with heavy loan losses since 2007. Fannie shares have been below the $1 average price level for 30 trading days. NYSE rules require a company to take action to boost its shares or delist. The government took over the pair in September 2008 under the authority of a law passed by Congress. So far, taxpayers have poured $145 billion into Fannie and Freddie to keep them afloat and to buoy the overall housing market.

Fannie Mae, Freddie Mac, the FHA and the Veterans Administration backed nearly 97 percent of home mortgages in the first quarter of this year, according to trade publication Inside Mortgage Finance. Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.” (See, on today?s de-listing story,

http://finance.yahoo.com/news/Fannie-Mae-Freddie-Mac-to-apf-2781597533.html?x=0&sec=topStories&pos=3&asset=&ccode= )

Michael

Full post as published by Texas Lawyer Blog on June 16, 2010 (boomark / email).