Merrill: Treasury Looking To Keep GSE's Shareholder Owned

Posted by John Carney, Aug 22, 2008, 4:13pm

The supporters of the current structure of Fannie Mae and Freddie Mac appear to be winning the debate at Treasury. "Merrill Lynch is telling its that a source within Treasury says they want to keep the GSEs in their current form, as in shareholder owned. That implies no 'takeover' any time soon, " finance blogger Accrued Interest tells us.

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Tags: Fannie Mae, Freddie Mac, Treasury

Comments

1

Posted by guest, Aug 22, 2008 4:37PM

Plus, everyone is too busy schmoozing in Jackson Hole to worry about restructuring GSE's this weekend.

2

Posted by guest, Aug 22, 2008 4:54PM

a comment from B-52 Ben...

A statutory resolution regime for nonbanks, besides reducing uncertainty, would also limit moral hazard by allowing the government to resolve failing firms in a way that is orderly but also wipes out equity holders and haircuts some creditors, analogous to what happens when a commercial bank fails.

3

Posted by guest, Aug 22, 2008 4:57PM

This, of course, has nothing to do with the river of lobbying cash that flows from the GSEs.

4

Posted by guest, Aug 22, 2008 5:40PM

Totally

5

Posted by guest, Aug 22, 2008 6:39PM

preferences aside, this may not be optional. i'll bet Tsy didn't "want" there to be ongoing credit disaster for the past 12 months either.

6

Posted by guest, Aug 23, 2008 8:23PM

Treasury gives two $hits about FNM/FRE they care about the impact that writing down the pref would have on the banking system (good article today in FT about exposure).

I'd look for a transaction that wipes out common, restructures the pref to make it (more) difficult to value (30+ FRE / 80+ FNM securities), so as to obfuscate the loss of value. Senior will be fine (buy below par) and sub should be ok.

Takeaway is...anyone who is buying the common is retarded. Anyone who is investing in the pref likely needs to rethink their strategy.

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