The common stock of Fannie Mae and Freddie Mac is almost exclusively held by large financial institutions. The top ten largest institutional holders control over half of the stock of each companies.
Details on Fannie Mae’s ownership can be found here. Details of Freddie Mac are here. (Courtesy of MSN.)
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before we jump to conclusions, need to ask whether or not these positions have been hedged. given all of the tumult, my bet is that all of those holders aren’t “naked”. further, it looks like most of the top ten are mutual funds. check your annual reports people – pm’s like holding these names because they seemed safe…
Index funds?
Come on… MSN for 13F filings?
Get real, at least the NASDork lets you drill back into the the full list…
Try this: http://www.nasdaq.com/asp/holdings.asp?symbol=FNM&selected=FNM
for one thing, this list shows holders as of June 30, when the FNM was about 20. It traded down to under 5. Highly likely that some/many of these shareholders at least reduced positions, as big plain-vanilla institutional holders tend to do when their stocks get hit this hard. Granted, some may have added to positions, but it’s a good bet that today’s shareholder list looks a lot different. Note that these stocks have traded on average about 100 million shares per day since 6/30. that’s not simply hedge funds trading with each other.
also, it’s easy to mistake economic interest when looking at 13f filings. just one example is that the Barclays position is almost certainly more a function of that company’s ETF business rather than investments on the bank’s balance sheet. Others report as custodians (i.e., not their own dough)
if it is a just world, that jabbering buffon Gasparino’s entire 401k is FreddieMac
So does the ban on lobbying apply to these welfare mommas as well? You know when they line up for their government cheese they’ll be lobbying congress about how this is people’s retirement money. And after all, why should those inscrutable Chinese be bailed out and not hard-working Americans?
Agreed that the lists are dated and can be misleading. The main point, though, is to express how the ownership of these companies is so heavily tilted toward institutional holders and not individual retail investors. The tilt toward institutions is much heavier with these companies than in the broader market.
This is helpful to keep in mind. It helps when considering who will and won’t be hurt by the rescue plan. And it tells us something about who has an ongoing interest in influencing the regulators and a conflict of interest with the US taxpayers.
You’re a good man Carney. Great coverage today.
where do you think #1 holder Cap Research got the money to invest in FRE? Much of it is in mutual funds like the AMCAP fund and the Growth Fund of America– large, widely distributed mutual funds mostly held by mom & pop. Same story for Legg Mason, Lord Abbett, and most of the others.
There will certainly be winners and losers due to the rescue plan, but you’ll have a hard time using the holders list as evidence of a conspiracy among the big bad institutions.
However, it may be likely that Bill Miller and Legg Mason were still long and adding…
None of those 13F filings are for institutions holding the stock as proprietary long positions. Read the description of 13F’s at http://www.sec.gov/answers/form13f.htm and note the all important word “managers”. It’s 95% mom and pop who’ve been put into the stock through mutual funds.
The tragic part of this bailout is not that the common shareholders were wiped out or that the preferred shareholders will take a beating, but that the new senior preferred is junior to the sub debt. You, the taxpayer, are bailing out the sub debt holders… do you realize the amount of cash we’re printing to do this? At the end of this party there’ll be a heck of a bill to pay and a massive hangover to boot.
This is some bush league shit right here. Fuck commie bailouts. I thought in America you get ahead by fusing dedication with greed. Greed is good.
-HEDGEmony
http://www.mffais.com/fnm.html
09/05/2008 Lord Abbett Growth and Income Portfolio reported a new holding of 4.4 million shares. Ouch.
Great work John and thank you.
SPODE
Thanks JC – great work today!
# 6
Chinese has been bailing you out, has been helping with your 13 trillion debts,helping with your low mortgage rate but you screw up your economy.
You are NOT bailing out China. It DOESN’T NEED to be bailed out.
Moron, you should know what’s going on with your economy as to:what, why,how, when and where,
Guest@6 – It’s not about choosing between bailing out the Chinese (and other foreign holders of GSE debts) over the Americans.
If the US welsh on the FNM and FRE debts, there will be a systemic crisis in the global financial system because banks will have to write down their holdings and adds a huge burden to their already fragile balance sheets. It is this threat to the global banking and financial system that prompted this action.
If the Treasury does not stand behind FNM and FRE, no other country will be willing to finance America’s deficits (current account & government budget) and the US government will effectively go bankrupt. The US treasuries will get hammered (already happening) and the US dollar will lose its status as the reserve currency of the world and we all go to hell.
anyone look at the asian markets? up 3+%…the world is breathing a huge sigh of relief. given that mutual funds hold most of the actual equity – one could realistically presume that the downdraft in the price of fnm/fre has been reflected (highly unlikely that any fund has more than 2% of assets in either co at this point). moreover, given today’s news, the resulting uptick in the other financials should help lessen the blow for all the funds left holding the bag of fnm/fre equity.
one more point, even though hank didn’t explicity state that the gov’t was backing the debt, the press release clearly indicates that those obligations are money good. from page 7: “Monday…business will open as normal, only with STRONGER [emphasis mine] backing for the holders of MBS, senior debt and subordinated debt”.
http://www.ustreas.gov/news/index1.html
I, for one, am quite happy entourage is back one to remind me that life indeed goes on – despite the shenanigans taking place in the mortgage market and at the treasury.
Entourage jumped the shark a long time ago. Still, too bad I’m still at the office and missed the season premiere.
-HEDGEmony
“Welcome to our merry band of “ideologues,” Mr. Secretary.”
The WSJ ed board is having a massive ‘I told you so’ year. Starting with Spitzer. Ha.
http://online.wsj.com/article/SB122083012951708369.html?mod=opinion_main_review_and_outlooks
Oh, and this is the difference between someone who has a semblance of ‘free market though’ in the treasury as opposed to an outright bleeding heart socialist.
“Mr. Syron called a board meeting immediately after his FHFA meeting. “Paulson said, ‘Accept or it will happen,’” Mr. Syron told the board, according to a person familiar with the matter.”
http://online.wsj.com/article/SB122083060663308415.html?mod=hps_us_whats_news
thank you America for putting the interests of China and Russia ahead of your own pensions and savings. All so you can keep borrowing like a pathetic street junkie looking for his next fix.
This is the end of the American century. Welcome to the third world.
Agree that John Carney really covered the story. Thanks, John.
@ #6
“Inscrutable” not the word you were looking for, does not make sense. Try again?
“Unscrupulous” is the word you meant…..
Your former English Teacher
Treasury has effectively written an unlimited capital put. Bondholders are reassured that the GSEs can issue any amount of equity capital required to protect their balance sheets.
Why would the GSEs ever need the actual capital? The puts ought to assure any debt rollover. So long as their operations stay cash flow positive, there isn’t any reason to actually exercise the puts.
So the shareholders could easily live to fight another day — they’ll pay 10% on the first preferred tranche, but after that they keep any gains. Any losses end up at Treasury. They have to start shrinking their portfolios, but not until 2010, and until then they finance those portfolios at Treasury rates.
There is the possibility of dilution via those warrants. But that’s _political_ risk, a gamble on government action. If the government won’t blow up the equity now, why on earth would they ever do it?
Why is Treasury doing this? The trillions of GSE debt is held by all kinds of financial institutions, and used in all kinds of money market financing transactions. The increase in GSE spreads has marked down the value of all that paper — slightly, but those losses are spread throughout the whole financial sector. And the instruments are much less reliable, which makes them much less useful for funding operations like repos, and less liquid stores for capital reserves. That’s a real systemic threat.
Why doesn’t Treasury wipe out the common shareholders? The GSEs have enough political cover from Congress to make that controversial, and enough legal cards remaining to make it uncertain. A fight over the common would only create uncertainty, which is the very thing Treasury is trying to avoid here.
The bottom line is that the GSE equity holders are getting very cheap equity, largely because they have become foundational to the capital markets and because their friends are prepared to hold those markets hostage to keep the GSEs afloat. The equity will have to be patient, and it has to bear political risk, but that’s what the GSEs have always been about.
@25 – let’s just be clear here: fnm/fre have about $36 billion in preferred and $1.6 trillion in debt outstanding (combined). while still a large number, it pales in comparison to the “trillions” of mbs that fnm/fre have propped up through purchases (to which you are more likely referring).
@23
inscrutable is the perfect word for those peoples.
-Round Eye
Any bets on what the GS Prop desk knew by last Thurs/Fri?
Probably a good month over there.
who owns FRE/FNM? ummm… aren’t we all wearing the shares now with our 80% ownership?
and with that said, I’d like to sue Hank Paulson for buying these shares illegally. read the “WSJ” this morn. Did syron and Mudd get their fingers out to the treasury? No, to quote:
“Paulson said, ‘Accept or it will happen,’”
What’s next? The govt acquires LEH now?
@29 – you make a good point, hank could be sued for making “unsuitable investments” as he has now become the financial adviser for all americans. the best one could do is go out and get a mortgage (isn’t that circular, as in, how we got into this mess?). given that I already own, it’s too late for me. except for the fact that the value of my home likely just went up – alas, I live nyc, so I’m not sure the needle is as affected by the latest head fake in d.c. one final note: given that taxes are likely to rise, in part, as a result of hank’s bazooka – you should probably go out and get a mortgage to alleviate some of the pain (interest is tax deductible up to $1mm).
#30. i am an 850 credit score paying off my mortgage. i want it forgiven if hank paulson wants me to forgive him…
sorry #30, another condition to my forgiveness: i want congress to enact a quick law now to make it illegal for hank paulson to acquire any auto manufacturers “on our behalf.”
Seems pretty straight forward: House and auto are most people’s largest purchases. Control of each makes the socialist agenda almost complete.
Vince Offer owns about 4 million shares of Freddie Mac. Talk about a Sham-Wow!
I’d like to exchange my FRE certificates for some Sham-wow towels myself. Sham-wow absorbs more s”*&
Wow I just made a boat load out of FNM & FRE’s failure. We shorts are saving the markets and making it more efficient.