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As Fannie and Freddie Rescue Debated At Treasury, Insider Trading Accusations Fly

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As investors continue to dump shares of Fannie Mae and Freddie Mac, the debate over a possibly government bailout of the two mortgage giants is raging inside the Beltway. One camp of free market oriented Fed officials is arguing that any rescue plan must wipe-out shareholders and include severe regulatory restrictions on future activity while others, who are viewed as long-time supporters of the GSEs, are arguing that the government should act now to shore up the banks and save regulatory restrictions for a legislative debate later.
We're told that the debate has become heated, with the two sides scrambling to build alliances and strong pressure from powerful lawmakers and lobbyists seeking to influence the outcome. The free-marketeers at Treasury fear that if they do not reign in the mortgage giants now, while they are at their weakest, Fannie and Freddie will continue to distort markets and put taxpayers at risk once the credit crisis has passed. The supporters of the current structure at Fannie and Freddie more or less agree, believing that if they are able to weather this storm they can emerge newly strengthened.
CNBC's Jim Cramer yesterday claimed that the stocks of both companies were being pushed down by people with inside information. He called for the SEC to halt all trading in the companies, basically freezing current holders in place. "This is an outrage," Cramer said shortly after the market closed yesterday. "It's very clear that someone knows what's happening."
Cramer's call, however, seems misconceived. The situation in Washington DC is still fluid, so it's not clear that any could know what's happening. There's nothing to know beyond the range of possibilities and the widely known fact that the two companies are in trouble.
Cramer expressed outrage that someone apparently leaked to Barron's earlier this week but leaking information to a newspaper is not insider trading. In fact, it's closer to the opposite of insider trading, making formerly secret information available to the public. Would investors be better off if they were surprised by moves coming out of DC? Surprise regulatory moves seem unlikely to bolster investor confidence.