Gretchen Morgenson, Dick Bové Find Common Ground

Fannie and Freddie bailout edition.
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What the hell are you doing?

There’s a lot to be said about the federal bailout of Fannie Mae and Freddie Mac and its aftermath, and Gretchen Morgenson says almost all of it in her 2,771-word magnum opus about the government-backed mortgage giants. But amidst all of the questions about whether the Treasury and FHFA played fast and loose at every possible turn, including the turn of “we’re just going to take all of your profits now,” one stands out. And that one obviously belongs the greatest banking analyst of all time: One Richard X. “Dick” Bové:

The government’s actions have even hurt its own investment in Fannie and Freddie. Under the terms of the bailout, the Treasury received a large stake in both companies. This stake would rise in value if the companies were allowed to keep their profits and rebuild their capital. Richard X. Bove, a longtime bank analyst at Rafferty Capital Markets, said it was difficult to measure what taxpayers might receive for their stake if the companies were allowed to recapitalize and exit the conservatorship. But the value of the stake could exceed $200 billion, he said.

“They’re just giving it away for nothing,” Mr. Bove said. “I don’t get that.”

Fannie and Freddie’s Government Rescue Has Come With Claws [NYT]

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