Fannie Mae and Freddie Mac are Worthless Owing $100 Billion to Government
Posted on | October 19, 2009 | 1 Comment
KBW cut their price target of Fannie Mae and Freddie Mac to zero from one dollar. The stocks of Fannie and Freddie dropped significantly on Monday as KBW basically said that the common and preferred shares would be “worthless” with the $100 billion they owe the government. Shares of each company fell around 18% on the New York Stock Exchange on Monday.
Fannie Mae and Freddit Mac are now government sponsored enterprises that buy up mortgages from banks. For these two companies to survive independently they are going to have to recapitalize, even if they do recapitalize they are still going to owe the government $100 billion. Analysts fell that the government is going to continue to run these companies for up to 10 year from now.
KBW downgraded each of these companies day to zero from one dollar. KBW analysts Bose George stated, “Our change in ratings and price targets today is primarily being made to make them consistent with the outcome that we are expecting for the companies: that they become government-run organizations and their current shareholders will not get anything in the end.” The two companies stocks have been all over the map lately but there is great support around that zero level. 
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Author: Jeremy North
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October 20th, 2009 @ 8:07 am
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