I yearned for the exoneration of Fannie Mae and Freddie Mac, but my voice, amongst many others, apparently has fallen by the wayside. I concede that stockholder concerns should, in this case, play second fiddle to the task of fueling America’s mortgage engine, but I still see this as a governmental maneuver to guise lethargy with an appearance of reform. Fannie Mae and Freddie Mac have been delisted from the New York Stock Exchange, now only to be traded over the counter.
They are still the only companies with the tools and resources necessary to make mortgages possible in America, but now it will only be more difficult to hone in on market share value and actually purchase for the observable share price – bigger bid-ask spreads convolute clarity. This will decrease the velocity by which the companies are actively traded, and that may be a positive, as it provides an opportunity for share price to truly represent both companies’ financials, opposed to shear speculation trading affecting price, while others perpetuate mis-pricing by taking advantage of noise traders. I know – playing both sides.
The current financials of both companies are in shambles, but I argue they are so as a result of government influence. Also, they have been working to eradicate poor assets from the balance sheets with government assistance in order to clear space for stronger ones. If done successfully, the two companies will again acquire desirable assets to influence the long-term profitability of the company. Why? They are the only companies capable of actually influencing mortgage lending in this country, and despite dropping market share value by nearly 40% of each, this may take the undue attention off the companies necessary to remove the names from the political spotlight. Reform will come, company financial strength will follow, and our real estate market will once again have wheels that actually spin. Maintain your faith in our mortgage buddies!
The Rent Lobster