well, he thinks correctly that nothing will be done with Fannie and Freddie for the foreseeable future but fails markedly to see the light at the end of the tunnel even though he sees that they don’t require additional capital to operate and have paid back the government more than borrowed.

lots of lies and bullshittery can be floated below like turds in the toilet bowl. one thing you can be sure of is that Christopher Whalen needs to find a toilet immediately because he’s full of …

 

 

Income Investing

News, analysis and commentary on income-generating investments.

Recent Fannie, Freddie Court Decisions Good For Bondholders: KBRA

Recent court decisions have frustrated private equity investors who are still seeking compensation from their ill-fated investments in Fannie Mae (FNMA) and Freddie Mac (FMCC) during the financial crisis.

However, Kroll Bond Rating Agency’s Christopher Whalen writes that while such investors “have been dealt what seem to be a series of fatal defeats,” they are good news for bond holders in these entities, as the courts have reaffirmed the supremacy of the government’s executive branch in regulating government-sponsored entities.

He writes in a report out today:

For investors in the debt issued by the GSEs, this outcome is positive and puts to rest the uncertainty regarding the standing of two of the largest and most important government agencies operating in the U.S. mortgage market.

Whalen writes that these GSEs are “creatures of Congress and are de facto backed by the full faith and credit of the U.S., regardless of what the law may say;” thus it is right that profits should be paid to the Treasury to compensate taxpayers for the ongoing full backing.

Nor does he agree with those, like Bill Ackman, who believe that there value in the equity of GSEs. He thinks it’s more likely that nothing will be done with these entities at least through the next presidential election. “More, as time goes on, we believe that members of Congress, the public and even the financial media will come to understand that the private equity holders are due no compensation, that the GSE require no additional capital to operate, and that the U.S. taxpayer should receive all of the net profits from both enterprises indefinitely.”

He concludes:

No matter how much money the private investors spend on private litigation and lobbyists, the fact is that Congress can do as it likes with both Fannie Mae and Freddie Mac. Private investors who are sufficiently misguided to hold the equity securities of the GSEs have no standing to object save through the political process. Equity investors in Fannie Mae and Freddie Mac rightly complain about a lack of due process and transparency in how the affairs of the GSEs have been managed, but such is life in a liberal democracy.

By admin