Fannie Spanked

Cramer wins!

I hate it when that happens...Cramer was very vocal that Freddie and Fannie’s bid to remove caps and expand their balance sheet would be denied. It might have been a political minefield and a long shot, but they threw cold water on it pretty quickly.

There was a great trade, in the GSE’s and other derivative stocks, early in the week that led to some quick money being made, as everyone shot first:

Mortgage finance giants Fannie Mae and Freddie Mac will not be allowed to take on more debt, the government said yesterday, denying requests to relax the companies’ investment caps as a way to pump cash into the struggling mortgage market.

The decision by the Office of Federal Housing Enterprise Oversight capped a week of speculation that buoyed the stock prices of the government-sponsored companies. Investors drove Fannie’s share price 17 percent above last Friday’s close, and pushed up Freddie’s stock by 11 percent. New York Post

An analyst from Keefe, Bruyette’s analyst weighed in as well:

“Politically speaking, Fannie and Freddie look better,” said Brian Gardner, a vice president with Keefe, Bruyette & Woods, who notes that Republican opposition to relaxing rules on the companies remains formidable. “It’s just not going to be enough to get the changes that they want,” he said. MarketWatch

Lockhart firmly rejected Schumer:

I must note that both Fannie Mae and Freddie Mac remain ‘significant supervisory concerns’ after more than three years of remediation efforts,” Lockhart wrote in a letter to Sen. Charles Schumer, D-N.Y., on Friday. Schumer has urged Ofheo to lift the portfolio caps.

And Wall Street loses another potential hero. No rescue there.

Fannie Bid to Lift Limit Denied
New York Post

Reversal of Fortune: An Encore for Fannie, Freddie
MarketWatch

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