Feds will put a little money right now and will remain on standby to put more if a need arise. FNM is not insolvent, and according to GS there was no need for a bail out (must be Bush and his cronies trying to make a few last quick bucks through this mess). Anyway, this small injection of capital will restore market confidence in FNM and FRE, which will lead to their ability to raise more capital from the market, again, if such need arises.
WRONG. As long as the issue of a potential future wipeout of value in common & preferred shares exist, they will NOT be able to raise capital.
That's part of the reason this is being done. The govt bailout legislation actually rendered them unable to raise capital. And until the issue is definitively settled somehow, they still won't be able to raise capital.
How would you like to buy shares, knowing tomorrow next week or next month the "benevolent" US govt stands ready to dilute you into the hereafter? Any takers??!! I thought not.
Take that thought one step further, who would invest in ANY GSE, if the govt ensures stock brokers like BSC get ten bucks a share, but GSE get the shaft because the same govt didn't due its regulatory job? And if you're not giving loans to folks who just barely qualify, why would you even have a GSE Fannie or Freddie in the first place?
Can you imagine the sound of silence the day they offer common to shareholders after wiping this group out?
Stick your shares up your a.s.s., is what I would think they'd say.