He speaks for the 52 democrats in the Senate and gives the consensus of the party democrats in the Senate. Reid will be the Senate Majority Leader until 2017. That means that no matter what happens it will be impossible to eliminate Fannie Mae for at least another four years. The Republican opposition to seeing them continue as long as they are reformed is pretty low. So no bill that eliminates them will ever pass. It means they will never be eliminated. That means that if left alone earnings from the companies will keep stacking higher and higher. The potential risk to the recovery is increasing daily along with the potential monetary liability that the government might end up owing to the shareholders in the companies. I conclude that continued conservatorship could result in serious problems for the companies themselves due to employee morale and their stability of their operations. These conservatorships have to be ended as soon as possible. They will see the logic and do it.
Sentiment: Strong Buy
Agreed. Reform, not dismantle. They will in fact survive and continue to be the backbone for affordable mortgages for the middle quartile of americans who are also half the voting population.
Sentiment: Strong Buy
I like what you're saying, but I don't agree that Reid speaks for all Democrats in the Senate. After all, Warner is a co-sponsor of the Senate bill. Just one example. I do agree that the majority of senators in the Democratic party will support Reid.
Harry Reid's support for Fannie and Freddie is major positive news for us, considering that the big perceived risk here is political risk. Fannie and Freddie have major support now, the majority of Democrats in both Houses of Congress are reportedly defending them, and some smart Republicans also, and Obama made conciliatory comments in his Zillow interview (made clear he wants Fannie and Freddie to continue operating!) There is no way this is being shut down. Supporters are coming out of the woodwork. Also, solvent companies don't go into bankruptcy/receivership, and we are protected by the Takings Clause, and Tort Law. This should be $40 by now. The market's reaction is delayed.
As far as I know, solvent companies can be liquidated by a) Court’s Order (due to public policy, criminal charges etc); b) Automatic Liquidation where the majority shareholder holding more than 75% have passed the resolution in an EGM.
The government holds the warrants which can be realized anytime making the government the majority shareholder with 79.9% shares. If they want it, they can do it.
Harry Reid is a smart man, he knows Fannie and Freddie are part of the solution, not part of the problem. The real problems (such as big bank and hedge fund fraud and manipulation) must be addressed and fixed. You don't fix what's not broken. Fannie and Freddie are not broken. If the government is going to continue to require them to purchase subprime mortgages, they need to monitor the banks very closely for fraud, and they need to stand behind Fannie and Freddie, not skip out like a traitor would and accuse them wrongly. Fannie and Freddie are not the enemy.
From an article that appeared when the press was erroneously reporting that Obama wanted to eliminate Fannie and Freddie (he only said eliminate them "as we know them," an unfortunate way of saying reform them,) before Obama made it clear, in his Zillow interview, that he doesn't want Fannie and Freddie to go away:
"Obama's plan would put him in opposition to House Democratic leaders and some Senate Democrats who have opposed efforts to wind down the GSEs." (Google it)
Now, Senate majority leader Harry Reid has officially joined the growing ranks of Congressmen who support Fannie Mae and Freddie Mac.
Kudos to Senator Harry Reid and yes this is a game changer but the Big Bank Planned Heist is thriving under the still in tact FHFA. Obama had done NOTHING to dismantled the FHFA which was Created by H.Paulson under Emergency Authority and Executive order by G.W. Bush. Now Obama has come out of the shadows to campaign for the "Wind Down" of F&F and is set to complete the hand over of America's largest asset and store of wealth and with it Control of American Monetary Policy will be in the possession of the Wall Street Banks rather then under the Democratic Control of all of the nations banks big and small who serve the communities and businesses throughout the Home Land.
Agreed. It is astounding just how little the average FNMA market participant notices and comprehends relevant information. It's as if a short-selling hedge fund has them cowed, and/or the price is largely controlled by clueless day traders who only read charts and believe misinformation. There will be more value investors, it just takes time.