Monday, September 8, 2008

Fannie- Freddie takeover: Beginning of the end, and, if so, which end?

The big news this weekend was that Fannie Mae and Freddie Mac are being taken over into conservatorship, in a stopgap measure designed to give the next president flexibility on what direction to go. (Before you start saying that this is a commercial real estate blog, think again. These lenders are not only pervasive but they also account for a good number of multi-family and other similar products.

Now, I'll admit that I am by no means a fan of government takeovers. You blow it, then the shareholders lose, and I don't generally see the government as the solution to many problems. But here there may have been little choice. And doing nothing, especially during an election year...well, you get the picture. The mechanics of it seem reasonably fair, and I agree that it could have been worse. I'll be interested to see the FHLB's take and participation in this as well.

So who wins and who loses? The global market sure seems happy. And the Dow gapped up almost 3% on the open. Some short sellers may take it hard, and I'm sad to see the execs will get the golden parachutes, but all in all the Journal's take on winners and losers does not make me too upset.

That does not mean that all is good in the world. One big concern is that it may be harder for other lenders to raise capital. We are not out of the financial woods, and goodness knows how much this mess is going to cost at the end of the day. (Jim Cramer says if it is done right, it may cost nothing. But that's an awfully big assumption.) Nor should you expect to see any immediate turnaround. But maybe doing something here is better then nothing.

0 comments:

 
-