Fannie Mae and Freddie Mac, the two government sponsored entities (GSEs) that form the underpinnings of the housing market, were delisted from the New York Stock Exchange today because their shares fell below the $1 minimum required by the exchange.
Fannie and Freddie were seized by the federal government in 2008 and put under conservatorship in order to prevent their insolvency. The GSEs purchase mortgages on the secondary market in order to provide liquidity to credit markets and help keep mortgage rates low. Since the government takeover, the mortgage giants have required $145 billion in taxpayer funds to stay afloat. Some estimate that the total bailout cost could run up to $1 trillion.
Edward DeMarco, the acting director of the Federal Housing Finance Agency said of the delisting: “A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets”.
According to this morning’s Wall Street Journal, the two companies have a total equity of -$147 billion dollars. I am not a stock expert by any means, but even I know that the fundamentals on these two stocks cannot be any good. Fannie and Freddie have been hemorrhaging money for the last 3 years. For the much of the last month their stocks were below $1.
Fannie and Freddie are for all intents and purposes part of the federal government and are only nominally independent companies. Their delisting was overdue in my opinion.
What do you think of the delisting? Let us know in the comments section below.
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