As both cynics and boosters anticipated, the Freddie Mac $3 billion sale of short term debt went off well this morning. As of this hours, the stocks of the GSEs have fared less well, as the Wall Street Journal notes:
Shares of Freddie were up about 20% soon after the market opened Monday but reversed course and recently traded down 53 cents to $7.22. Fannie stock jumped around 30% at the open and but turned around to trade slightly lower on the day, down 59 cents to $9.66.
Reservations are even stronger in some quarters. Bloomberg reports that Jim Rogers gives the rescue plan, such as it is, a big thumbs down. Rogers is short the GSEs and admittedly talking his book, but the flip side is that traders are married to profits and can exit a liquid stock quickly. The fact that Rogers remains short confirms that he is not impressed:
The U.S. Treasury Department’s plan to shore up Fannie Mae and Freddie Mac is an “unmitigated disaster” and the largest U.S. mortgage lenders are “basically insolvent,” according to investor Jim Rogers.
Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson’s request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview….
“I don’t know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,” Rogers, 65, said in an interview from Singapore. “So we’re going to bail out everybody else in the world. And it ruins the Federal Reserve’s balance sheet and it makes the dollar more vulnerable and it increases inflation.”….
“These companies were going to go bankrupt if they hadn’t stepped in to do something, and they should’ve gone bankrupt with all of the mistakes they’ve made,” Rogers said. “What’s going to happen when you Band-Aid and put some Band-Aids on it for another year or two or three? What’s going to happen three years from now when the situation’s much, much, much worse?”….
Rogers said he had not covered his so-called short positions in Fannie Mae and would increase his bet if it were to rally….
“They’re ruining what has been one of the greatest economies in the world,” Rogers said. Bernanke and Paulson “are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this.”
Courtesy Dealbreaker comes another bouquet for the plan, this from banking analyst Dick Bove in a CNBC interview:
Dick Bove: Fannie Mae and Freddie Mac in my view are disasters they were basically companies that were filled with fraud and mismanagement for the last five or six years. They have to be broken up, they have to be gotten rid of. I don’t think there’s any question about that, but it can’t be done now and can’t be done in a period of hysteria…. I think what you’ll see is that Fannie Mae and Freddie Mac will be gone.
Steve Liesman: That’s sort of, I hate to say it at 6:14 in the morning, insane.
Given that two years ago, no one would have predicted we’d have a partially nationalized banking system in 2008, I would hesitate to deem Bove’s scenario as impossible (which is the polite translation of “insane”). Unlikely, yes, Impossible, no.