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Banking, finance, and taxes

US May Put $15 Billion Into Fannie Mae (FNM) And Freddie Mac (FRE)

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By Douglas A. McIntyre Published
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In an attempt to save Fannie Mae (FNM) and Freddie Mac (FRE) from becoming insolvent, the US Treasury is reviewing a plan to put $15 billion in new capital into the companies.

According to The Times, "The capital-injection plan is said to be high on a list of options being considered by regulators as a means of restoring confidence in the lenders."

Because Fannie Mae’s market cap is now only $10 billion, and Freddie Mac’s is only $5 billion, a cash infusion could cut the value of the common stock in the two companies by two-thirds or more.

The plan would involve money which ultimately comes from US taxpayers, but shareholders in the two firms would be nearly wiped out.

If the two companies fail, the mortgage markets could fall into tremendous disarray causing more write-offs at banks and making home loans much harder to get

On that basis, the bail-out is cheap.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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