I will preface this by saying that I’m a big fan of David Dreman. I read his column in Forbes regularly, and his book Contrarian Investment Strategies is an all-time classic.

That said: his status as a significant shareholder in Fannie Mae (FNM) and Freddie Mac (FRE) has eliminated all rationality from his argument about the $25 billion taxpayer-financed bailout of those quasi-governmental entities with 8-figure executive pay. He actually said this to Reuters:

"This is a bailout for the mortgage market — not for Fannie and Freddie shareholders."

David, David, David. That’s the greatest piece of doublespeak since President Clinton patiently explained to thick-skulled grand jurors that the nature of his relationship with an intern hinged on the precise definition of the word "is".

Mr. Dreman: Fannie and Freddie shareholders are dependent on the viability of mortgage market. Arguing that shoring up those entities is not bailing out shareholders is like saying that paying people $200 for every round of golf they play is a bailout of the "golf market" not the golf courses. It’s idiotic hair-splitting, it’s intellectually dishonest, it’s transparent, and it’s pathetic.

It seems so obvious: if Fannie and Freddie need $25 billion from the government, then their equity should go to zero. Give the equity to the taxpayers who are funding the bailout!

Zac Bissonnette

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