This morning we are seeing a massive gain on the heels of the US government seizure tied to Fannie Mae and Freddie Mac.  Those shares are halted and Warren Buffett has just called these virtual call options.  What we wanted to see was which actively traded financial stocks are really going to benefit the most from the US stepping up to the plate and guaranteeing the GSE debts and obligations. While the answer to "Who Wins?" is really EVERYONE (except FNM/FRE common holders), there are several stocks that will be key to watch as this could be yet another game saver for them as they are still somewhat leaders and most leveraged compared to their top peers.

Lehman Brothers (NYSE: LEH) is the first one to come tomind.  This has been the most at-risk of all major brokerage firms orbulge bracket brokerage firms in the U.S.  On the heels of a buyoutpotentially or it spinning off some of its bad assets, the cost ofpoker just went up for potential suitors.  Shares closed at $16.20Friday and are trading up almost 8% around $17.45 in pre-market trading.

American International Group, Inc. (NYSE: AIG) is perhaps the biggestnon-bank winner as this insurance giant and DJIA component has beeneating mortgage losses like that young Chinese guy that wins the hotdog eating contests.  With the company is considering a spin-off of itstroubled assets, the value there may have just been given a more solidfloor.  Shares closed at $22.34 Friday and are indicated up 11.9% at$25.00 in early pre-market trading.  With shares down from a high of$70.13, this is the most leveraged of the major US financial giants.

Annaly Capital Management, Inc. (NYSE: NLY) is a REIT structure thatessentially plays mortgage spreads versus the cost of borrowing.  Asmost of its bets are in agency-backed paper and structured productsfrom those agencies, a solid backstop may have just been put in place.Shares are up 15% at $17.70 pre-market, so some are already lookinghere as this potentially being the biggest winner.

Speaking of Annaly, the first vulture fund (with Merrill Lynch andAnnaly as backers and Annaly as the manager) to launch in 2007 has beenpunched around the ring after seeing an initial success.  This stock was valued at nearly $20.00 afterits $15 IPO when it was believed to be holding the cheapest paper atthe cheapest discount.  But things continued to weaken and what wascheap got only cheaper after the vulture fund bought.  Shares closed at$6.68 Friday.  There are no trades seen yet, but this is potentiallythe highest leveraged stock based upon the vulture assets it holds.

Washington Mutual Inc. (NYSE: WM), or WaMu, has been deemed the most atrisk of the major US banking operations.  In fact, its shareshave been down more than 90% at the worst point from its highs.  This is onethat is considered as having some of the most at-risk clients on itslending operations.  With a 23% gain pre-market to $5.20, you can seetraders are bidding this up on hopes.  Shares closed at $4.27 Fridayand the 52-week range is $3.03 to $39.25.

Again, the list of winners is essentially anything tied to financialstocks.  This list could be endless but we wanted to break out thebiggest or most leveraged of the stocks which will benefit the mostdirectly from this news.

Jon C. Ogg
September 8, 2008

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