What Barron’s Is Not Telling You About Fannie & Freddie’s Survival
Indices opened moderately up yesterday, becoming choppy/mixed before heading south as light volume and a lack of fundamental news kept the market fixated on a story in Barron’s on “The Endgame Nears For Fannie Mae and Freddie Mac”.
Shares of Fannie Mae (FNM) and Freddie Mac (FRE) closed at multiyear lows yesterday despite the fact the Barron’s article contained no new information regarding the government-sponsored enterprises. The article’s “source” was an “insider in the Bush administration” who the paper quoted as saying that “Fannie and Freddie are being jawboned by the Treasury Department and their new regulator, the Federal Housing Finance Agency (FHFA), to raise more equity.” Notice this “source” is in the Bush administration, not specifically indicated to be in the Treasury Department. The Barron’s article injects politics and opinion, concluding that “whether Fannie and Freddie are liquidated or nationalized as a prelude to privatization, in their current form they won’t be missed.”
Today News Corp’s (NWS) sister publication, The Wall Street Journal, has a lead editorial (“When Henry Met Fannie”), promoting Barron’s: “When a single story in one day can take nearly 22% off Fannie shares, and nearly 25% off Freddie’s, you know investors are scared to death.” The editorial repeats the mantra of Former Fed Chairman Greenspan, his PIMCO clients, and other short sellers masquerading as free marketers who believe “existing Fannie and Freddie shareholders should be wiped out.” The Journal editorial states that Treasury Secretary Paulson “should already have eliminated managers and private holders as a price of the recent bailout legislation. But if he lets either survive after taxpayers are forced to inject cash, the Treasury chief should be run out of town.”
In a post I wrote on “Greenspan and PIMCO: A Gross Conflict of Interest” , I outlined the economic and financial fallout that would likely ensue from GSE nationalization. I also explained how nationalization would financially benefit former Fed Chairman Greenspan’s client, PIMCO. For all the “free market” rhetoric spewing out of these individuals and News Corp, how would a government takeover of two publicly traded companies be defined as a free market solution? And why is it once the two companies are nationalized, the free marketers have “a goal of selling their profit making businesses to the private sector”, to quote The Wall Street Journal? “Profit making businesses”? And what happens to the rest? Reading Barron’s, The Wall Street Journal, listening to Greenspan, PIMCO, FBR analyst Paul Miller, etc., would have you believe the GSEs aren’t even worth a dime.
If the “free market” crowd turns out to be right about a Treasury takeover of Fannie and Freddie while Bush is still in office, it would most likely occur between August 30 and September 29. After looking at the charts for Fannie, Freddie, Treasury, Secretary Paulson, and the USA, the most active times in all the charts cluster around the Virgo New Moon of August 30, the First Quarter Moon of September 7, and the Full Moon of September 15.
Fannie Mae went public August 31, 1970 and Freddie Mac on August 9, 1989.* Both companies have several planets in Virgo which are being conjoined by transiting Saturn in Virgo, increasing investor worries and decreasing their stock prices. Both companies went public during an eclipse cycle which tends to magnify the drama surrounding them. Fannie went public on the day of a solar eclipse which conjoins the August 30 New Moon. Freddie went public just before the August 17, 1989 Lunar Eclipse in Aquarius, exactly where last Saturday’s Lunar Eclipse occurred. The New Moon relates to making fresh starts, and the Virgo New Moon falls on Fannie’s Sun and Freddie’s Mercury. This is where Saturn in Virgo was transiting on July 30 when President Bush signed the housing bill, giving the Treasury authority to backstop all Fannie and Freddie debt and buy equity in them if necessary. Saturn conjoins the Treasury’s natal Sun, indicating increased responsibility and regulatory authority. Mars in Libra opposing Paulson’s Aries Sun and conjoining natal Neptune in Libra can represent the push to personally take charge (Sun) by dissolving (Neptune) Fannie and Freddie as public companies (or at least dissolving shareholder equity).
The First Quarter Moon of September 7 is in Sagittarius, a sign ruled by Jupiter. Jupiter energies are especially strong then as it is moving stationary direct.** When Jupiter energies are prominent, big events are likely to occur. Jupiter is in Capricorn, representing large bureaucratic structures. Between September 7-9, Mercury (news), Venus (financial system), and Mars (action) challenge Jupiter, impacting the USA’s Sun in Cancer (real estate) and Saturn in Libra. The Bush administration could be overconfident about expanding the government’s reach in buying equity/nationalizing the mortgage guarantors/lenders. (Since Mars rules the military, this could also relate to expanded action on that front.) Business cycle planets Jupiter (expansion) harmonizes with Saturn (contraction), Capricorn’s ruler. This alignment first occurred on January 22, when global markets declined as SocGen unwound positions. Corporate and/or government leader(s) could resign now.
Pluto energies are also prominent in early September as the planetary energy of debt, the bond market, bankruptcies, and hostile takeovers, moves stationary direct in late Sagittarius. Pluto represents events that have massive repercussions. Major shakeups and surprises could be in store as the September 15 Full Moon in Pisces conjoins Uranus, opposing the USA’s Neptune, reinforcing the themes of the August 30 New Moon.
In their mission, Fannie and Freddie have to take on a certain degree of riskier mortgages to support affordable housing. However, their venture into Alt-A and other private securitizations was pure greed. At first they said that mortgages are their only business and they were forced to compete with lower underwriting standards. Then Freddie CEO Syron said the path forward is to shrink (Saturn) during good times so they will have the capital capacity to expand (Jupiter) when the mortgage market is tight. It appears the new straightjacket is working and the government and the major financial operators should give the GSEs the time necessary to rehabilitate themselves.
Related Post: “What Is Paulson Cooking Up For Fannie and Freddie?”
Disclosure: Long FRE
*Per email correspondence by the author with their Investor Relations departments.
**Planets do not really move backwards, but appear to from Earth’s vantage point.
USA: July 4, 1776 5:10 PM LT Philadelphia, PA
Dept. of the Treasury: September 2, 1789 time unknown Washington, DC
Treasury Secretary Paulson: March 28, 1946 time unknown Palm Beach, FL
Posted 8/19/2008 07:42:00 PM