Fannie and Freddie: Rising to Big Cash or Another Fake?

August 29, 2008

Fannie Mae (FNM) and Freddie Mac (FRE) having almost doubled their stock prices within the last five days. Last week, on Friday, they were both stated to be going bankrupt, out of cash, and the government would be better off just letting them die off. The reasoning was that the amount of cash to keep them up within the billions would leave little to cover other costs. The FDIC, after the IndyMac failure, only has so much money to cover other banks that go bankrupt. I heard that the early 90s had the same bank problems.

Now, I do think the economy has only one way to go - UP! It’s been so bad lately with the foreclosures and banks failures, but I do believe we are slowly recovering. I also don’t think the government will let these two mortgage lenders go down the hole. If you knock over one domino, you’d be sure to hit many more down the way. If these two fall down, the hurting will not stop for quite a long time.

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