Dollars and Jens
Monday, September 08, 2008
Fannie and Freddie
At the moment, FNM seems to have stabilized (sort of) around 80% below its close last Friday, with FRE off about 75%. Someone -- Citigroup? -- put out price targets for both around 30 cents per share; they're both 4 to 5 times that yet.

If you think the companies are long-term solvent, and that they'll pay back anything they need to borrow to the feds and reemerge with their current capital structures, I believe the Treasury is claiming 80% of the upside as part of the stand-by liquidity provision. If there was sense in the $60 per share at which they were trading a year ago, you could say they're still worth $12 per share, but I think 0 is pretty likely, and there is historically a tendency for lottery tickets to be overpriced.

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