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Freddie Mac

Further to that point made yesterday about Fannie Mae. Yep, Obama’s Feds stole Freddie Mac:

Freddie Mac (OTCQB: FMCC) stock is up 32% (more formally, Federal Home Loan Mortgage Corporation). FMCC stock is up because a court just said that the Feds did indeed steal it from stockholders back in 2012. Not only that, the Feds have to pay compensation for having done so. This is the same issue that we noted over Fannie Mae yesterday. “ FNMA stock moved on the verdict of a Washington DC court. Which, stripped of all the legal stuff really says that yep, back in 2012 the Federals really did steal the company from stockholders. Which is, as we can all agree, so terribly nice of the Obama Administration.

11 thoughts on “Freddie Mac”

  1. “Further to that point made yesterday about Fannie Mae”: I must have missed that. Can you point to it, please?

  2. Thank you, and well worth reading too. I wonder whether the non-union pension scheme members of General Motors could sue over the way Obama let their pensions go phut while paying off the union members’ pensions.

  3. And another thing: didn’t the shareholders of Northern Rock claim that the Blair/Brown government had stolen their shares? I paid no heed at the time but I vaguely remember someone who later looked back at the numbers and concluded they were right. Wasn’t you, by any chance, was it?

  4. The courts said they were right. I was a lot dubious about that. And not just because it was an old buddy running the compo campaign.

  5. Nonsense Tim.

    Back in September 2008, Fannie and Freddie were worthless. The US government bailed them out in complicated deals based on ‘conservatorship’ – the government (the FHFA) controlling the companies, in exchange for eye-bleeding amounts of cash.

    As a result, share prices, including prefs, fell to very little, and most of the shares were picked up by speculators: the speculation was that Fannie and Freddie would eventually become profitable, and that by deploying enough lawyers in enough courts the speculators could force the government to let them make huge gains from their bets.

    By 2012 the companies were profitable again, but only if you exclude fair interest payments on the Treasury’s massive investment. Those payments would be huge, since at the time of the investment the companies were unable to borrow. So the FHFA instituted an arrangement under which most of the company’s profits would go to the Treasury.

    The legal disputes have been over whether this arrangement was contractually allowed, which it was, and over whether it was reasonable, which is up to the jury. And also some arcane stuff about the structure of the FHFA, which was ruled to be irrelevant to the dividend question.

    Up to now, the speculators had lost in court, but this one has gone the other way.

    Whatever the legal resolution, this is not a case of the government having robbed innocent investors.

  6. “…FMCC stock is up because a court just said that the Feds did indeed steal it from stockholders back in 2012”

    Neither the plaintiffs nor the court said that the Feds stole the company or its stock in 2012. The action was over the distribution of profits between 2012 and 2019.

  7. The argument that:

    You shouldn’t have to pay those who own the instruments because they aren’t the real investors, they’re speculators who bought at a discount

    was precisely the claim championed by the Jeffersonians at the birth of the USA. If they, rather than Alexander Hamilton, had won that argument, then the Federal Government would never have built the credit to enable it to trigger today’s problems.

  8. Contractually due moneys should be paid, OK.

    This case was about whether an implied commitment to reasonable restraint in the contracts legally prevented the FHFA helping itself to as much of Fannie’s and Freddie’s profits as it did. The first jury to consider the question couldn’t decide, the second one decided in the the plaintiff’s favour.

    Tim’s description of all this as ‘theft’ is the sort of overblown rhetoric one expects, but his claim that “the Federals really did steal the company from stockholders” is plain wrong – as he reminds us from time to time, income and assets are not the same thing.

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