Fannie's Questionable Future

After surging more than 500% just this year alone, common shares of Fannie Mae are on investors' minds. In addition to investors, the organization is also on the mind of the federal government, as profits are swept over to Uncle Sam due to the FHFA's role as conservator

In this segment of The Motley Fool's everything-financials show Where The Money Is, banking analysts Matt Koppenheffer and David Hanson discuss the situation with a... tasteful example.

With so much of the financial industry getting bad press these days, it may be a greedy when others are fearful moment. Not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, The Stocks Only the Smartest Investors Are Buying, you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.

You can follow David and Matt on Twitter. 

Read/Post Comments (12) | Recommend This Article (10)

Comments from our Foolish Readers

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  • Report this Comment On June 25, 2013, at 6:50 PM, soad34 wrote:

    Fruit Loops? Sounds about right!

  • Report this Comment On June 25, 2013, at 10:10 PM, Caludio wrote:

    Matt your presentation looks a lot like paid propaganda trying to drive away investors from Fannie and Freddie. I think it will hurt your carrier. I am at least 40 years older than you and I feel so sad because of the way "they" are "USING" young

    guys like you.Think of your future man. Your reputation is going down the drain!

  • Report this Comment On June 25, 2013, at 10:53 PM, elm61 wrote:

    I will look elsewhere for info on Fannie Mar....enjoy your fruit loops.

  • Report this Comment On June 25, 2013, at 11:35 PM, tony1234567 wrote:

    The real situation is much deeper than that.

    The gov can not simply take and tear down like you portray the situation to be. This is not China!

    You guys are so typical: pump something to dump it or bash something to buy it.

    One day when the smokes clear and things are not like you portrayed, you'll spinning it differently again based on whatever your agenda is at that time.

    It's never about the truth.

    Shame on you!

  • Report this Comment On June 25, 2013, at 11:48 PM, Caludio wrote:

    This is garbage. If you are an investor Google this article instead:

    "Initial Price Target Of $19.8 For Fannie Mae"

    you will read a serious not biased analysis

  • Report this Comment On June 26, 2013, at 7:53 AM, msimons4 wrote:

    The stockholders take all the risk and the government takes all the profit.

  • Report this Comment On June 26, 2013, at 10:57 AM, JamesHoJuice wrote:

    Having invested in Fannie Mae in the OTC markets since the $0.30s , I'm going to drop a very simple analysis.

    Fannie Mae shares are not investment material, but from a speculation point-of view, the reward over risk factor is through the roof.

    Simple math would have made anyone understand that with $3.2 trillion dollars of assets, a 10% gain in the assets would generate $320B worth of equity.

    Sure, Ordinaries are behind the government, preference shareholders in terms of claims. Being ridiculously conservative, 5% of $320B is already $16B.

    That's double the current market cap of $8B at ~$1.40

    2nd point on dissolving the FHFA. Governments are also people. And people like to choose the easy way out. Seems like a grossly simplified, unreasonable assumption.

    But then again so is the flawed thesis of dissolving the FHFA. If they wanted to do it, should have been done long time ago.

  • Report this Comment On June 26, 2013, at 3:06 PM, jbtorrez wrote:

    The real question here is why aren't we hearing about Fannie fighting back? Where are the advocates for keeping a stable and profitable company operating? Although Obama has many plusses, this is staggering that the government would do this in a CAPITALIST country.

    I see this as part of a larger problem with what is happening to the American spirit. When Bernake announced that stimulus would TAPER off (not be cut off tomorrow, people) we see a 400 point crash in the market.

    What is wrong with this country that we don't welcome getting out of a fiscally unsustainable plan? It was a helping hand, a crutch-- not meant to keep the country on permanent bed rest.

    Stand up America and start WORKING, start THINKING, stop demanding the easy wrong and take the hard road that will lead us back to some sense of right, some independence, some moral decency.

    With that kind of attitude we ought to scrap capitalism and just sign up for communism because we are becoming a nation of lazy, ignorant, greedy fools-- a very bad combination.

    The government only does what we allow them to, and with no one speaking up in opposition government is running rampant.

  • Report this Comment On June 26, 2013, at 4:07 PM, PaulApp wrote:

    I've lost faith in the U.S. government and Congress to do what's just and right! This country has lost its common sense and dignity! But I still have faith in the people. They can fight and stand up for what is just against the people that doing nothing for the American people! God blessed America! Bring back your country from the corrupted government and politicians!

  • Report this Comment On July 01, 2013, at 8:58 PM, Wills61 wrote:

    I totally get it! I am a Fool! I am Foolish on the fact that Matt considers those stocks as speculative. The Government will use more and more of these cash cows to feed their need! Ralph Nader and many others lost their stacks to this bunch and are to my understanding seeking damages. These guys hurt us all but our out of control socialists will continue to take the lion share of fruit loops. I am more Foolish that ever! Thanks Dude.

    By the way I almost bought $4000.00 of each last month and would have raked...however I just don't want to be part of the problem...Peace and Fool On!

  • Report this Comment On July 01, 2013, at 9:11 PM, Wills61 wrote:

    By the way...I can't remember the exact numbers but even though Fannie and Freddie are posting historical profits...they both still owe US like 135 Billion Dollars from the "bail" out! They can't pay it back! Then don't forget some really powerful folks would like their money back too. Let me recap foolishly...The governments money is their money...our money is their money...your money is their money...wait...there is no mo money for honey!

  • Report this Comment On July 01, 2013, at 9:27 PM, constructive wrote:

    Nice work guys, this was entertaining.

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