General Question

isorabins's avatar

If the government takes over freddie and fannie mac, will the stock be worthless?

Asked by isorabins (50points) August 13th, 2008

and a related point, should the stock rally if the government bails them out, but allows them to remain independent?

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3 Answers

allengreen's avatar

Yes, the stock will go to zero

marinelife's avatar

The government is unlikely to take them over. After the bailout was announced, the stock jumped.

allengreen's avatar

marina, you are wrong, and a simple Google of this topic will illuminate the reality of insolvency at both Fannie and Freddie.

The stock jumped as a result of SEC banning shorting of 19 financial stocks, the two mentioned above included.

Fannie and Freddie will be taken over in the very near future, as they are insolvent and do not have enough finanical reserves in relation to the number of defaulted loans in the portfolio.

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