www.bidnessetc.com/...assctn-fnni-me-and-freddie-mac-fmcc-sto/
As of 2:48 PM EST, Fannie Mae (OTCBB:FNMA) is trading up by around 23.64%, while the Freddie Mac (OTCBB:FMCC) is trading up by around 23.94%. The buying spree on the mortgage companies come as a result of a New York Times article, accusing the US Department of Justice (DoJ) of not making around 150,000 pages of documents public.
The New York Times report from Gretchen Morgenson raised a number of questions regarding the case against the US Government. Ms. Morgenson questioned the secrecy which has been built around the case.
Since August 2012, the earnings from Fannie Mae and Freddie Mac have been directed towards the Federal Government. The Government was sued by a large Fannie Mae and Freddie Mac shareholder, the Fairholme Fund, in July 2013 for not sharing the profits with the investors.
Ms. Morgenson questioned that the DoJ has prevented 45 documents to be produced, as a result of the presidential privilege on the said documents. Included in the documents are email correspondences, news releases, and draft memos from the Federal Housing Finance Agency (FHFA) as well as the Treasury department.
The presidential privilege given to the said documents comes as a result of the claim from the Government that the disclosure of documents relating to their actions would destabilize the economy and financial markets and raise mortgage rates. Ms. Morgenson replied to the claim saying that the documents in question were created three to seven years ago, and would not have an impact on current markets.
Moreover, the DoJ said that 669 of the documents that are scheduled to be produced in court are under different privileges, keeping them from being disclosed. Included in the privileges are the deliberative process privilege and the attorney-client privilege.
As a part of the initial agreement, Fannie Mae and Freddie Mac were expected to pay interest on the $187.5 billion bailout extended to the companies in September 2008. However, in August 2012, the profits from the mortgage giants were being paid out to the Treasury Department, as a part of the third amendment.
Since then, the Treasury Department has received around $225.4 billion as of December 2014. Moreover, the budget offered by the President estimates that a total of $153.3 billion will be received from the mortgage giants by the Treasury Department through 2025.
The Managing Member of Fairholme Fund, Bruce Berkowitz, raised the question in a note on January 28 that the secrecy came as a result of the possible implications on the Presidents senior advisers. Building on the note from Mr. Berkowitz, Ms. Morgenson said that the FHFA should be in charge of the profits coming from the mortgage giants, and not the Treasury Department.
In response to the New York Times article, Rafferty Capital Markets analyst, Dick Bove, said: What the Times and Ms. Morgensen are beginning to understand is that the American people own Fannie Mae and that there is a possibility that actions are being taken that are against the interests of the American people in this case. He said that the government is denying the low income households the right to purchase houses, by eliminating the 30-year mortgage.
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