After 40 years of marriage, one of the most iconic couples of the 20th and 21st centuries has called it quits. And no, we're not talking about Al and Tipper Gore.
On June 16, Fannie Mae and Freddie Mac announced plans to voluntarily delist their shares from the New York Stock Exchange, ending a union that began in 1968 and 1970 respectively, and dissolving a partnership that firmly established the two mortgage giants as financial royalty.
Riches to rags and the Big Board to the OTC Bulletin Board. In the words of one June 16 Wall Street Journal: "The delisting confirms that Fannie and Freddie aren't real companies anymore."
If there was ever a more glaring example of the government's inability to save the day via easy lending policies and stimulus packages -- THIS IS IT.
Since being taken over by Uncle Sam in September 2008, Fannie and Freddie have been on the receiver's end of more bailout funds than any other U.S. enterprise, ever. The U.S. Treasury and Federal Reserve has spent $1.4 trillion to buy the mortgage-backed securities of both companies; the NYSE suspended its $1/share minimum price requirement until the firms could raise their stock above the level; and lending rates stand at an all-time record low -- YET, here we are, like the famous Buster Brown song "Fannie Mae" says, "Cry'n oh oh poor me!" into my penny stock jar.
Truth be told, Elliott Wave International's experts foresaw the change in Fannie-Freddie's tune from Bridal march to Blues, along with the futility of such efforts to keep the mortgage giants afloat. Here, the following archive of EWI quotes set the stage for their coming collapse:
- EWI president Robert Prechter, Conquer the Crash: "Managers of these companies are going to be utterly shocked when a [downturn] devastates their portfolios and their earnings. Investors in these companies' stock will be just as surprised when prices and ratings collapse."
- July 2004 Elliott Wave Financial Forecast: "Despite a 45-year low in interest rates and the biggest mortgage explosion in history, Fannie Mae's stock prices has already declined by 20% (from its December 2000 peak). It probably won't survive the bear market without a complete round trip to $1 a share."
- August 2008 Elliott Wave Financial Forecast: "The government plans to rescue the mortgage giants is doomed to fail because it perpetuates the myth that the bad loans if Fannie and Freddie's books are worth anywhere near the $5.2 trillion they saw they are."