The estimated cost of the bailout of Freddie Mac and Fannie Mae is $300 billion, that’s if their loan books only suffer 5% loss. For some, that 5% guess is a little low, for others it’s on target.
When Freddie Mac (FRE) and Fannie Mae (FNM) were taken into conservatorship, their common stock was essentially rendered valueless. The numbers you see are their 52-week stock price ranges as of Wednesday (9/10/08) and it’s a pretty grisly sight isn’t it? Why are people buying the stock? You never know what can happen. Bear Stearns was sold for $2 a share yet people kept buying it, a week later the price was revised to $10 a share. You never know!
Want to get fired up about something? How much do you think you can get to run Freddie Mac into the ground? What about Fannie Mae? Exiting CEO Syron of Freddie Mac may get between $12m and $14m. Exiting CEO Mudd of Fannie Mae could get anywhere from $7m to $9m. [Newsday] It’s hard work getting the “sponsored” out of “government sponsored entities.” (apparently it was harder at Freddie Mac!)
And, to put all these numbers in this perspective, the mortgage market is about $12 trillion a year.