GSE’s Shareholders Should be Allowed to Benefit From Fannie and Freddie’s Recovery Just as AIG and Citi Stockholders Benefited
In a letter today to the Secretary of the Treasury, Jacob J. Lew, Mr. Nader urged Secretary Lew to consider the plight of Fannie Mae and Freddie Mac’s common shareholders. In the letter, Mr. Nader wrote that the government sponsored enterprises’ (GSEs) shareholders have been mistreated and left in a sort of financial limbo. He explains that steps taken by the Federal Housing Finance Agency (FHFA), as the GSEs’ conservator, have unnecessarily harmed their shareholders. By delisting Fannie and Freddie’s stock from the NYSE, both tumbled from about $1 per share to 30 cents, wiping out billions of dollars in shareholder value and chasing away many institutional investors.
Nader noted that high-ranking government officials including: former Treasury Secretary Henry M. Paulson, Federal Reserve Chairman Ben S. Bernanke, former Senator Christopher Dodd, Representative Barney Frank, and former OFHEO Director James B. Lockhart, made positive comments about the financial health of Fannie Mae and Freddie Mac in July of 2008, just two months prior to the creation of the conservatorship. “Even the most risk-adverse, prudent investor was comfortable relying on statement from knowledgeable high-ranking government officials who publically claimed Fannie Mae and Freddie Mac were rock-solid companies,” said Mr. Nader.
Now, Fannie Mae and Freddie Mac are beginning to recover from the financial crisis. Nader pointed out, “In sum, Fannie and Freddie received a total of approximately $188 billion from the U.S. government, and will have paid the government about $132 billion in dividends by next month. Moreover, it is fair to assume that Fannie and Freddie will be able to fully repay the U.S. government.”
Nader continued, “As you know, the federal government provided funds to help stabilize AIG ($69 billion) and Citigroup ($45 billion). Other funds and guarantees were also made available to these companies. AIG and Citigroup shareholders benefited from the recovery of these companies. Similarly, Fannie Mae and Freddie Mac common stockholders should be allowed to participate in the recovery of the value of their stock just as was the case with AIG and Citigroup investors. The common shareholders have been in a financial limbo far too long.”
A full copy of the letter can be found here: Letter to the Honorable Jacob J. Lew