2007 and 2008 aren’t turning out to be the best years for GSE’s like Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Things just got worse for these two this morning.
Merrill Lynch has issued a downgrade of nearly the worst sort. Both GSE shares were downgraded to the ugly "SELL" rating this morning. Shares were already at a Neutral rating at the firm before the downgrade. Pzena’s value call looks a little premature.
Part of the reasoning behind the downgrade is a worsening of credit performance…. Gee, who’d a thunk it?
Freddie Mac is down almost 5% at $26.39 at the open and Fannie Mae shares are down 4.2% at $27.77 in opening indications. With earnings next week, we’ll get to see just how bad things are. It’s hard to expect any good news. maybe these two should just consolidate and see if Fleetwood Mac wants to license the the Freddie name.
Jon C. Ogg
February 22, 2008