Shares of Fannie Mae and Freddie Mac are getting destroyed today.
Stifel Nicolaus’ Dave Lutz points us to reports that Senator Bob Corker will push to wind down Fannie and Freddie as part of housing finance reform.
Fannie and Freddie are government sponsored enterprises (GSE) that were created to boost liquidity in the mortgage markets buy packaging mortgages and selling them off to investors as bonds (or mortgage-back securities).
These MBS also came with implicit guarantees, which got the them into trouble when the housing bubble burst.
It’s worth noting that Fannie and Freddie are traded on the Over-The-Counter Bulletin Board. Stocks trading on the OTCBB often experience more volatility than stocks traded on the Nasdaq or New York Stock Exchange.
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