So, how much will it cost to save Fannie Mae and Freddie Mac? $40-$100 billion. Good thing Hank Paulson has stopped saying he doesn’t think the government needs to save them.
NYP: Fannie Mae and Freddie Mac may need to raise as much as $100 billion in order to cover potential losses on their mortgage portfolios – a goal that might prove impossible to achieve, an analyst predicted.
Joshua Rosner, a well-respected analyst at consulting and research firm Graham-Fisher, said that even under the most conservative circumstances, the embattled government-sponsored enterprises (GSEs) would need to go out, hat in hand, and raise at least $40 billion in order to shore up their balance sheets.
But the realistic number could be more like $100 billion.
Fortunately, another analyst predicts they’ll only have to raise $40 billion.
ClusterStock: PIMCO bond guru Bill Gross, appearing on CNBC, has says that Fannie Mae (FNM) and Freddie Mac (FRE) will need far more than the $5-$10 billion that most people. Gross thinks the pair will need $40 billion and that if investors are to regain confidence, the Treasury will have to act soon:
“They need to hear not only that [the Treasury] is willing to stand behind Fannie and Freddie but that their money is going to do that,” he said. “In terms of the amount, 15 to 20 billion per institution in the form of preference or preferred stock that hopefully will be at the same level of the existing preferred stock.”
And what does Gross think the common stock is worth? $0:
“At three and four dollars per share respectively, in effect the market is valuing both of these companies at zero,” Gross said. “These are perpetual options at these prices with three to four dollar prices that effectively use a strike price of zero for the common stock.”
Gross said it’s possible the Treasury bailout could put some value on the common stock but “in our opinion, not much.”
Bailout coming soon to two monstrous incompetent companies near you.
Business Insider Emails & Alerts
Site highlights each day to your inbox.