Thursday, August 09, 2007

So how're Fannie & Freddie?

They're doing surprisingly well, thank you for your concern. In one of those strange twists of history, after a series of accounting and management scandals Freddie Mac and Fannie Mae were placed under a short leash, which seems to have greatly limited their exposure (see here and here) to the subprime sector. Just look at the performance of their stocks (FRE, FNM):

This is very good news. The markets will need all the help they can get and Freddie Mac and Fannie Mae can play a crucial market making (and thus liquidity-providing and price-creating) role, hopefully coordinating with the Fed. I'm sure we'll be hearing a lot more from them very soon.