Fannie and Freddie are still cash flow positive, yet that have had huge write downs, and as they have to refinance a bunch of debt, they need the market to think these companies have positive book value, or a guarantee from the government. The government stepping in, for 80% ownership, is a good move, because these institutions were truly too big to fail. One might think that they could have given less to the existing shareholders, but given current law, if you piss them off too much you can engender litigation, so one can not really 'wipe the shareholders out' as we would all like. If there is any consolation, they have lost a lot of money over the past year. But the bottom line is, that Richard Syron, head of Freddie Mac, made $18MM for 2007! This when it should have been obvious things were not good. So, perhaps the Stock and options were already promised, but the bonus of $3.4MM? Was that really appropriate? I wish they would go after the management of these organizations, because these were the plumb patronage jobs that has made millionaires out of more politicians.
Japan is up 3% right now, and it not clear where Fannie and Freddie are trading. At first there we down 20%, but are now about where they were on close. One must remember, these companies were worth 10 times what they are worth now last year, so being worth 20% of that, is still a bigger number than today's value.