The stability of Freddie Mac’s (OTCQB: FMCC) and Fannie Mae’s (OTCQB: FNMA) share values may be directly tied to the outcome of the upcoming U.S. Senate races, according to some political observers.
One thing is certain: neither agency is thriving under the current divided U.S. Congress. Over the last 30 days, both stocks have lost about half their value.
FMCC’s share value Oct. 9 closed at $1.70, up 5 cents, or 3.03% from its closing price of $1.65 the previous day, on volume of 7.6 million shares. This is substantially higher than its 30-day average volume of 5.4 million shares.
Meanwhile, FNMA’s stock value closed at $1.75, up 4 cents, or 2.33%, from its close of $1.71 the previous day, with 13.2 million shares changing hands, substantially higher than its 30-day average volume of 11.7 million.
Judge Throws Out Lawsuits
The latest downward trend of these quasi-public agencies recently was fueled by a federal judge throwing out two Fannie Mae/Freddie Mac lawsuits that alleged the government transferred nearly all the profits generated by mortgage finance companies to the U.S. Treasury.
Some industry observers believe that both stocks will continue to lose value because of the constant uncertainty and controversy surrounding the agencies in both public and private arenas.
Divided Government Hurts
On one hand, the Obama Administration is pushing for reform that would once again make it easier for consumers to purchase a home with low down payments and limited credit history, while conservative forces both public and private are trying hard to dismantle both agencies and make them strictly private entities -- driven solely by market forces.
To make matters worse, both agencies still face countless lawsuits and a slumping housing market that appears to be nixing the chances of any meaningful economic recovery. So, it is with little wonder that both stocks’ volumes continues to soar as their collective share prices continue to fall.
Outcome of Senate Elections Will Affect Both Agencies
However, some political observers say if the Republicans should gain the Senate in the upcoming elections, giving them control of both Houses, Freddie Mac and Fannie Mae’s Future could become stabilized.
That’s because such a consolidation of power would give the Republicans the necessary votes to once and for all reform both agencies.
In addition, it would give them the potential negotiation gravitas to persuade President Obama to sign a compromise bill that they push through both Houses. Currently the Democrats have the upper hand by controlling both the Senate and the White House. Political observers say it is not a partisan issue, but rather a balance-of-power issue.
If this does come to fruition, some experts believe it will stabilize and possibly initiate a long term turnaround for both agencies. However, they contend that if the Democrats continue to hold on to the Senate, Freddie Mac and Fannie Mae will continue to be in limbo, thus diminishing their changes of a speedy recovery.
Find out what could be the best investor’s move when it comes to FMCC and FMCC by getting the complete report here or by cutting and pasting the following link in your Web browser:
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