Fan, Fred Stock Up But Company Execs Avoid It
By Nick Timiraos
Fannie Mae and Freddie Mac stocks became hot commodities earlier this week. But before jumping on that bandwagon, consider: The companies’ own executives aren’t being paid with their companies’ stock.
Fannie and Freddie shares rose earlier this week on the Treasury’s decision last Thursday to hand a blank check for any losses the companies may take over the next three years.
Treasury made its Christmas Eve gift the same day that it signed off on multimillion dollar compensation deals to Fannie and Freddie’s senior executives. Those deals, which offer pay packages worth up to $6 million to chief executives of Fannie and Freddie, are being paid in cash.
As the WSJ reported last week, government overseers wouldn’t force the executives to take stock because it doesn’t have much value, and they didn’t tie pay to long-term performance because, well, no one knows if Fannie and Freddie are here for the long term.
“They’re fully aware the stock is not worth anything down the road,” says Bose George, an analyst who covers the companies for Keefe, Bruyette & Woods Inc. “This acknowledges from all sides that the stock is not worth anything in the long term.”
It’s not unusual to see big jumps–driven mostly by small investors and day traders–in Fannie and Freddie stock whenever news filters out about what the government may or may not be doing to the companies. Freddie gained around 33% to a mid-day high of $1.68 on Tuesday from last Thursday before closing at $1.42 on Wednesday. Fannie posted a similar jump to a mid-day high of $1.38 on Tuesday before closing Wednesday at $1.16.
Investors cheered the Treasury’s decision to uncap the government’s bailout of the two companies because rising losses alone won’t be enough now to push the companies into receivership, a form of bankruptcy restructuring. The government had previously pledged up to $200 billion to each company to keep them afloat and out of receivership. (This WSJ story today looks at some questions that those decisions have raised among analysts).
Some investors and pundits have argued that the companies could one day have value, but most analysts who still cover the companies think their common stock is worthless because the companies won’t ever be able to fully repay the government, which has taken preferred shares in the companies that pay 10% dividends in exchange for pumping $112 billion into the companies
By Nick Timiraos
Fannie Mae and Freddie Mac stocks became hot commodities earlier this week. But before jumping on that bandwagon, consider: The companies’ own executives aren’t being paid with their companies’ stock.
Fannie and Freddie shares rose earlier this week on the Treasury’s decision last Thursday to hand a blank check for any losses the companies may take over the next three years.
Treasury made its Christmas Eve gift the same day that it signed off on multimillion dollar compensation deals to Fannie and Freddie’s senior executives. Those deals, which offer pay packages worth up to $6 million to chief executives of Fannie and Freddie, are being paid in cash.
As the WSJ reported last week, government overseers wouldn’t force the executives to take stock because it doesn’t have much value, and they didn’t tie pay to long-term performance because, well, no one knows if Fannie and Freddie are here for the long term.
“They’re fully aware the stock is not worth anything down the road,” says Bose George, an analyst who covers the companies for Keefe, Bruyette & Woods Inc. “This acknowledges from all sides that the stock is not worth anything in the long term.”
It’s not unusual to see big jumps–driven mostly by small investors and day traders–in Fannie and Freddie stock whenever news filters out about what the government may or may not be doing to the companies. Freddie gained around 33% to a mid-day high of $1.68 on Tuesday from last Thursday before closing at $1.42 on Wednesday. Fannie posted a similar jump to a mid-day high of $1.38 on Tuesday before closing Wednesday at $1.16.
Investors cheered the Treasury’s decision to uncap the government’s bailout of the two companies because rising losses alone won’t be enough now to push the companies into receivership, a form of bankruptcy restructuring. The government had previously pledged up to $200 billion to each company to keep them afloat and out of receivership. (This WSJ story today looks at some questions that those decisions have raised among analysts).
Some investors and pundits have argued that the companies could one day have value, but most analysts who still cover the companies think their common stock is worthless because the companies won’t ever be able to fully repay the government, which has taken preferred shares in the companies that pay 10% dividends in exchange for pumping $112 billion into the companies
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