Why The Outcome Of The Election May Not Matter For Fannie Mae

Some have argued that if President Donald Trump loses the election, Fannie Mae and Freddie Mac will be left in conservatorship instead of recapitalized and released. However, Tim Pagliara of CapWealth Advisors has argued that even if Joe Biden wins the election, he believes the government-sponsored enterprises will still be released.

Now it seems analyst Dick Bove of Odeon Capital agrees with him, although he disagreed before. He said in a recent report that regardless of election's results, the winner needs the housing market to be strong, and that requires Fannie Mae and Freddie Mac to be in good shape.

Fannie Mae, Freddie Mac preferred shares fall as election nears

Bove pointed out that interest in Fannie Mae's and Freddie Mac's preferred shares has been lackluster for quite some time, and he believes the election is to blame. He said that anecdotally, there appears to be more sellers than buyers.

He added that this is confusing because of the breakthrough that has brought one of the cases filed over the GSEs before the Supreme Court. He said the outlook for plaintiffs in the courts "has never been as favorable as it is today."

He assumes that interest in Fannie Mae's and Freddie Mac's preferred shares is low because it looks like Biden will win the election and like Democrats will also take control of the Senate. It is widely believed that if the Democrats are in power, the GSEs will remain in conservatorship, so investors may think that buying their preferred shares would be a mistake.

However, he suggests that investors step back from the battle in the election and see the broader picture for Fannie Mae and Freddie Mac. He noted that both candidates need a strong economy in 2021, and that strength could come from housing. However, for that to happen, Fannie and Freddie must be strong, which suggests that there must be a resolution to their issues no matter who is in the White House.

Getting Fannie and Freddie out of conservatorship

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