According to certain analysts, a Treasury Department document as old as four years, could turn the suit in favor of shareholders of Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA). It is believed that the surfaced document will aid the shareholders tape the earnings sweep by the Federal government.
The document’s reference
The said document pertains to the date, Jan 4, 2011 when staff members had sent out a memorandum to then Treasury Secretary, Timothy Geithner. As per the memorandum, the staff members had proposed to wind up the government-backed firms, Fannie, and Freddie and requested to privatize them. The memorandum had placed an option to privatize the government sponsored entities (GSEs), once they attain the state of ‘adequate capitalization’.
Analyst, Edwin Groshans at Height Analytics believes that the emergence of the said treasury document will benefit the Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Freddie Mac shareholders to appeal against the bailout agreement. Groshan noted that the agreement clearly points out the end goal of the placing the entities under conservatorship, which is to privatize them.
Things might not change
Despite such clear mandate, another set of analysts feels that the document is not enough to help the shareholders completely. As Compass Point Research and Trading’s analyst Isaac Boltansky said that they do not see how the document will change the existing legal landscape for the shareholders. Boltansky said that the contribution of the document towards the suit will only be marginal and that it might favor the GSEs shareholders a bit.
At present, Federal Home Loan Mortgage Corp(OTCBB:FMCC) and Frennie Mae’s shareholders have filed a lawsuit over the bailout agreement that mandates the two housing companies to divert their earnings to the U.S. Treasury Department. As a result of such move, the shareholders are unable to receive any benefit from the profits earned by the two entities. The stock of Federal Home Loan Mortgage Corp (OTCBB:FMCC) ended 4.20% higher at $2.73 during the last session, when 2.38 million stocks changed hands.