Will Politicians Become PMs?
If you look on Bloomberg under the HDS function for American International Group (“AIG”), Federal National Mortgage Association (“Fannie Mae” – “FNM”), and Federal Home Loan Mortgage Corporation (“Freddie Mac” – “FRE”), you will see something very interesting. The top holder is the U.S. Government for each equity, with holdings of approximately 10.6 billion shares of AIG, 4.28 billion shares of FNM, and 2.5 billion shares of FRE. This brings up some very interesting and thought provoking questions.
Where and when do they sell? Who makes the decision to sell? Bush/Obama/McCain/Paulson, now politicians, soon to be portfolio managers? Or if you put an equity czar in place like Bloomberg or Buffet, will their personal interests get in the way? Consider that they are billionaires, they have investments all over the place; thus decisions they make could be become skewed.
Who profits, when and if these stocks go up?
Where are they traded? At Paulson’s old firm, Goldman Sachs? Or some new Wall Street math wizard firm?
I have a lot more questions with little answers. Now the U.S. government owns individual stocks, although FNM/FRE were quasi government agencies, they were hidden under the sheets. They operated as a well-oiled machine behind the scenes. Now, the machine is broken and the government is coming in to “fix” the mess. This is not the answer because you have both ethics and conflict of interest again.
On the housing issue, we are in for a long, long road of turbulent times. Individuals in the US had houses that were skyrocketing in price. As it did, they also had credit card debt, and played piggy bank by refinancing their loans. Now, they are short and credit cards are maxed out again. The other problem is taxes on the homes, if X % is in foreclosure the local and state government will not receive tax revenues, should the local and state government then receive some return if the prices of FNM/FRE and/or AIG go up?
Today, I also heard something new. Individuals are now trying to buy second homes and then walking away from first home because it is too expensive. This is new and seems like it will create a different kind of mess in X time.
As I mentioned earlier, I do not have answers to tough questions, just some thoughts. And this just scratches the surface.
Scott Ammaturo Vice-President, Program Trading and Sales