Annaly - Note on Freddie Mac Following Release of its 3rd Quarter Results

Another (see post below on Pzena) opinion on Freddie Mac:

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Richard Syron, Chairman and CEO of Freddie Mac, articulated the company’s dilemma in very blunt terms. He said that he could either turn his company into “Fortress Freddie”, in which the company shrinks its business, or he can continue down the path they have laid out today. Either outcome is unpleasant. “Fortress Freddie” would mean that the firm would likely be a seller into the market at a time when the market is looking to the GSEs to provide liquidity, which would not benefit the mortgage market or the economy as a whole. The path they have laid out, on the other hand, will depress returns to shareholders, at least in the short run, but keep Freddie as a more active participant in the mortgage finance process.

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Headlines and press releases will continue to affect the trading of the securities of the Agencies. We already see what has happened to their share prices. Agency MBS, as usual, underperform Treasuries, a fact that has not been helped by the challenges of the current credit crunch. But Freddie Mac has chosen wisely to focus on fulfilling its mandate and to shore up its balance sheet. This bodes well for holders of Agency MBS. Freddie Mac stockholders, however, will have to wait.