Tuesday, December 4, 2007

Fannie cuts dividend, to raise $7 billion

FNM is selling off to 34 in the afterhours on this news. When Freddie did the same thing, the stock hit it's lows in the after-hours session at 25. Traders selling here should remember that Bernanke originally suggested that Freddie and Fannie should temporarily increase the limits of their mortgages as a work-out strategy when things were "contained."

Don't think that Freddie and Fannie Mae won't be in the discussions in the boardroom next Tuesday when the Fed meets. Once again, look for a 50 basis point cut in the Fed funds, and a 75 basis point cut in the discount rate after the meeting.

Does it make sense then, to sell at these prices?

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