it's almost unthinkable, but the possibility of a fre and fnm equity wipeout is upon us, thanks to the remarkable ineptitude of our friends at the fed. it's unthinkable - the equity of fnm and fre seem to be on the verge of being wiped out.
that doesn't mean the bonds that they own are being wiped out. it does mean that we could be in a position where the major financial institutions that we know and respect will have to be recapitalized with the current common stock shareholders being diluted to the point of oblivion.
it is all rather remarkable.
to be clear, i don't think this will happen. i am long a slight amount of fnm and looking hard at adding to it. still, i believe that the potential obliteration of the common stock of fnm and fre can no longer be taken off the table.
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