Episode summary
Fannie, Freddie Shares Mimic Meme-Stock Mania With Wild Swings
Bloomberg Surveillance
· · 8 min · Guests: Chris Whalen
Summary
Chris Whalen argued that Fannie Mae and Freddie Mac should not be treated like tradable growth stocks because the government still controls them and the common shares have no real control rights. He said the enterprises should be turned into utilities that buy loans, package them into securities, and sell them on to Wall Street, with the voting common shares bought back and the balance sheet funded with debt and preferred stock instead.
Whalen was sharply skeptical that either company is headed out of conservatorship anytime soon. He said the firms have effectively become government agencies and lack the systems and investments needed for a clean exit, while also criticizing the political leadership at the FHFA as inexperienced and driven more by loyalty than competence.
He also broadened the conversation to crypto and markets, saying Bitcoin has mutated from an alternative to fiat money into a speculative vehicle and that the summer may have been the high point for many crypto assets. In his view, crypto tokens are speculative instruments, stablecoins resemble bank deposits or prepaid gift cards, and the IRS will inevitably use blockchain records to track taxable activity. He contrasted that speculation with gold, which he said central banks are increasingly favoring as a reserve asset.
Key takeaways
- Chris Whalen said Fannie Mae and Freddie Mac should be utilities, not publicly traded common-stock plays, because government control means there is “no alpha.”
- Whalen said there is “no possibility” of the enterprises coming out of conservatorship soon because they lack the systems and investment needed.
- Whalen argued Bitcoin has lost its original monetary purpose and become a speculative vehicle, with the summer marking a likely peak for crypto.
- Whalen said stablecoins make sense mainly as a payments or discount tool, not as an investment product.
- Whalen said gold, not Bitcoin, is becoming the key reserve asset and a better inflation reference point.
Notable quotes
“We should not be trading the common voting shares of Fannie Mae and Freddie Mac because the government always controls it”
“we should buyback all the voting common shares and fund this thing with debt and preferred”
“At the moment, nothing is going to happen”
“Bitcoin is an option to take advantage of a greater fool. It has no intrinsic value”
“The tokens since go up and down in value to me are just a speculative vehicle”
How the episode opens
I don't think he knows what's going on inside his own agency, Tom. I have no malice against the man. You know, he's a 37 year old individual who has no background in finance and mortgages, so he's a patronage appointee.
The president is clearly more concerned with loyalty than he is with competence. And I think we just have to wait until we get somebody else in that position. We're certainly not going to take Fannie Mae and Freddie Mac out of conservatorship while Bill Culty is in that job.
That's for that's for one thing. Mr. Eckman says leave it alone as Fannie and Freddie.
Chris Whalen a going concern forward for the nation. Our listeners, our viewers. Yes, they really support half of the mortgage market.
The middle, the middle class, upper middle class borrower typically goes through Fannie or Freddie and they are an important utility, but that's all they should be. We should not be trading the common voting shares of Fannie Mae and Freddie Mac because the government always controls it. Tom, there's a guy named Louis Brandeis who used to sit on the US Supreme Court, and almost a century ago he defined a true sale.
And he said, if you retained dominion over the assets, then it is fraud on its face. So we should not commit fraud by selling voting shares to individuals who do not control either company. You know, I've said to Ackerman and others we should buyback all the voting common shares and fund this thing with debt and preferred.
That's the best way to do it and make them utilities. We don't need to have any alpha here. There is no alpha.
So what do you think the path forward is for Fannie and Freddie here and who's going to drive that?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fannie mae and freddie mac
- mortgage market volatility
- retail trading mania
- fhfa privatization
- crypto margin calls
Companies and tickers mentioned
- FNMA
- FMCC
- NMR
- Fannie Mae
- Freddie Mac
- Nomura Holdings
Watch the episode
Watch “Fannie, Freddie Shares Mimic Meme-Stock Mania With Wild Swings” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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