Cramer Slams Government Over Fannie, Freddie Mismanagement
Itâs better late than never. Now that a government takeover of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac has been declared âinevitable,â the media are beginning to realize the GSEs were a bad idea to begin with.
The August 18 issue of Barronâs warned of âinevitable government recapitalizationâ of Fannie Mae (NYSE:FNM) and and Freddie Mac (NYSE:FRE). The mortgage giants have been suffering in the housing crisis after years of mismanagement.
Jonathan R. Laing concluded in the Barronâs report that âwhether Fannie and Freddie are liquidated or nationalized as a prelude to privatization, in their current form they wonât be missed.â
Freddie Mac has dropped around $2 per share since August 18. Fannie Mae has dropped $3.50. The significant losses have garnered attention from the financial media and led CNBC âMad Moneyâ host Jim Cramer to slam the government for not regulating the GSEs enough.
âStop trading these two stocks,â Cramer said in an interview with CNBC Managing Editor Tyler Mathisen on âClosing Bellâ August 20. âThis is an outrage â 200 million shares of each were trading today. Itâs very clear that someone knows whatâs happening. Now one of the things weâre supposed to have, you know, we have this organization called the SEC. It was really fabulous â and I have to be facetious because itâs just too unbelievable. The New York Stock Exchange, another organization. The companies themselves â they used to stop trading when it was clear that there were some people who knew what was going on and others donât.â
âThereâs not cop on the beat anymore,â Cramer complained. âThere isnât anyone who just says, âWait a second, this is outrageous.ââ
The networkâs âloose-cannonâ launched into a rant about the failure of the government to prevent the mismanagement of the GSEs. He told Mathisen the market couldnât be trusted to sort out the problem by allowing Fannie and Freddie to fail without government intervention.
âItâs never been like that,â Cramer said. âGo back to 1929 then. Letâs just have a free-fire zone for everybody other than the ultra-rich. Letâs drive everybody out and make this into the club that is Piping Rock âŠ the club that is just a bunch of rich people sitting around and saying, âHaha â look at those chumps.â I know what Paulsonâs saying.â
âThis is an outrageous moment and I am just aghast that the SEC, the New York Stock Exchange, Fannie Mae, Freddie Mac, anybody in charge, Justice Department â come on,â Cramer said.
A July 28 Business & Media Institute report showed how the mainstream television media missed the potential danger for Fannie Mae and Freddie Mac, despite pleas dating back to 2004 by some financial journalists.
The Business & Media Institute warned about problems at Fannie Mae in 2005. It pointed out in a Special Report, âGovernment-Sponsored Enron,â that print outlets had done a good covering its mismanagement while broadcast networks virtually ignored it.