Freddie Mac Stock:
Why Warren Buffett Sold His Shares
Fannie Mae and Freddie Mac grab headlines, and Warren
Buffett has reveled why he sold his position that was once worth $3.9 billion.
Warren Buffett and President Barack Obama
Patrick Morris
(TMFMorris)
Jul 25, 2014 at 2:11PM
Think you've heard everything about Fannie Mae (NASDAQOTH:FNMA) and
Freddie Mac
(NASDAQOTH:FMCC)?
Wait until you here why Warren Buffett unloaded
the Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) stake
that was once worth nearly $4 billion.
The continual push
In recent years many big name investors -- including Bruce Berkowitz, Carl Icahn, and Bill Ackman -- with billions at their disposal have weighed in on what they believe the government should do with Fannie Mae and Freddie Mac. After all, the companies still sit in limbo as they are controlled by the Federal Housing Finance Agency and return every dime they earn back to the Treasury.
In recent years many big name investors -- including Bruce Berkowitz, Carl Icahn, and Bill Ackman -- with billions at their disposal have weighed in on what they believe the government should do with Fannie Mae and Freddie Mac. After all, the companies still sit in limbo as they are controlled by the Federal Housing Finance Agency and return every dime they earn back to the Treasury.
But this isn't a secret. The first sentence of the annual
report of Fannie Mae reads:
We have been under conservatorship, with the Federal
Housing Finance Agency ("FHFA") acting as conservator, since
September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers
and privileges of the company, and of any shareholder, officer or director of
the company with respect to the company and its assets.
Yet many are still willing to fight for it and suggest
change is coming and the best days are ahead for the two government sponsored
entities.
The massive position
With all that in mind, it's natural to wonder what Buffett thinks. And while he's given us the answer for how he feels about Fannie and
With all that in mind, it's natural to wonder what Buffett thinks. And while he's given us the answer for how he feels about Fannie and
Freddie currently,
as shown in the video below, Buffett has also discussed why he unloaded his
stake in Freddie Mac nearly 15 years ago.
At one point he owned nearly 9% of it, and by 1998, his
position had climbed to have a market value of $3.9 billion, representing a
return of almost 1200%:
Source: Company investor relations.
But as you can see, that position came to abrupt end, as
he noted bluntly in his letter, "in 2000, we sold nearly all of our
Freddie Mac and Fannie Mae shares."
So why did he do it? Freddie Mac became too focused on
quarterly results, took on too much risk, and more. When he saw these things he
noted, "I figure if you see just one cockroach, there's probably a
lot."
The lesson learned here extends well beyond Fannie and
Freddie, revealing investors must always be aware of those things both great
and small at the companies they invest in, as a small sign of trouble can be
just the tip of the iceberg.
Yet as it relates to Fannie and Freddie, Buffett notes
they were trying to serve the mandates of Congress and the demands of Wall
Street, and "that's a tough balancing act." Undeniably that balancing
act has ended and now leans exclusive to the side of the government.
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Freddie Mac
Anthony A.
Williams is a director at Freddie
Mac, and a trustee at the Urban
Institute (think tank).
Note: Foundation
to Promote Open Society was a funder for the Urban Institute (think tank), the Carnegie Endowment for
International Peace (think tank), and the Brookings Institution (think tank).
George Soros
was the chairman for the Foundation to Promote Open Society, is the
founder & chairman for the Open
Society Foundations, and a friend of Michael
Douglas.
Open
Society Foundations was a funder for the Carnegie Endowment for
International Peace (think tank).
Jamie S. Gorelick
is the chairman for the Urban Institute
(think tank), was the vice chair for Fannie
Mae, and a trustee at the Carnegie Endowment for International Peace
(think tank).
Warren E. Buffett
is a life trustee at the Urban Institute
(think tank), the chairman & CEO for Berkshire Hathaway Inc., an adviser for the Nuclear Threat Initiative (think tank), and a friend Byron D. Trott.
Michael Douglas
is a director at the Nuclear Threat
Initiative (think tank), and a friend of George Soros.
Carnegie
Endowment for International Peace (think
tank) was a funder for the Nuclear
Threat Initiative (think tank).
Jessica Tuchman Mathews is a director at the Nuclear Threat Initiative (think tank),
was the president of the Carnegie Endowment for International Peace (think
tank), a director at the American Friends of Bilderberg (think
tank), an honorary trustee at the Brookings Institution (think tank), and
a 2008 Bilderberg conference participant (think tank).
Ed Griffin’s interview with
Norman Dodd in 1982
(The investigation into the
Carnegie Endowment for International Peace uncovered the plans for population
control by involving the United States in war)
Byron D. Trott is
a friend of Warren E. Buffett, and a
member of the Commercial Club of Chicago.
Commercial Club of Chicago, Members Directory A-Z (Past
Research)
Tuesday, December 17, 2013
R. Eden Martin is
the president of the Commercial Club of
Chicago, and counsel at Sidley
Austin LLP.
Barack
Obama was an intern at Sidley Austin
LLP, and the president for the Barack
Obama administration.
Newton N. Minow is
a senior counsel at Sidley Austin LLP,
and a member of the Commercial Club of
Chicago.
Rahm I. Emanuel is a member of the Commercial Club of Chicago, the Chicago (IL) mayor, was the White House
chief of staff for the Barack Obama
administration, and a director at Freddie
Mac.
Anthony A.
Williams is a director at Freddie
Mac, and a trustee at the Urban
Institute (think tank).
Warren E. Buffett
is a life trustee at the Urban Institute
(think tank), the chairman & CEO for Berkshire Hathaway Inc., an adviser for the Nuclear Threat Initiative (think tank), and a friend Byron D. Trott.
Jamie S. Gorelick
is the chairman for the Urban Institute
(think tank), a partner at Wilmer
Cutler Pickering Hale and Dorr, was the vice chair for Fannie Mae, and a trustee at the Carnegie Endowment for
International Peace (think tank).
Cameron F. Kerry
was an associate at Wilmer Cutler
Pickering Hale and Dorr, is a partner at Sidley Austin LLP, John F.
Kerry’s brother, and a fellow at the Brookings
Institution (think tank).
Barack
Obama was an intern at Sidley Austin
LLP.
John
F. Kerry is Cameron F. Kerry’s
brother, and married to Teresa Heinz
Kerry.
Teresa Heinz
Kerry is married to John F. Kerry,
an honorary trustee at the Brookings Institution (think tank), an emeritus
life trustee at the Carnegie Mellon
University, and the chair for the Heinz
Endowments.
Frank V. Cahouet
is an emeritus life trustee at the Carnegie
Mellon University, was a director at the Heinz Endowments, and the president & COO for Fannie Mae.
Heinz Endowments
was a funder for the Brookings Institution (think tank).
Thomas E. Donilon was a trustee at the Brookings
Institution (think tank), a director at the American Friends of Bilderberg
(think tank), a lobbyist & EVP for Fannie
Mae, and a 2008 Bilderberg conference participant (think tank).
Cyrus F.
Freidheim Jr. is an honorary trustee at the Brookings Institution (think tank), and a member of the Commercial Club of Chicago.
Rahm I. Emanuel
is a member of the Commercial Club of
Chicago, the Chicago (IL) mayor,
was the White House chief of staff for the Barack
Obama administration, and a director at Freddie Mac.
Anthony A.
Williams is a director at Freddie
Mac, and a trustee at the Urban
Institute (think tank).
Warren E. Buffett
is a life trustee at the Urban Institute
(think tank), the chairman & CEO for Berkshire Hathaway Inc., an adviser for the Nuclear Threat Initiative (think tank), and a friend Byron D. Trott.
Byron D. Trott is
a friend of Warren E. Buffett, and a
member of the Commercial Club of Chicago.
Commercial Club of Chicago, Members Directory A-Z (Past
Research)
Tuesday, December 17, 2013
R. Eden Martin is
the president of the Commercial Club of
Chicago, and counsel at Sidley
Austin LLP.
Barack
Obama was an intern at Sidley Austin
LLP, and the president for the Barack
Obama administration.
Newton N. Minow is
a senior counsel at Sidley Austin LLP,
and a member of the Commercial Club of
Chicago.
Rahm I. Emanuel is a member of the Commercial Club of Chicago, the Chicago (IL) mayor, was the White House
chief of staff for the Barack Obama
administration, and a director at Freddie
Mac.
Anthony A.
Williams is a director at Freddie
Mac, and a trustee at the Urban
Institute (think tank).
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