FMCC and FNMA Stock Should Be Higher

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If you are an owner of FMCC stock or FNMA stock, the speculative securities associated with Federal National Mortgage Association (OTCMKTS:FNMA) or Fannie Mae and Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) or Freddie Mac, then god only knows how patient you have been. To say it has been a frustrating decade would be such an understatement. As a FNMA stock owner, I know the feeling all too well. 

Here's the back story if you don't know it. Fannie Mae and Freddie Mac are still owned by the government, and essentially all profits are forfeited to the Treasury. FNMA stock and FMCC stock are essentially speculative reflections that one day, the government or Treasury Secretary Steven Mnuchin will do what's right and free Fannie Mae and Freddie Mac of conservatorship. In no situation should Federal National Mortgage Association (OTCMKTS:FNMA) or Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) still be a GSE that's owned by the government, since each company is more than capable of standing on their own two feet. 

Steven Mnuchin often said before taking his role as Treasury Secretary that reform was a top priority for Fannie Mae and Freddie Mac. However, Fannie and Freddie are cash cows for the Treasury, and my guess is the 10s of billions of dollars that each asset provides to the government has replaced the desire to do what's right. After all, it is a lot easier to balance Treasury budgets with all that profit from Fannie Mae and Freddie Mac.

How much profit are we talking about? That's the part that will make FNMA stock and FMCC stock owners physically sick. Take a look below:


Between Fannie Mae and Freddie Mac, the two companies generated more than $35 billion in operating income last year that was all handed over to the U.S. Treasury. This is a huge problem. 

We have two of the biggest most profitable companies in the U.S. owned by the government, and the government won't set them free. 

Keep this in mind, Federal National Mortgage Association (OTCMKTS:FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) have twice as much operating income as U.S. Bancorp (NYSE:USB). Yet, USB stock supports a $90 billion valuation!

FNMA stock and FMCC stock are pushing $3 billion together. This realization of lost value and visual of profits is sure to make any Fannie Mae or Freddie Mac investor sick, but at the same time, it's why we keep holding this dead money, lost cause security. Like others, I'll keep holding the small stake in FNMA stock and betting that eventually Fannie and Freddie will be freed from government conservatorship. 

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