Wednesday, August 20, 2008

Kass: Fannie and Freddie Headed to Zero

Hedge-fund manager Doug Kass, who is heavily short Fannie Mae, said today that both Fannie and Freddie will continue to fall, and that the two companies will drop to zero. He dismissed, out-of-hand, comments made over National Public Radio by Fannie Mae Chairman Danel Mudd that the company has more capital than it has ever had and that it has not asked nor been offered help from the Treasury.

"What Mudd didn't say is that the company is too leveraged to a depreciating asset—housing—and losses are off the charts and [there are] no signs of stability," Kass said in an interview with Reuters.

Kass said he believes there will be "some de facto government rescue" of the companies, probably in the form of a series of extremely dilutive financings.

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