Some people just don’t know when to call it quits. The GSEs, Fannie Mae and Freddie Mac, are on their way out. That’s been obvious since their role in the housing crisis became clear. They needed to be completely overhauled and their influence limited.
But some investors are still holding out hope that a big bet on the GSEs will pay off. Two investment firms have just added even more shares to their stakes in the two companies. This is despite a court ruling that let the government take all profits from the GSEs and put them in the US Treasury.
What this means is quite clear. The companies that stood to benefit most from the housing crash and the layers upon layers of securities backing want things to continue the same way. They don’t like the thought of changing their business model despite the dangers to the economy.
I’m hoping for a some people to get the bigger picture into their heads. But when it comes to money it doesn’t always happen. What do you think? Pull out or double down?