Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) has been facing capital problems lately, owing to the recent decline in the housing market, the agency’s inspector general warned that the company may soon need a bailout.
After the Treasury took control of all the profits generated by the company, it was now incapable of meeting its capital requirements. There was little good news for the company, as its share price showed some growth, rising to $2.55 gaining 1.59%.
These announcements are not only unfavorable for the market or the investors alone; they affect the taxpayers of the nation as well. With nothing to build on its capital reserve, the company is solely dependent upon the treasury to provide it assistance when needed. In a bid to keep the company going, the Treasury will have to place an additional burden on the taxpayers. However, the rise in the stock, after a period of downfalls, would indicate that the investors are expecting the bailout deal to go through smoothly.
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) being aware of its problems and the threats it poses to the American people is trying other avenues for capital as well. The company recently announced its plans to target stock exchanges in Europe to allow investors in the EU take part in mortgages in the US. The move just might prove to be life-saving for the company and come as a relief for the taxpayers. Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) plans to raise sufficient amount for the treasury to reimburse its capital reserves and allow it to proceed, with operations.
Additionally, the government is also considering moving the company back to conservatorship, with the government. This would prove to be a smart decision, if executed at the right time, it would return the company’s right to keep its profits and decrease the liabilities of the Treasury as well. This debate would also indicate that the company has little chance of recovery unless it expands its investor base substantially.