What's new, another company needs money. This time it is the lending giant Freddie Mac who is asking for a $30 billion dollar loan after reporting that they lost $23.8 billion in the fourth quarter of last year. For all of 2008, the firm lost $50.1 billion. The problem is now what to do with this troubled firm. In one case, we desperately need both Freddie Mac and Fannie Mae to rebound to help the property market and the overall lending market. As of right now, the only option would be for the government to loan Freddie Mac the money. What's another $30 billion after all the money we have handed out so far? The effects such a loan would have on the market would be instrumental to ending the recession. Lending is the one part of the financial institutions which is lacking right now. It is the sole factor that runs the economy as without the distribution of capital, Companies can never prosper or grow, couples cannot buy homes, small business can't start up. These factors are the reasoning in why the Government will ultimately lend Freddie Mac the money. For Shareholders of Freddie Mac, another loan will end up not helping you share price. If Freddie Mac continues to accept more government subsided loans it will only bring the company closer and closer to nationalization. I expect shares to hover around .25-.50 cents for quite some time until we have a clear plan for what the companies long term goals will be.
Wednesday, March 11, 2009
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