I've never understood the attraction of Fannie Mae to an investor. In fact, I don't really get its appeal as a business model.
I'm gonna keep this simple...
Today's going rate, per Wells Fargo: roughly 5%.
To fund a loan, Fannie borrows money from the US Treasury at about 3%.
That leaves it with about 2% after paying the Treasury.
So how is it that Fannie can offer its shareholders a dividend yield of 4.7%?
From Motley Fool in 2004:
Want to know why Fannie Mae is in trouble? It's simple enough: This company, more than any other in America, is run by, in the interests of, and with the protection from politicians, not businesspeople.The advice at the end of the article: "Many people are getting interested in Fannie Mae for its rising dividend yield. Don't make this mistake -- that dividend is very much at risk." Again, this is from 2004.
Fannie still hides under government protection, it's still not run by businesspeople, and its accounting is a massive shell game. Rather than approach the problem squarely with accountability and transparency to strengthen our economy, politicians in Washington screech about bonuses to a few executives. They do this to obfuscate their role in this mess. Don't look at them stab the taxpayer... look at those greedy executives instead!
I ask you: what non-governmental entity competes against Fannie?
Why is that? Because Fannie's impossible "business" model operates at a loss to give the power to Washington, creating a monopoly that is uncompetitive.
AIG is in insurance. That's the next industry. And Washington's acquisition will yield similar catastrophic results.
This is so not about bonuses.