And They Could Call It Frannie

There is talk on Wall Street and within Fannie Mae and Freddie Mac about the government-sponsored enterprises (GSEs) merging, says an article in the Wall Street Journal, although most observers do not expect such a move.

However, eliminating redundancies would reduce operating costs by $1.2 billion per year, which would generate upwards of $19 billion in value, experts say. Meanwhile, increased leverage and buying power would shave approximately $300 million per year off foreclosure costs.
According to Leader Capital CEO John Lekas: "The market will know that both entities combined will have much more consistent, stable margins."

Still, Congress would be hesitant to approve a deal that would result in massive layoffs; and lawmakers would have to rewrite legislation that created the GSEs and deal with concerns about a monopoly.

Source: New York Times, Andrew Ross Sorkin (09/02/08)