13 July 2008: Paulson asks for powers to rescue Fannie and Freddie
On a Sunday, Treasury Secretary Henry Paulson announced a plan to seek authority to lend to and even buy stakes in Fannie Mae and Freddie Mac, whose shares had been collapsing. The hope was that having the power would mean never needing to use it. Less than two months later the government used it anyway, taking both companies into conservatorship and leaving common shareholders with very little.
The lesson: When the government says a rescue is only a backstop, shareholders should ask who gets rescued first.
What it meant for investors
$1,000 in Fannie Mae at the start of 2008 → $200 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2008, the year it happened. That is a loss of $800, while a plain index fund over the same years made $3,626.
What Fannie Mae teaches: When a business's fate depends on a government decision rather than its own operations, the stock becomes a political wager, not an investment in earnings.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2008 | $40.00 | $200 | $4,626 |
| 2010 | $1.00 | $8,000 | $6,071 |
| 2012 | $0.25 | $32,000 | $5,312 |
green = beat the S&P 500 · red = lost money
What if you bought Fannie Mae? Every starting year and the full story →
More Fannie Mae history
- 7 September 2008: Fannie Mae and Freddie Mac taken over
- 25 November 2008: The Fed launches what became QE1
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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