7 September 2008: Fannie Mae and Freddie Mac taken over
The US government placed Fannie Mae and Freddie Mac into conservatorship, taking control of the two companies that backed a huge share of American mortgages. Treasury committed to support them with capital. Bondholders were protected, but common and preferred shareholders were effectively wiped out. Investors who had assumed an implicit government guarantee covered everyone learned that it mainly covered the debt, not the stock.
The lesson: An implicit government guarantee protects the system and its creditors, rarely the shareholders.
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
- 13 July 2008: Paulson asks for powers to rescue Fannie and Freddie
- 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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