Fannie Mae's stock has dropped about 16 percent in two weeks. And even before the abrupt slide, it's been three years since the stock made any big gains for its investors.
The company's books are being questioned. It will be years before we know if Fannie's financial reports really have reflected how the business is doing.
Chief executive Franklin D. Raines's Fannie Mae is under intense scrutiny.
(File Photo)
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Top Fannie Mae executives are in danger of losing not only their jobs, but also their political careers. Odds are some of them will be gone long before the accounting snarl is untangled.
And yet, most investment analysts continue to tell their clients to buy Fannie Mae stock.
Two weeks into an accounting scandal that is sure to transform the Washington region's biggest, richest business, Wall Street is humming, "Stand by your Fan."
A few analysts have downgraded Fannie's stock, but the shares still get better ratings than the average stock in the Standard & Poor's 500-stock index. As of Friday, 11 analysts were rating it "buy," eight "hold," and just two "sell," according to Bloomberg News.
Since the scandal broke, the stock has plunged to $65.25 a share from $77, but the analysts telling their clients to buy it are predicting Fannie stock will go as high as $115 within the next year or two.
Fannie will be one heck of an investment if that happens . . . but will it?
It's way too soon to predict how the scandal will evolve, let alone how Fannie's business and stock price will be affected. Predicting, however, is what investment analysts get paid to do, so for the past few days they have been serving up instant analysis. Their comments should be taken with more than a grain of salt -- they ought to be served like margaritas in a glass crusted with the stuff.
Without waiting to see what the ongoing federal investigations will turn up, analysts are choosing sides, dividing themselves into Fannie whackers and Fannie kissers.
