Breaking News from CNBC's David Faber: Fairholme Fund Takes Roughly $500M Stake in Fannie & Freddie Preferred Shares
WHEN: TODAY, WEDNESDAY, MAY29, 2013
WHERE: CNBC'S "FAST MONEY HALFTIME REPORT"
Following is the unofficial transcript of breaking news from CNBC's David Faber. Following is a link to the breaking news on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000171775.All references must be sourced to CNBC.
DAVID FABER: WE'VE WATCH SOME VIOLENT MOVES IN THE COMMON OF FANNIE AND FREDDIE AND WE'VE KEPT A CLOSE EYE ON THAT PREFERRED AND I CAN NOW TELL THAT THE PREFERRED DOES NOW HAVE A VERY LARGE SHAREHOLDER IN IT IN THE FORM OF BRUCE BERKOWITZ WHO RUNS THE FAIRHOLME FAMILY OF FUNDS. OUR VIEWERS MAY REMEMBER BERKOWITZ OF COURSE MORNING STAR FUND MANAGER OF THE DECADE I BELIEVE BUT HAD A COUPLE OF ROUGH GOES THERE EARLY IN THIS DECADE HOWEVER A GOOD YEAR LAST YEAR LARGE HOLDER OF COURSE IN AIG IN THE PAST,LARGE HOLDER IN BANK OF AMERICA IN THE PAST AND NOW A LARGE HOLDER IN THE PREFERRED OF FANNIE AND FREDDIE. MR BERKOWITZ TELLING ME IN FACT THEY OWN ROUGHLY A HALF A BILLION DOLLARS WORTH OF THOSE PREFERRED SHARES WHICH IN SOMEWAYS PEOPLE THINK OF AS INTERCHANGEABLE THAT WOULD MAKE IT IF NOT THE LARGEST CERTAINLY ONE OF THE LARGEST SHAREHOLDERS OUT THERE. WE'VE BEEN WATCHING THESE PREFERRED MOVE UP OF LATE OF COURSE AND WE KNOW THAT THERE ARE A LOT OF HEDGE FUNDS IN THEM. THIS IS ALL A BIG GUESS IN TERMS OF WHAT WILL HAPPEN FOR THE FUTURE OF BOTH FANNIE AND FREDDIE THAT HAVE BEEN SO IMPORTANT AND ARE SO IMPORTANT TO THE MORTGAGE MARKET IN THIS COUNTRY. AT THE END OF THIS YEAR THERE IS AN EXPECTATION GIVEN THEIR PROFITABILITY THAT THEY WILL HAVE PAID BACK THE ENTIRETY OF THE ROUGHLY $188 BILLION THEY TOOK IN FROM THE FEDERAL GOVERNMENT TO KEEP RUNNING. AND THE QUESTION THEN BECOMES WHAT DO YOU WITH THEM. IT WAS A CONSERVATORSHIP AKIN TO A BANKRUPTCY IN A WAY BUT THEY ARE STILL PRIVATE ENTERPRISES A POINT THAT MR BERKOWITZ MADE TO ME A NUMBER OF TIMES DURING OUR CONSERVATION WE HAD EARLIER TODAY. HE WENT ON AS WELL TO WRITE ME A LITTLE NOTE IN WHICH HE SAYS TAXPAYER DOLLARS EXPENDED BY THE GOVERNMENT DURING A TIME OF NATIONAL CRISIS WILL BE FULLY REPAID. AND EQUITABLE TREATMENT OF TAXPAYING SHAREHOLDERS, INCLUDING COMMUNITY BANKS AND INSURANCE COMPANIES, MUST BE RESTORED. THE GOVERNMENT'S ABILITY TO FULLY RECOUP ITS INVESTMENT AND RESTORING VALUE TO SHAREHOLDERS ARE NOT MUTUALLY EXCLUSIVE. THIS IS THE AMERICAN WAY SAYS MR BERKOWITZ. HE IS CLEARLY LENDING HIS VOICE TO A DEBATE THAT IS GOING TO BE ONGOING FOR THOSE WHO OWN THIS PREFERRED AND EVEN THE COMMON WHICH WE CAN GET TO IN A MOMENT WHO WANT TO SEE VALUE RESTORED HERE. HE GOES ONTO SAY THE TIME TO RESTRUCTURE FANNIE AND FREDDIE IS UPON US. SUSTAINING OUR NATION'S ECONOMIC RECOVERY REQUIRES IT. ON BEHALF OF THE HUNDREDS OF THOUSANDS OF FAIRHOLME SHAREHOLDERS WHO HELPED TO REBUILD AMERICAN INTERNATIONAL GROUP,BANK OF AMERICA, CIT GROUP, GENERAL GROWTH PROPERTIES, MBIA INC., AND OTHERS AFTER THE GREAT RECESSION – WE STAND READY TO DO OUR PART. NOW THEY HAVE BEEN LOOKING AND I WOULD SAY THAT WHEN I SAY THEY I MEAN MANY OF THE HEDGE FUNDS WHO OWN THIS FOR SOMEBODY TO TAKE THE LEAD IN ARGUING AS TO WHY CAUSE THEY ARE NOT A GREAT CONSTITUENCY TO ARGUE FOR A BUNCH OF RICH HEDGE FUND GUYS RIGHT. THAT BEING SAID MANY WOULD SAY THESE ARE PRIVATE ENTERPRISES YOU TOOK THEM INTO CONSERVATORSHIP YOU ARE GOING TO BE PAID BACK YOU CANNOT LET THIS CONTINUE.
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