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Questions From Cramerica

Instead of doing his usual Mad Mail segment, Cramer thought the Fannie-Freddie bailout warranted some extra time with callers. Here are their questions.

Geoff from Colorado: what is a conservatorship?

Cramer says: It means “…they’re going to be run basically by the government. Not necessarily to be able to make a lot of profit…there’s really nobody they’re going to be operating this for other than, frankly, the interests of the housing market…it’s a take over meant not to enrich anybody. And if everything works out, maybe you make a little money on some of the debt or the common stock – I don’t think so. But this was a takeover, and they put it into something, and they really didn’t’ know what to call it, so they called it a conservatorship. That’s all they really did.”

Diana in New York: What happens to shareholders?

Cramer says: “I think it’s pretty much of a wipe out. Before this thing ever starts making money, if it ever does makes money, I think you’ll just kind of own this thing [and it will] go down a little bit everyday. Unless house prices shoot up in value almost immediately, the Fannie Mae and Freddie Mac common stock are, what they’re best used for is tax losses against some wins that you might have in another part of your portfolio. Take them by year end.”

Don in Wyoming: Is the government’s solution a good one?

Cramer says: “I think that we were faced with a crisis that we will only find out years from now how bad it was…I believe that because this is a conservatorship the government will be able to take all the bad mortgages that they can – some people are going to lose their homes – but they’ll be able to reformulate the system. I guess the bottom line is, things are better than they were last Friday. And I do believe housing bottoms June 30, in part – in major part – because of this decision.”



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