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Now that Fannie Mae and Freddie Mac are penny stocks, betting on shareholder survival has become an increasingly popular trade. It remains to be seen whether it is a rewarding one.
Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) both dove below $1 per share on Sept. 8, on news that the government was stepping in to reorganize the two companies. On Tuesday, both Fannie and Freddie broke through $1 and spent most of the day trading above $1.25. Fannie gained 65% and Freddie gained 55% for the day.
Both companies are still under the grip of government control--the Federal Housing Finance Agency is the "conservator" in charge of the companies, rendering shareholders powerless.
On Tuesday morning, FHFA director James B. Lockhart III testified before the Senate Banking Committee that "common and all preferred stocks will remain outstanding," and said that as SEC registrants, quarterly results will continue to be posted.
Lockhart emphasized that new laws will set fresh standards for guidelines like minimum capital standards and portfolio limits. The new regulations are critical, Lockhart said, so that "any new investor will understand the investment proposition."