John Curry to Laura Ecklar: How many shares and how much?

From John Curry, September 9, 2008

Subject: Laura...a question...

Laura,

Could you also state how much STRS has lost on its Fannie Mae and Freddie Mac holdings during the last year...and not just the one day that you said we lost "$3 million on Fannie Mae and Freddie Mac stock yesterday" in the quote taken from today's Columbus Dispatch? Retirees would like to know this figure also.

"The State Teachers Retirement System of Ohio lost about $3 million on Fannie Mae and Freddie Mac stock yesterday. However, it made $40 million to $50 million from about $4 billion in bond investments because of the government's move to firm up the balance sheets of the two companies, said Laura Ecklar, spokeswoman for the $70 billion pension fund."

The Dispatch article goes on to say: "The Ohio Police & Fire Pension Fund holds about 5,500 shares of stock in the two companies; the shares were bought months ago at about $28."

If the OP & F can state the amount they paid several months ago for Fannie Mae stocks ("about $28") and the number of shares held ("5,500 shares of stock in the two companies") I would also ask you, "How many shares of Fannie Mae and Freddie Mac stock did STRS own, as of yesterday, and what price(s) did we pay for these?"

Thank you, John Curry

P.S. So that there will be no confusion let me restate my questions:

1. Could you also state how much STRS has lost on its Fannie Mae and Freddie Mac holdings during the last year...and not just the one day that you said we lost "$3 million on Fannie Mae and Freddie Mac stock yesterday" in the quote taken from today's Columbus Dispatch?

2. How many shares of Fannie Mae and Freddie Mac stock did STRS own, as of yesterday, and what price(s) did we pay for these?

Wild day for public pension funds
Fannie, Freddie shares sink, but gains made on mortgage-backed bonds

Columbus Dispatch
September 9, 2008

By Steve Wartenberg

[Click to view larger image.] Ohio's police officers and firefighters took a beating in the stock market yesterday as Fannie Mae and Freddie Mac shares plummeted to less than $1 on news of the federal government's takeover of the mortgage giants.

The Ohio Police & Fire Pension Fund holds about 5,500 shares of stock in the two companies; the shares were bought months ago at about $28.

However, the pension fund also owns Fannie Mae and Freddie Mac mortgage-backed securities that trade like bonds, and they did well yesterday.

"Actually, it was an overall plus at the end of the day. We came out ahead," said David Graham, spokesman for the $11.5 billion pension fund.

Wall Street came out ahead, too, as the Dow Jones industrial average soared 289.8 points, or 2.6 percent, to 11,510. Financial stocks did even better, rising 3.42 percent as a group.

Figuring out the financial winners and losers in the aftermath of the Fannie Mae and Freddie Mac takeover will take months to sort out, but the experts say some things are already clear:

• Individual owners of the two stocks will lose a bundle.

• Most mutual funds and pension funds are diversified enough to minimize the effect of the Fannie Mae and Freddie Mac meltdown and could offset those losses with overall gains in the stock market spurred by the takeover.

• The two stocks have been on a downward spiral for so long that most of the damage to mutual funds and pension funds already has been done.

• Banks will benefit from an increase in the stability of the mortgage industry.

• Banks, pension funds and mutual funds that own Fannie and Freddie mortgage-backed securities will do well because of increased stability; banks that own significant stock in the two companies will suffer.

"There is a very significant short-term positive for (Fannie Mae and Freddie Mac) bond holders," said Jim Coons of J.W. Coons Advisors of Columbus.

The State Teachers Retirement System of Ohio lost about $3 million on Fannie Mae and Freddie Mac stock yesterday. However, it made $40 million to $50 million from about $4 billion in bond investments because of the government's move to firm up the balance sheets of the two companies, said Laura Ecklar, spokeswoman for the $70 billion pension fund.

The Ohio Public Employees Retirement System has not yet tallied gains and losses, but spokeswoman Julie Graham-Price said that as of Friday, the $82.9 billion pension fund had $2.9 billion in Fannie Mae and Freddie Mac bonds and $21 million in stock.

In Sunday's announcement of the government's takeover, U.S. Treasury Secretary Henry Paulson stated that Fannie Mae and Freddie Mac "will no longer be managed with a strategy to maximize common shareholder returns."

This statement all but assured that their stocks would tank yesterday, and they did: Fannie Mae closed yesterday at 73 cents, down 89.6 percent; Freddie Mac closed at 88 cents, down 82.8 percent.

"You generally only see this when a stock is on its way to zero," Coons said.

Nationwide Bank does not own Fannie Mae or Freddie Mac stock but does have more than $1 billion in mortgage-backed securities issued by the two companies, President Anne Arvia said.

She said most financial institutions invest in mortgage-backed securities, and the government's takeover means that Fannie Mae and Freddie Mac will not default on these bonds. And banks can breathe a big sigh of relief.

swartenberg@dispatch.com
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