I am not sure I share the optimism of the market on the takeover of Freddie Mac and Fannie Mae. The long term structural implication for the US business and banking environment is not yet clear. But here are some thoughts that come to mind:
I think BofA will be hurt in the long term as Fannie and Freddie will cut their activities by 10% a year. Countrywide Financial Corp., now part of Bank of America Corp., was the largest provider of loans purchased by Fannie Mae, accounting for 29% of its business in 2007, according to Inside Mortgage Finance, and was the second largest source of loans for Freddie Mac, with a 16% share.
NorthStar Finance and other mortgage reits will benefit as debt spreads over treasuries will come down a lot as some uncertainties have been lifted from the market. Commercial debt and most residential mortgage debt will trade higher as their rates heads down. NRF will have a lot of business lending and making good deals and play the yield curve spread, borrowing low and lending high.
Tax rates: personal tax rates may have to go up to fund all these bailouts. There will be some structural changes to the economy as a result of all these bailouts. What is it? I am not sure. But it will increase budget deficit and tax rates and that can bot be good for future earnings.
Housing recovery may not get affected at all with this takeover. You may have Treasuries interest rates go up while mortgage rates go down and they converge some where higher, therefore not reducing the cost of borrowing much for the homeowners.
I think whatever you think of this takeover, positive or negative, it is very dangerous to decide on any long term investment or action based on this takeover and today's market reaction.