Even if they do increase their limits, will they have any noticeable impact on the subprime market? I think I heard someone on CNBC the other day say that the total subprime and alt-a market was around $2.5 trillion. It doesn’t seem like these two companies could even make a dent in that.
And why would Fannie’s and Freddie’s stock prices rise on this particular tidbit of news? The rotting corpses of subprime lenders and the hedge funds who buy their paper are strewn all over the place, and yet the market cheers when a rumor circulates that Fannie and Freddie are going to fill the gap created by the now defunct hedge funds? Doesn’t make a lot of sense to me.
