By Ben Popken September 10, 2008

Now that the magic accounting party is over, Fannie Mae and Freddie Mac are to be removed from the S&P 500 starting Wednesday. The minimum market cap a company needs to be allowed in the index is 5 billion. Freddie’s market cap is $614 million and Fannie’s $1.04 billion. [AP]

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Comments

  1. duffm4n says:
    September 10, 2008 at 4:29 am

    Great, now two of the biggest banks in the US can’t even make the “Standard and poor” 500 list.

  2. papahoth says:
    September 10, 2008 at 6:08 am

    One word — greed. Pure naked, unregulated greed. And now we the taxpayer pay for it.

    • kc2idf says:
      September 10, 2008 at 1:08 pm

      @papahoth:
      Obligatory quote from Wall Street:

      The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.

      There are two sides to the coin, really. Greed is like anything else; it has its place when used in moderation. Unfortunately, it is also intoxicating, and will be used by those who become addicted, and lose all moderation.

      • Trai_Dep says:
        September 10, 2008 at 4:32 pm

        @kc2idf: Greed only works if greedy bast*ards are allowed to die writhing in the dirt from a ruptured stomach.
        What – was that too graphic?
        (ahem) OK, I can see the need to guarantee the securities. But let’s eliminate the hybrid nature of these funds’ next incarnation? And Hell to the HELL No to bailing out the Big Three. Jeezus does it burn me that that’s even said in public without the speaker being ridiculed.

      • stinerman says:
        September 10, 2008 at 5:33 pm

        @kc2idf:

        Greed can’t be in moderation by definition. Greed is defined as an excessive demand for power, money, etc.

  3. Trai_Dep says:
    September 10, 2008 at 6:49 am

    So… Now’s the time to buy?!

    • Ben Popken says:
      September 10, 2008 at 12:54 pm

      @Trai_Dep: WSJ said that if you own one of the stocks, you should sell it and buy the other. They figure the two are going to rise in tandem, so you claim the tax loss on one, and ride the other when the stock comes back.

      • mugsywwiii says:
        September 10, 2008 at 3:51 pm

        Wall Street is a great movie.

        @Ben Popken:
        I’m no expert on the matter, but that sounds exactly like a wash sale:
        [en.wikipedia.org]

        “In the USA, per IRS Publication 550, a wash sale occurs when you sell or trade stock or securities at a loss, and within 30 days before or after the sale you:
        * Buy substantially identical stock or securities“

        You don’t get to deduct the loss, but you do get to use it to offset gains in the other stock. Essentially it’s a wash, hence the name. You’re not going to have a loss you can deduct unless you have a net loss between the two stocks, and you’re not going to have to pay taxes on any gains unless you have a net gain between the two stocks.

        At least that’s my understanding.

    • moore850 says:
      September 10, 2008 at 1:08 pm

      @Trai_Dep: I’d wait to buy until it totally hits the bottom. Here’s a tiny graph of what will happen today:

  4. Trai_Dep says:
    September 10, 2008 at 6:50 am

    Kidding. I’m kidding. Geez!

  5. dgsaunders says:
    September 10, 2008 at 1:51 pm

    Ha, you think the magic accounting party is OVER? I wish you were right – this sort of thing will happen again (and has happened before).