Citi: Nationalization of GSEs 'Unlikely'

Citigroup, in a new report, says it is unlikely that the federal government will nationalize Fannie Mae and Freddie Mac, while admitting that in time some type of federal action may be necessary. The report says the government-sponsored enterprises are not entirely without options, adding that their new regulator, the Federal Housing Finance Agency, could ease "the arbitrary capital surplus requirement further." It adds, "given our analysis, which shows that both [Fannie Mae and Freddie Mac] should have sufficient capital through (at least) year-end 2008 under a variety of negative credit scenarios, all parties could wait-it-out until market conditions improve." In Monday's trading, Freddie's share price was up 15% at one point to $3.26, while Fannie's was up 5% to $5.24.