Fannie Shares Seen as Worthless Surging in Disconnect

Fannie Mae and Freddie Mac shares surged to five-year highs last week, giving them a combined market value of $48 billion, about the same as BlackRock Inc., the world’s largest money manager, and Starbucks Corp., the biggest coffee-shop operator.

The securities have climbed eightfold this year as the U.S. housing recovery led the mortgage financiers to record profits and speculation grew they would repay the government after their 2008 bailout and be released from conservatorship. Under a new bipartisan bill being prepared by U.S. senators, the companies would be liquidated and the stock could be worthless. Higher-ranking preferred securities, whose buyers include billionaire hedge fund manager Paulson & Co. and Bruce Berkowitz’s Fairholme Capital Management, are also at risk from the legislation.