Allstate trading at par post-pricing; Fannie, Freddie soften as Obama outlines housing overhaul

By Stephanie N. Rotondo

Phoenix, Aug. 6 - A preferred stock trader likened the day's activity to "slow water torture," as investors waited for the market to "either really sell off or for something to move the market one way or another."

He said Tuesday's session was starting out soft.

In the primary, the Allstate Corp.'s newly priced $800 million issue of 5.75% $1,000-par series B fixed-to-floating rate subordinated debentures due 2053 were trading around par, according to the trader.

The deal priced late Monday.

In the secondary, Fannie Mae and Freddie Mac paper was weakening as president Barack Obama prepared to give a speech in Phoenix in which he would outline his ideas to unwind the two agencies.

Obama reportedly supports bipartisan legislation currently in the Senate that proposes to end the two entities while also helping potential homeowners get into 30-year fixed-rate mortgages.

Obama talks Fannie, Freddie

Fannie Mae and Freddie Mac paper took a hit Tuesday as Obama gave a housing speech in Phoenix in which he proposed eventually privatizing the two mortgage giants.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferred stock (OTCBB: FNMAS) dropped 23 cents, or 4.51%, to $4.87. Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) declined by 16 cents, or 3.13%, closing at $4.95.

"For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag," Obama said in his speech, held at a local high school.

The speech marked the first time Obama has voiced his ideas to wind down Fannie and Freddie, though he has often supported the goal. Obama said Tuesday that instead of the government providing a backstop for the two entities, the private sector should be the ones to take the risk. The government's role would be reduced to oversight and as a last-resort loan guarantor.

Obama also said he wanted to make sure the private sector would continue to offer 30-year fixed-rate mortgages.

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