Agency strategists from RBS Greenwich Capital last week downplayed the chances for Fannie Mae and Freddie Mac privatization. They believe that the potential for the GSEs to end their charters at this time is unlikely considering that neither agency is current with their financials. Also, Fannie Mae's subordinated debt is now on negative watch by both Standard & Poor's and Fitch Ratings. Furthermore, the agencies still have the ability to benefit from the arb as run-off is replaced.

"We think that the review of the charter's value is likely conducted in the normal course of business," wrote the strategists. Additionally, talk of privatization is really nothing new. Most market participants believe that the GSE debt outstanding would be defeased to the U.S. Treasury and the process would be conducted over several years.

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