Fannie Mae, Freddie Mac, Bank of America, Wal-Mart and Macya?s

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Fannie Mae (NYSE: [ FNM ]), Freddie Mac (NYSE: [ FRE ]), Bank of America (NYSE: [ BAC ]), Wal-Mart (NYSE: [ WMT ]) and Macya�s (NYSE: [ M ]).

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Here are highlights from Thursdaya�s Analyst Blog:

Initial Jobless Claims Go Up

In years gone by, the unemployed who were homeowners could tap the equity in their homes, but with 24% of all homes now worth less than the mortgages that are already on them, and with an additional 4% with less than 5% positive equity, that option is not open to them this time around. Also, the states with the highest percentages of underwater homes also tend to be states with higher-than-average unemployment rates.

If there were no extended benefits, these people would not only be left with no income, but probably no financial resources at all. Obviously that would be bad news for them, but it would also be bad news for the entire economy.

They will first respond by stopping payment on their mortgages and wait for the sheriff to show up at the door. These days, in many parts of the country, it is possible to live rent- and mortgage-payment-free for up to a year until the sheriff shows up. However, that just leads to more foreclosures, and deep losses for Fannie Mae (NYSE: [ FNM ]) and Freddie Mac (NYSE: [ FRE ]), both of which are now wards of the state.

It also hits the capital of the big banks like Bank of America (NYSE: [ BAC ]). While the big banks are rightfully not popular these days, the economy would not be better off if Bank of America became Bankrupt of America.

With no income and no other financial resources to draw on, people could not shop for even the most basic items, which would be bad news for retailers like Wal-Mart (NYSE: [ WMT ]). Earlier on they have probably already traded down from shopping at more upscale stores like Macya�s (NYSE: [ M ]).

In response to the lower sales, stores like Wal-Mart would respond by laying off more people, adding to the unemployment rolls, and those people would eventually be in the situation where they too had no income or other financial resources -- and the downward spiral would continue. It is for this reason that the non-partisan Congressional Budget Office scores extended benefits as among the most effective stimulus programs on a dollar-spent-per-job-saved-or-created basis.

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Fannie Mae, Freddie Mac, Bank of America, Wal-Mart and Macya?s