If Al Gore wins the November election, it would give Fannie Mae's and Freddie Mac's flagging stocks an immediate 10% to 20% boost, according to an analyst at Morgan Stanley Dean Witter & Co.

If George W. Bush wins, the stocks of the government-sponsored enterprises will probably take longer to rebound, said Kenneth A. Posner in a report issued Monday morning.

Mr. Posner predicted that the stocks would rise in any event because, he said, they are undervalued relative to other financial stocks. They are cheap now, he said, because political troubles in Washington have prevented them from participating in the financial stock rebound sparked by the Fed's decisions this summer to leave interest rates alone.

Fannie and Freddie have been subjected to strong criticism arising from hearings on a Republican-sponsored bill that, if passed, would raise their borrowing costs.

They have taken potshots from FM Watch, a coalition of large-bank competitors. And Federal Reserve Chairman Alan Greenspan has publicly questioned whether Fannie and Freddie have been passing on all of their government benefits to consumers.

Mr. Posner argued that, because the Democrats are fundamentally pro-consumer, Republican legislators would not waste time fighting for a politically unpopular bill that would lack support from a Gore administration. And whoever Mr. Gore might choose to be Treasury secretary probably would not make waves for the GSEs, Mr. Posner said.

He is predicting 15% long-term growth rates at both companies. Working in the favor of the GSEs, he said, are favorable spreads between mortgages and agency debt that will foster portfolio growth. He predicted that consumer credit quality will remain excellent and that, with the Fed apparently finished with its monetary tightening, interest rate risk management should become a lesser concern. He also pointed to stable-to-improving guaranty fees.

Mr. Posner also said he believes that regardless of who is elected president legislative reform of the GSEs stands little chance of passing. He said any bill that increased Fannie's and Freddie's borrowing costs would be strongly opposed by the housing industry because it would prompt higher mortgage rates.

Even if Mr. Bush wins and the Republicans keep control of Congress, he said, it remains likely that the GSEs will emerge unscathed from any legislative battle.

Still, there is some degree of risk, Mr. Posner said. He has a 12-month target price of $85 per share for Fannie Mae but said in a telephone interview Tuesday that "$80 is a fair target for investors to keep in mind, given our assessment of the probabilities of real risk."

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