Can Fannie and Freddie fight free fall?
Stocks for Fannie Mae and Freddie Mac have lost half their value on Wall Street today and many seem to think a government takeover is on the way. Alisa Roth explores how the companies might save themselves.
The logos for Freddie Mac and Fannie Mae (freddiemac.com/fanniemae.com)
More on Fed. Budget/Govt. Spending, America's Financial Crisis
TEXT OF STORY
Scott Jagow: Things are looking pretty grim this morning for the mortgage lenders Fannie Mae and Freddie Mac. The stock price of both companies is in a free fall. Those shares have lost half their value today. Wall Street seems convinced a government takeover of some sort is coming. Alisa Roth has more.
Alisa Roth: The U.S. mortgage market is worth $12 trillion. Fannie Mae and Freddie Mac either own or guarantee half those mortgages. But the two companies have seen huge losses since the mortgage crisis started. And it's getting worse.
Josh Rosner is with Graham Fisher:
Josh Rosner: Look, the companies obviously ultimately have losses that will require them to raise more capital.
He says if there's a way to raise that money through equity, the companies should do that. But he worries that with share prices falling, that could be tricky.
There's long been an assumption the government would bail out Fannie and Freddie if the situation got really bad. So the question is how would or how could the government step in?
Rosner: There is no clear policy. Washington has dragged its feet on legislation and unfortunately still is not fully accepting the seriousness of the situation.
Rosner says a straight bailout is out of the question. But there are other options. The government's considering what those might be. But, Rosner warns, Fannie and Freddie may still be able to sort it out on their own.
In New York, I'm Alisa Roth for Marketplace.
Comments
Comment | Refresh
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.