Shares of Fannie, Freddie Down Again
- Aug 20, 2008
Shares of Fannie Mae and Freddie Mac plummeted yet again today on renewed fears of the possibility that the government may be forced to bail out the beleaguered institutions. Shares of both Fannie and Freddie were down 27 percent in trading on the New York Stock Exchange this afternoon, continuing a slide which saw each already down some 20 percent thus far this week, and a staggering 90 percent so far this year after being stung by the subprime mortgage crisis and housing slowdown. Given the importance of the two agencies to the American housing market–Fannie and Freddie together own or back some $5 trillion in mortgages–the government would likely be forced to extend a lifeline to them should they be in danger of failing. However, no such plan is in the offing at this point, according to Fannie Mae CEO Daniel Mudd, who denied either being offered or asking for a bailout during an interview with National Public Radio today. The housing law passed by President Bush in late July would allow the Treasury Department to loan an unlimited amount of money to the agencies and buy shares in them should it be deemed necessary to their survival. Estimates on how much such a bailout would cost vary widely, ranging from $25 billion and $100 billion.