Fannie Mae, Freddie Mac Are Pounded

八月 19, 2008 at 15:59 | 張貼於Finance, USA | 發表留言
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Two Stocks Plunge
On Growing Fears
Of a U.S. Bailout
By JAMES R. HAGERTY and APARAJITA SAHA-BUBNA
August 19, 2008

Share prices of Fannie Mae and Freddie Mac plunged Monday amid growing fears that the two largest providers of funding for U.S. home mortgages won’t be able to avoid a government bailout.

In 4 p.m. trading on the New York Stock Exchange, Freddie shares were down 25% to $4.39. Fannie stock dropped 22% to $6.15. Both stocks are down more than 90% from a year ago.

In early July, a previous plunge in the companies’ shares prompted the U.S. Treasury to announce a package of measures aimed at shoring up investor confidence. Among other things, the Treasury said it would lend money to the companies or make equity investments in them if needed.

As defaults on home mortgages soar, Fannie and Freddie have recorded combined losses of about $14 billion in the past four quarters. Those losses are expected to continue for at least another few quarters, and some analysts don’t think the companies will return to the black before 2010 or 2011.

Freddie has said it plans to raise at least $5.5 billion of capital, likely through offerings of common and preferred stock, but it is waiting for market conditions to improve. Fannie raised $7.4 billion through common and preferred offerings in May but said recently that it may need to raise more capital eventually.

In a research note, Merrill Lynch said it doesn’t expect any “sustained recovery" in Freddie shares until investors get a clearer view of the losses the company will sustain and the government response.

— Deborah Solomon and Serena Ng contributed to this article.

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