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Thursday, July 10, 2008

Future of Fannie, Freddie in Question

FOXBusiness

The health of Fannie Mae and Freddie Mac has been a hot topic with the Bush administration regarding plans for the potential failure of the government-sponsored enterprises, according to the Wall Street Journal which cited people familiar with the matter.

Although the discussions come at a time when stock prices for both companies are falling, the discussions are part of regular contingency planning undergone by the Treasury Department.

However, the talks have taken a more serious edge recently, due to financial concerns of government-charted companies that are shareholder owned, according to the Journal. Treasury officials are currently discussing options for what to do if Fannie Mae and Freddie Mac fell into a situation where they could not borrow money or continue operating.

With that said, Fannie and Freddie are not expected to fail, and there is no true “rescue plan” in place as of yet, according to the Journal’s sources. The companies should be able to raise capital fairly quickly and easily.

At yesterday’s close on the NYSE, Fannie and Freddie experienced the lowest close in over 15 years. Freddie shares fell 24% to close at $10.26, and shared of Fannie dropped 13% to $15.31. Year to date, Fannie's share price is down 76% and Freddie has dropped by 83%.