WHAT ABOUT FANNIE MAE & FREDDIE MAC? 2: Government to the rescue
With $5 trillion in mortgage assets and guarantees, Fannie Mae and Freddie Mac (both GSEs) have been one of the biggest casualties in the subprime crisis and together have lost $11 billion (with expectations of more losses till the end of the year). For a while, both companies’ stock prices took a beating.
To shore up their financial status, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson announced that Fannie & Freddie would be given increased credit lines and, if still needed, Congress would be requested to allow the Treasury to buy shares in both companies.
What have been the effects of these pronouncements from government?
info from http://www.ofheo.gov/newsroom.aspx and http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
image from Microsoft Clipart
Very interesting stocks to follow right now. The week before last Freddie shares were down below $6 and have now rebounded to above $9. They’re in trouble but I think the drastic drop may have been excessive…but then again who knows what their balance sheet may be hiding!