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October 11, 2008 1:19:13 AM CDT

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As Speculation Swirls, Panic Stalks Freddie, Fannie

Posted Jul 11, 08 7:56 AM CDT in Business 

(Newser) – What started as a whisper Monday is a roar at week’s end as investors wrestle with the fate of mortgage giants Fannie Mae and Freddie Mac, the Wall Street Journal reports. While neither firm, which together own or back roughly half  the nation’s mortgages, faces imminent collapse, awareness that the government is mulling options for a bailout has sent Wall Street into a speculative downward spiral.

While federal officials were at pains to reassure investors yesterday that both are solvent, private banks are wary. “There is a real panic about these companies on Wall Street right now, and sometimes a blaze like that grows almost without reason,” a Freddie veteran tells the New York Times. The uncertainty sparked a selling frenzy yesterday, pushing share prices down another 22% for Freddie and 14% for Fannie, to their lowest in 17 years.

Sources Wall Street Journal, New York Times

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"I think they could do an even a better job if they were better supervised and better capitalized," Federal Reserve Chairman Ben Bernanke said of Fannie Mae and Freddie Mac, hinting at intervention.   (AP Photo/Manuel Balce Ceneta)
The Fannie Mae building in Washington is a house of cards to some on Wall Street, though government officials assure the mortgage giant is solvent%u2014for now.   (AP Photo/Manuel Balce Ceneta)
Mortgage giants Freddie Mac and Fannie Mae hold or back $5.2 trillion in U.S. mortgages, and some fear the subprime crisis is pushing them toward collapse.   (AP Photo/Mark Lennihan)
Treasury Secretary Henry Paulson: "[The firms] touch 70% of the mortgages that are made in this country. They are a very important part of our economy, a very important part of our housing market."   (AP Photo/Manuel Balce Ceneta)
An auction sign is seen in front of this foreclosed home, Tuesday, Oct. 30, 2007, in Shaker Heights, Ohio.   (AP Photo/Tony Dejak)
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Financial Crisis  • Federal Reserve  • Wall Street  • housing crisis  • mortgage crisis  • Fannie Mae  • Freddie Mac  • subprime mortgage crisis  • mortgage debt  • market turmoil



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