Shares of Freddie Mac and Fannie Mae dropped sharply in premarket trading Friday as Wall Street continued to worry about the health of the mortgage companies and the potential for a government takeover. The fears worsened after the New York Times reported Friday that the government is considering taking over Fannie and Freddie if their funding problems worsen. Freddie shares plunged 22%, and Fannie fell 13.8% Thursday, in part because former St. Louis Federal Reserve Bank president William Poole told Bloomberg News the mortgage giants were technically insolvent.
The Times said the government is considering a plan that would place the companies into conservatorship, citing people briefed about the plan. This would mean the shares would be worth little or nothing, and the losses on home loans they own or guarantee — half of all U.S. mortgages — would be paid by taxpayers.
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