Freddie, Fannie shares plummet amid fears of government intervention

WASHINGTON (AP) – July 11, 2008 Shares of Fannie Mae and Freddie Mac plummeted Friday as Wall Street became more convinced that the government is likely to bail out the United States’ key mortgage financiers.Freddie Mac shares fell $2.91, or 36.4 percent, to $5.09 in late-morning trading, while Fannie Mae fell $3.80, or 28.7 percent, to $9.40. Both are at 17-year lows.Treasury Secretary Henry Paulson sought for the second-straight day to calm investors panicked about out the financial state of Fannie Mae and Freddie Mac, saying the agency aims to keep the mortgage finance companies “in their current form” without a government takeover.The financial health of the companies is of critical concern to Washington policymakers because of the crucial role Fannie and Freddie play in the housing market.The pair hold or guarantee more than $5 trillion worth of mortgages. That’s roughly half of the $9.5 trillion debt of the United States. The fear is that a failure of one or both would wreak havoc on the nation’s financial system and the broader economy.

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