Fannie and Freddie Bailout
In a move not dissimilar to a Premier League manager getting a vote of confidence from the board days before getting the sack, reports emerged late Friday that the US government WILL put troubled mortgage lenders Fannie Mae and Freddie Mac under federal control.
Fannie & Freddie own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt.
At $5.2 trillion in mortgage securities, even a mere 1% loss from foreclosures wipes $50 billion off the bottom line for Fannie & Freddie.
The CEO's of both companies were told Friday that they and their boards would be replaced and shareholders value diluted, but the companies would be able to continue functioning with the government standing behind their debt, according to the New York Times.
Shares in both companies dropped in after-hours trading late Friday with Fannie shares falling 16.9 percent to $5.85, whilst Freddie's shares fell 7 percent to $4.74.
Shares in both companies traded at over $65 a year ago.
Fannie & Freddie own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt.
At $5.2 trillion in mortgage securities, even a mere 1% loss from foreclosures wipes $50 billion off the bottom line for Fannie & Freddie.
The CEO's of both companies were told Friday that they and their boards would be replaced and shareholders value diluted, but the companies would be able to continue functioning with the government standing behind their debt, according to the New York Times.
Shares in both companies dropped in after-hours trading late Friday with Fannie shares falling 16.9 percent to $5.85, whilst Freddie's shares fell 7 percent to $4.74.
Shares in both companies traded at over $65 a year ago.