Yesterday, Fannie and Freddie declined 27% and 22%, respectively. Investors are scared. If the government takes over, their shares will most likely be lost.
Makes sense: who’s the government going to worry about first? The taxpayers or the investors? Sure, there’s some overlap there, but Big G doesn’t really want to think about that.
Here’s more, from a segment of yesterday’s Marketplace:
- The other alternative is the feds take an equity stake in the companies. The feds would buy newly issued shares in Fannie and Freddie, diluting the value of old shares to next to nothing. That’s exactly what Wall Street fears, even though taxpayers could profit if the businesses succeed.[...]
- Fannie Mae’s CEO appeared on public radio’s Diane Rehm Show this morning to reassure investors a bailout wasn’t on the horizon.[...]
- Shareholders weren’t reassured. After that interview, Fannie’s stock continued to plunge.
Read/listen to the full segment here.
