Image via WikipediaFreddie and Fannie shares drop on possibility of bailout - The New York TimesFannie Mae and Freddie Mac shares fell again on Friday — and the broader stock market followed suit — as concern mounted that the government will be forced to take over the beleaguered mortgage finance companies, which some investors fear are at risk of default.
Even after a week of unprecedented losses, the companies' declines on Friday were the sharpest yet: Freddie Mac shares were down 24 percent from Thursday's closing price, to $6.08 a share, and Fannie Mae stock fell 28 percent to $9.51 a share, in midday trading after opening sharply lower. Freddie Mac shares were last down 9.4 percent. Fannie Mae was down 24.8 percent at $9.97. Earlier, the stocks had fallen as $6.87.
Less than an hour after the markets opened, Henry Paulson, the Treasury secretary, said a government bailout was not an immediate possibility.
"Our primary focus is supporting Fannie Mae and Freddie Mac in their current form," Paulson said in a statement. "We are maintaining a dialogue with regulators and with the companies."
The companies currently operate with an implicit, but not assured, government guarantee.
The remarks did not appear to placate investors, who accelerated the sell-off that began at the market's open. Investors were running scared across the board, sending the Dow Jones industrial average down 244 points and the Standard & Poor's 500-stock index down 2.2 percent in midday trading.
Adding to the pain was a $5 surge in the price of oil, which reached another record in overnight trading, touching $147 a barrel, on concern over recent tensions in the Middle East.
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