Freddie and Fannie shares crash on ''takeover'' speculation

By MoneyhighStreet Staff. Published on August 18, 2008 This post currently has no comments.

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Shares in mortgage lenders Freddie Mac and Fannie Mae fell to their lowest level in almost 20 years Monday after rumors that a de facto government takeover of the troubled firms may now be inevitable, according to reports.

The slide was sparked after news service Barron''s reported the US Treasury may be forced to recapitalize the lenders - which finance around 38 per cent of America''s mortgage debt - because it looks increasingly unlikely that private sector investors will come to the rescue.

Such a move would "wipe out" existing shareholders, leading many investors to bail in early trading. Both companies were in the most active listings in the New York Stock Exchange (NYSE) morning session.

In recent trading, shares in Freddie Mac were down 14.01 percent to $5.03, while Fannie Mae declined 13.63 percent to $6.83.

Elsewhere on the NYSE, shares were generally down as oil prices bounced back from last week''s declines, which saw crude hit its lowest levels per barrel since May, the Associated Press reported.

Overall, the NYSE composite had declined 45.16 points in recent trading to 8338.51 points.