Fannie Mae and Freddie Mac Hit 13 Year Low

Posted on July 7, 2008

Fannie Mae and Freddie Mac plunged today on news that they made need to raise $75 billion in capital to cover writedowns and comply with stricter accounting Rules. This is a 13 year low.

Freddie Mac fell 18 percent and Fannie Mae dropped 16 percent after Lehman Brothers Holdings Inc. analysts said in a report today that an accounting change may force them to raise a combined $75 billion. Speculation that the companies may take further writedowns also weighed on the stock, said John Tierney, a credit strategist at Deutsche Bank AG in New York.
"There's a lot of apprehension about writedowns," Tierney said. "If they have writedowns, they have to raise capital. How much do they raise and how easily can they do that? Those are the questions that everybody is asking."

The subprime mortgage crisis has not hit rock bottom yet. The reverberations are still wreaking havoc. There is talk of giving an exception to the new accounting rules, becasue it is highly unlikely that they can raise that much capital. it's just not going to happen. Meanwhile, the losses continue to pile up as more homes are being foreclosed on. Fannie Mae and Freddie Mac are down more than 60% this year, which is really disturbing.