Fannie Mae fell in European trading to the lowest in 19 years amid concern the US government will need to bail out the nation's biggest mortgage finance company.
Fannie shares fell 1 per cent to $6.09 in Frankfurt at 11.03am, extending a 22 per cent drop in New York trading yesterday. Washington-based Fannie fell as much as 3 per cent in earlier trading. Freddie Mac rose 3.4 per cent to $4.54 after sliding 25 per cent yesterday to the lowest since January 1991.
Barron's reported on August 16th that the Bush administration anticipates the government-chartered companies will fail to raise the capital they need to offset losses, leading the treasury secretary, Henry Paulson, to exercise the authority granted to him last month to fund the companies if needed.
The mortgage lenders have been battered by record delinquencies and rising losses amid the worst housing slump since the Great Depression, posting four straight losses totaling $14.9 billion. Fannie has lost about 85 per cent of its market value this year, while McLean, Virginia-based Freddie has lost 87 per cent.
Fannie Mae has raised $14.4 billion in new capital since December to offset credit losses. Freddie Mac, which sold $6 billion in preferred stock in November, plans to raise an additional $5.5 billion, it said in May.
Bloomberg