Freddie, Fannie Plunge on Speculation Firms May Need to Raise $75 Billion

[marmar]

from Bloomberg:



Freddie Mac, Fannie Mae Plunge on Capital Concerns (Update1)

By Jody Shenn and Shannon D. Harrington

July 7 (Bloomberg) -- Freddie Mac and Fannie Mae plunged in New York Stock Exchange composite trading on concern the two largest mortgage-finance companies may need to raise more capital.

Lehman Brothers Holdings Inc. analysts said in a report today that an accounting change may force Fannie Mae to add $46 billion of capital and Freddie Mac to add $29 billion. Speculation that the companies may need to make 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.''

Freddie Mac fell $3.31, or 23 percent, to $11.19 at 1:04 p.m. Fannie Mae dropped $3.43, or 18 percent, to $15.35. The cost to protect against a default by Fannie Mae or Freddie Mac on their bonds also rose.

Brian Faith, a Fannie Mae spokesman, didn't immediately return a call for comment. Michael Cosgrove, a Freddie Mac spokesman, declined to comment. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=asb4r81Ls6kE&refer=home