Business
Fannie Mae, Freddie Mac shares tumble
New York | July 08, 2008 12:01:13 AM IST
Fannie Mae and Freddie Mac shares tumbled Monday as word circulated about proposed accounting-rule changes that could force them to raise billions of dollars. Shares for both were off by more than 20 percent after a note from Lehman Brothers analysts said a pending Financial Accounting Standards Board rule change could result in the two needing to raise a total of $75 billion, MarketWatch.com reported. The Lehman Brothers analysts also said they thought the two government-sponsored enterprises would be granted an exemption to the rule change. A literal interpretation of their minimum capital requirements would suggest that the GSEs would become significantly under-capitalized, and it would be very difficult for them to raise the capital needed, the analysts wrote. Egan-Jones Ratings, an investor-supported ratings agency, said Freddie Mac has $7.2 billion in market capitalization, but probably at least $5 billion in capital to rebuild its base, MarketWatch said. As the mortgage market deteriorates, we expect more charge-offs, the agency said. (UPI)
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