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| US mortgage firms' shares slump | US mortgage firms' shares slump |
| (10 minutes later) | |
| Shares in US mortgage firms Freddie Mac and Fannie Mae have fallen by more than 40% in early trading amid concerns for the future of the companies. | Shares in US mortgage firms Freddie Mac and Fannie Mae have fallen by more than 40% in early trading amid concerns for the future of the companies. |
| Investors are concerned that the government may have to step in to rescue them, a move that would wipe out the value of existing shares. | Investors are concerned that the government may have to step in to rescue them, a move that would wipe out the value of existing shares. |
| However, this week their regulator said they were "adequately capitalised". | However, this week their regulator said they were "adequately capitalised". |
| The companies are behind half of all US mortgages and have been hard hit by the slowdown in the housing market. | The companies are behind half of all US mortgages and have been hard hit by the slowdown in the housing market. |
| The two companies play an important role in the financial markets in providing funding for home loans by buying up mortgages and packaging them as investments. | |
| Freddie Mac shares fell $4.03, or 50%, to $3.97, at the start of trading. Shares of Fannie Mae fell $6.09, or 46%, to $7.11. | Freddie Mac shares fell $4.03, or 50%, to $3.97, at the start of trading. Shares of Fannie Mae fell $6.09, or 46%, to $7.11. |
| There has been a sense of unfolding crisis surrounding the companies this week according to the BBC's New York Business Correspondent Greg Wood. | |
| He added that it would be unthinkable that they could be allowed to fail. | |
| While no longer government owned, Fannie Mae and Freddie Mac are government sponsored, leading many to suggest that the Bush administration will be forced to step in. | |
| "I think everybody's just holding their breath in expectation that something substantive from the government will happen today or over the weekend," said Karen Shaw Petrou from Federal Financial Analytics in Washington. | |
| Treasury Secretary Henry Paulson tried to reassure the markets on Thursday, saying Fannie Mae and Freddie Mac had adequate capital and were working through "this challenging period". | |
| Investors are eagerly awaiting a further statement from Mr Paulson later on Friday. |