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| Version 5 | Version 6 |
|---|---|
| US mortgage firms' shares slump | US mortgage firms' shares slump |
| (about 1 hour 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. |
| But the US Treasury said it would back the firms in their "current form". | But the US Treasury said it would back the firms in their "current form". |
| 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. | 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. |
| As mortgage backers, the companies have had to pay out when homeowners have defaulted on their loans. | As mortgage backers, the companies have had to pay out when homeowners have defaulted on their loans. |
| 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. |
| 'Unthinkable' | 'Unthinkable' |
| There has been a sense of unfolding crisis surrounding the companies this week according to the BBC's New York Business Correspondent Greg Wood. | There has been a sense of unfolding crisis surrounding the companies this week according to the BBC's New York Business Correspondent Greg Wood. |
| Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission Treasury Secretary Henry Paulson Q&A: Freddie Mac and Fannie Mae | Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission Treasury Secretary Henry Paulson Q&A: Freddie Mac and Fannie Mae |
| He added that it would be unthinkable that they could be allowed to fail. | 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. | 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. |
| 'Important mission' | 'Important mission' |
| In response to reports that the Treasury was planning some kind of government-led rescue, Treasury Secretary Henry Paulson said: "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission." | In response to reports that the Treasury was planning some kind of government-led rescue, Treasury Secretary Henry Paulson said: "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission." |
| Mr Paulson said the Treasury was "maintaining a dialogue with regulators and with the companies". | Mr Paulson said the Treasury was "maintaining a dialogue with regulators and with the companies". |
| He stressed that their regulator continues to work with them "as they take the steps necessary to allow them to continue to perform their important mission". | He stressed that their regulator continues to work with them "as they take the steps necessary to allow them to continue to perform their important mission". |
| However analysts were disappointed with his remarks. | However analysts were disappointed with his remarks. |
| "It is designed more to signal policy intent than manage market expectations," said Michael Woolfolk of Bank of New York Mellon. | "It is designed more to signal policy intent than manage market expectations," said Michael Woolfolk of Bank of New York Mellon. |
| "He left his cheer-leading outfit in the drawer." | "He left his cheer-leading outfit in the drawer." |
| Following Mr Paulson's remarks, Fannie Mae shares were trading 35% lower and Freddie Mac's shares were 40.5% down. | Following Mr Paulson's remarks, Fannie Mae shares were trading 35% lower and Freddie Mac's shares were 40.5% down. |
| Earlier this week, Freddie Mac and Fannie Mae's regulator stressed that the firms were "adequately capitalised". | |
| The Office of Federal Housing Enterprise Oversight said they had large liquidity portfolios, access to the debt market and over $1.5 trillion in unpledged assets. | The Office of Federal Housing Enterprise Oversight said they had large liquidity portfolios, access to the debt market and over $1.5 trillion in unpledged assets. |