Freddie Mac, Fannie Mae Shares Slump Again

New York, NY (AHN) - Shares of lenders Fannie Mae and Freddie Mac again plunged on Thursday over reports that the government-chartered mortgage firms may require a public bail-out.

Shares of Fannie Mae tumbled by 23 percent and Freddie Mac plunged by as much as 33 percent in New York Stock Exchange composite trading on Thursday.

However, U.S. Treasury Secretary Henry Paulson defended the two firms, saying they play an important role in the housing market.

Over the last few weeks investors have speculated that Freddie Mac is finding it difficult to raise fresh capital to shore up its weakened balance sheet, following the report that the authorities are discussing a post-failure scenario.

The two largest U.S. providers of financing for home loans tumbled as analysts are concerned about reports that banks may unload more mortgage bonds.

Early this week, analysts from Lehman Brothers Holdings Inc. wrote in a report on Monday that the two largest mortgage-finance companies may have to raise up to $75 billion, including $46 billion by Fannie Mae and $29 billion by Freddie Mac.

Last month, Lehman Brothers said in a report that Fannie Mae and Freddie Mac may post a second-quarter operating loss of $1.20 per share and 55 cents a share, respectively, more than it had expected earlier.

U.S. Treasury Secretary Paulson has emphasized the important role of government-sponsored enterprises Fannie Mae and Freddie Mac in raising capital for financing houses.

Freddie Mac responded by saying that it is not likely to raise capital until after posting the second quarter earnings report next month.

The financial shares led by Fannie Mae and Freddie Mac pulled down the U.S. stocks on Wall Street, including the shares of other banking firms.

Shares of firms continued their downturn rally for the third time on Thursday as reports indicated that the companies are on the watch-list of the U.S. Treasury Department for months.