Fannie Mae and Freddie Mac in Trouble?

The news was pretty tough in the stock market today. It appears that Fannie Mae and Freddie Mac are in trouble. According to news that I heard on NPR, there seems to be a story that was published about how these two companies are having liquidity issues based on the US housing slump. With the increases in foreclosures Fannie Mae and Freddie Mac would guarantee mortgage is or how to confront lots of money on defaulted loans.

An article that appeared in the Times, revealed a liquidity issue with both companies, and it spurred a serious drop in pricing of the stock of the two companies. The stock price is down 80% over what it was at this time last year. This rundown in stock price has caused the government to get involved at state that they are not planning on taking over the two companies and they see them as being privately held run companies.

From what I understand, even though the government is saying that these two companies will be fine, there is a big selloff because investors are concerned about the fact that a government takeover would render their shares are virtually worthless. However, I heard that the Fed has asked the two companies to offer (sell) more shares so they can build up funds. This causes another problem for investors because I'm offering a more shares will devalue their current stock price.

The scariest thing about both of these companies is that combined they old or guarantee trillions of dollars of mortgage pack securities. The combined number of both of these companies is equal to 50% of the US housing mortgages. A decline or crash all of both of these companies would virtually bring the US housing market to a screeching halt.

The challenge with that is that we already experiencing a housing slump, and a crash of these two markets will a lot would prevent people from being able to buy or sell houses.

To top it off, in the Mac was seized by US regulators today. The FDIC has taken over in the Mac, and they will reopen on Monday under government regulation. This is another in the crush that has been caused by the debacle of the subprime mortgage crisis.

It will be pretty interesting to see what happens in the next few years. I had heard somewhere, that some of the situations are looking at although different and new ones are very similar to what caused the Great Depression. When the Great Depression started, there was a crash of the stock market caused by the collapse of the savings and loans and banks. The result was the Great Depression.

Looking out into today's market we see the dollar tanking it dipped to under 11,000 shares today, we see banks closing in being bailed out by the government, we see a huge run-up in gas prices and food costs. And, credit card debt is another problem. No one is admitting it but we may be looking at recession, and depending on things go with the housing market who knows? We may be looking at the next depression...