Stock Prices Fall Sharply on Friday

July 11, 2008 12:00:00 AM PDT
Shares of mortgage giants Freddie Mac and Fannie Mae tumbled as rumors of a government takeover swirl around them.Reports that the federal government is considering a take-over of mortgage giants Freddie Mac and Fannie Mae may mean a rough ride for the stock markets today. That's despite denials from company officials and the Bush administration that there is any crisis.

In a written statement, Treasury Secretary Henry Paulson said, "Today our primary focus is to support Fannie Mae and Freddie Mac in their current form as they carry out their important mission;" which repeats the assurances he gave congress yesterday.

But some investors remain skeptical, and shares of Freddie Mac and Fannie Mae stocks have fallen dramatically. The impact of their failure could have a devastating ripple effect on the broader economy. Together, they own, or back, more than half of the nation's $12 trillion dollars in mortgages.

A government take-over could leave tax payers footing the bill for any losses. It could also make borrowing money, across the board, even harder.

President Bush and his economic team met Friday morning. He said, "These are tough economic times for American citizens, but there is a way forward to help relieve some of their, some of the pressure on their pocketbooks."

Senators are expected to pass the housing rescue legislation on Friday. Proponents want the president to have the bill by the beginning of August.

He has threatened a veto in its current form. But the White House is hinting that with some changes, the president will give his support.


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