Into the Abyss: Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are now nearly worthless, having each lost nearly 90 percent of their value in the last year alone. Fannie Mae shares dropped to just $3.75 on Thursday; Freddie Mac shares bottomed at one point at $2.68. A government bailout is now all but certain, and the possibility that the two federally-sponsored giants will be dismantled and sold for scrap is now a serious concern, according to Reuters.

The continued downfall of the two firms has been well-covered in the media, but the sheer magnitude of the problem is difficult to encapsulate. The 52-week share prices for Fannie Mae and Freddie Mac show a disturbing mirror image. The two companies posted monstrous budget deficits in the second quarter of 2008: $826 million for Freddie Mac and $2.3 billion for the larger Fannie Mae. And now, what amounts to a hostile government takeover is in the works. This takeover is likely to wipe out most common shareholders while also costing the American taxpayer an additional $225 billion or more.

Source Reuters:

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