Fannie and Freddie plunge again
Continue sharp slide in shares of mortgage finance firms raises new concerns about need for new capital, threat of government takeover.
NEW YORK (CNNMoney.com) -- Mortgage finance giants Fannie Mae and Freddie Mac saw their shares continue their recent plunge in pre-market trading early Friday.
About 90 minutes before the market open shares of both companies were off about 30% from their already battered close on Thursday.
This week has already seen shares of Fannie lose 30% of their value, while Freddie shares tumbled 45%. For the year, Fannie is down 67% and Freddie 77%.
The two firms own or back more than $5 trillion of home mortgages and are a crucial source of funding for banks and other home lenders looking to make additional loans. If they were unable to do so, it would significantly raise the cost and availability of mortgage loans, causing significantly more problems for already battered housing prices and sales.
The Wall Street Journal reported a number of scenarios it said are being discussed by bankers and analysts to deal with investors' current crisis of confidence in the firms, including possibly having the Federal Reserve purchasing some of their debt or mortgage-backed securities, having the Fed make large, 10-year loans to the companies or even having the Treasury buying stock in the companies.
The paper's report did not indicate if the government is moving to take any of these steps, but it reported comments from many leading officials that the firms are too important to the housing market and the overall economy to be allowed to fail.
The paper said that the Office of Federal Housing Enterprise Oversight, the regulator of Fannie and Freddie, could take control of the firms if their capital falls too far below required levels. The paper said it is unclear how the firms would operate in that situation, known as a conservatorship.
It is unclear if current shareholders would see their holdings wiped out under some of these options - leading to the pre-market sell-off.
Fannie and Freddie issued statements Thursday saying they had the necessary capital to continue operating, adding they would not comment on the decline in their stock value. But the decline in their stock makes raising additional capital that much more expensive and difficult. 
