African American Money: Stocks Plunge on Fed News

12 Jul


Freddie Mac stock over 5 days.



Statement by Secretary Henry M. Paulson, Jr. on Fannie Mae and Freddie Mac

Washington, DC–Secretary Henry M. Paulson, Jr. made the following comment today on news stories about “contingency planning” at Treasury:

“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.

“We appreciate Congress’ important efforts to complete legislation that will help promote confidence in these companies. We are maintaining a dialogue with regulators and with the companies. OFHEO will continue to work with the companies as they take the steps necessary to allow them to continue to perform their important public mission.”

From staff and wire reports

Stocks reversed a steep slide late Friday on speculation that giant mortgage companies Fannie Mae and Freddie Mac could soon see their finances stabilized with access to emergency Federal Reserve lending.

In a Capitol Hill news conference, Sen. Christopher Dodd, D-Conn., the Banking Committee chairman, raised the prospect that the companies could be given access to emergency Federal Reserve lending.

Dodd, who spoke Friday to Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, said the two are “looking at various options” for propping up the firms if they ultimately need help. Those include giving them access to the Fed’s emergency lending “discount window,” Dodd said. Earlier this year, the Federal Reserve took the unprecedented step of offering direct loans to investment banks.

That news briefly turned Freddie’s shares into positive territory, and trimmed losses on Fannie stock for a time.

The Dow Jones industrials average also reversed course. Earlier, the Dow had fallen more than 250 points, sliding below the 11,000 mark for the first time in two years. As it was, the index ended down 128.48 points or 1.14% at 11,100.54.

At the close on the New York Stock Exchange, Fannie Mae stock was off more than 22% at $10.25 a share; Freddie Mac stock was off a scant 3% to $7.75.

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