Fannie, Freddie: 45% and sinking fast

By Chris Isidore, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- The growing anxiety over Fannie Mae and Freddie Mac escalated on Friday as shares of the mortgage finance giants plunged in early trading.
Immediately after the market open shares of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) were both off more 45% from their already battered close on Thursday.
In the first four trading days of the week, the shares of Fannie have lost 30% of their value, while Freddie shares have tumbled 45%. For the year, Fannie is down 67% and Freddie 77% through Thursday's close.
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 restrict the availability of mortgage loans, causing significantly more problems for already battered housing prices and sales.
The New York Times reported Friday that senior Bush administration officials are considering a plan to have the government take over one or both of the companies if their problems worsen.
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.
Under current law, 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. It is unclear how the firms would operate in that situation, known as a conservatorship.
It is also unclear if current shareholders would see their holdings wiped out under some of these options - leading to the pre-market sell-off.
A Fannie spokesman said Friday morning that the company had no comment, while a spokeswoman for Freddie was not available for immediate comment. Both firms issued statements on 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.