Yesterday (emphasis added):
Mortgage financiers Fannie Mae and Freddie Mac are adequately capitalized and continue to be active in the mortgage market, said James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises.
“Both of these companies are adequately capitalized, which is our highest criteria,” Lockhart said in an interview with CNBC. “They have been very active in the mortgage market, and they are continuing to be. And, in fact, Congress has put on them the requirement to do jumbo mortgages and they have been doing those as well.”
This comment was a desperate effort to reassure nervous investors about the financial health of these companies. How successful has it been thus far? Not very. You can only lie your way out of a bad balance sheet for so long:
Shares of Fannie Mae and Freddie Mac tumbled Wednesday amid continuing fears the mortgage finance companies will be forced to sell more new shares than anticipated to compensate for losses from the housing slump.
. . .
Freddie Mac shares fell $3.20, or 23.8 percent, to $10.26 Wednesday after earlier sinking to a 16-year low of $9.88. Shares of Fannie Mae fell $2.31, or 13.1 percent, to $15.31.
. . .
Investors are finally realizing that the housing market’s troubles are not confined to subprime loans made to borrowers with poor credit and will increasingly affect loans bought or guaranteed by Fannie and Freddie, said Joshua Rosner, managing director of research firm Graham, Fisher & Co.
I wonder what too them so long?
Fortune ponders the doomsday scenario of Fannie Mae and/or Freddie Mac folding. I smell a massive, taxpayer-funded rescue in the air.
Elsewhere, Nouriel Roubini appeared on CNBC this morning and predicted that the credit crisis will get worse, with losses surpassing $1 trillion. Watch the video.