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Fannie, Freddie: The biggest losers |
| Date Added: September 08, 2008 05:37:38 PM |
| Author: |
| Category: Finance: Mortgages |
| NEW YORK (Fortune) -- Big investors in Fannie Mae and Freddie Mac face a brutal Monday. Shares in the mortgage giants, which have already lost 90% of their value over the past year, are likely to plunge anew in the wake of the government's announcement Sunday that it is taking control of the companies and ending the payment of common and preferred dividends. Common and preferred shareholders won't be outright eliminated, as some had feared. But while the shares will continue to trade, it may for investors be a distinction without much of a difference. Under the "conservatorship" plan announced Sunday by Treasury Secretary Henry Paulson, common shareholders will also be stripped of their rights to govern the companies. Given that both Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) have posted billions of dollars in losses during the past year, and that billions more are expected while house prices continue their historic decline, it's not likely that the market will accord much value to shares that give holders no right to select board members or otherwise oversee management. |
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