Fannie Mae and Freddie Mac shares drop on fresh fears on 100 Mortgages

It seems as if Fannie Mae and Freddie Mac mortgage buyers worries are far from over, their shares have dropped yet again following fresh fears over how investors and taxpayers would be affected by the U.S. government, using public money to prop the troubled banks up.

Shares of Fannie fell 28% to close at $7.03 while Freddie’s dropped 26% to finish at $5.29. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have had to explain their plan to the Senate Banking Committee.

Both men had to face some tough questions as to what the cost to the taxpayers would be, Paulson seemed to dodge the question and did not put a dollar on the amount of aid that both banks need.

A deal was hammered out over the weekend by the Treasury and the Federal Reserve however; this now has to be approved by Congress. Just yesterday, many financial experts had said that if the U.S. Government has to buy stakes in Fannie Mae and Freddie Mac, then current equity holders may be wiped out.

I still do not understand how Fannie Mae CEO Daniel Mudd can keep saying that the bank will not need to tap into any government money; he insists that they have a lot of capital.

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