Investors Run from Fannie Mae and Freddie Mac

A few numbers:

• United States GDP: $13.8 trillion (2007 est.)
• United States annual tax revenues: $2.6 trillion
• United States national debt: $9.5 trillion
• Assets held or backed by Fannie and Freddie: $5 trillion

Current status of Fannie and Freddie:

The anxiety over Fannie Mae and Freddie Mac, crucial to a recovery of the battered housing market and the economy as a whole, reached fever pitch on Friday as shares plunged on speculation of a looming bailout.

Immediately after the markets opened, shares of Fannie and Freddie fell more than 47% from their already battered closing price the day before. They soon rebounded later in the morning but Fannie shares were still down 22% and Freddie shares were off 20% in midday trading. ...

Even before the latest report on a possible rescue plan, speculation about the future of the firms this week sparked a run by investors away from their shares. That in turn raised questions about how difficult and expensive it will be for them to raise needed capital in the future, which fed into the stock plunge in a vicious cycle.

Source.