Freddie Mac and Fannie Mae, who was the key source of funding that have kept lending to home buyers from totally drying up, were ordered by the government to cease trading all of their shares on the New York Stock Exchange to abide by NYSE delisting rules. Freddie Mac and Fannie Mae stocks, which have already lost nearly all their value within the housing crisis, fell further when the markets got the news. Following the delisting, which was ordered for failing to meet NYSE requirements for maintaining price levels, the stocks of the two companies could be traded in the over-the-counter market now rather than before.
NYSE rules for delisting
Freddie Mac and Fannie Mae were delisted because NYSE delisting rules require that a business pull its stock if it can’t do anything to keep shares from dropping below the $ 1 average price level for 30 trading days. The Associated Press reports that after the NYSE delisting announcement had been made, Fannie Mae shares dropped 42 cents, or 46 percent to 50 cents, while Freddie Mac slid 55 cents, or 45 percent, to 67 cents. In 2007, shares of both companies traded at more than $ 60. As the housing crisis deepened, the stocks lost almost all of their value as they went below $ 1 by September 2008. Fannie and Freddie were then taken over by the government.
Fannie Mae and Freddie Mac losses
31 million homes worth $ 5.5 trillion are guaranteed by these companies. That’s half the mortgages in the US. CNNMoney.com reports that given that September 2008 the Treasury Department has poured $ 83.6 billion into Fannie Mae and $ 61.3 billion into Freddie Mac to pay for losses on the mortgage-backed securities they own or assure. During the housing crisis, the money has kept lending to home buyers, kept home sales and new home construction from falling further than it has, and has also kept homes from losing more value than they have. But Freddie Mac/Fannie Mae losses totaled $ 93.6 billion in 2009 and an additional $ 18.2 billion within the first quarter this year. The Congressional Budget Office estimates that nearly $ 400 billion in tax dollars can be needed at some point to cover Freddie Mac/Fannie Mae losses, making it probably the most costly of all the government bailouts.
Delisted Fannie Mae and Freddie Mac stock by July 8
Freddie Mac and Fannie Mae will delist from the New York Stock Exchange on or about July 8. The Wall Street Journal reports that the NYSE delisting meets the goals of government conservatorship as they’re trying to preserve and conserve assets. By delisting, Fannie and Freddie should both save $ 500,000 a year. Both companies paid the maximum amount.
Freddie and Fannie OTC stock
After July 8, Fannie and Freddie stock will be traded over the counter. Brokers will negotiate directly with one one more for Fannie and Freddie stock over computer networks and by phone. OTC stocks are typically very risky because they are the stocks that aren’t considered stable enough to trade on the New York Stock Exchange. These stocks have research that is hard to find. With the delisting, David Lutz, who’s the managing director of equity trading at Stifel Nicolaus and Co. in Baltimore, told Business Week that “We lose some transparency into what is essentially a large black hole that is eating up a large part of our bailout funds.”
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Associated Press
google.com/hostednews/ap/article/ALeqM5gKpMFnJoJc8QkAW3abF41E4d492QD9GCEEC00
CNN Money.com
money.cnn.com/2010/06/16/news/fannie_freddie_delisting/
Wall Street Journal
online.wsj.com/article/SB10001424052748704198004575310443796994402.html?mod=rss_Today’s_Most_Popular
businessweek.com
businessweek.com/news/2010-06-16/fannie-freddie-plunge-after-moving-to-delist-shares-update2-.html
