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Fannie and Fannie Plunge, Sparking Rescue Rumors

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Shares of Freddie Mac and Fannie Mae have continued to drop this afternoon. Their credit-default swaps are up sharply, and there is lots of talk that they might need to raise more capital. Both plunged to their lowest price in 13 years.
There are a number of contributing factors this morning. Lehman Brotherss analysts pointed to an accounting change may force them to raise a combined $75 billion of new capital. Traders are talking about further write-downs. This morning's "Heard on The Street" column added fuel to the fire, focusing attention at the challenges faced by Freddie.
Unconfirmed, unsubstantiated and possibly baseless rumors began circulating late this afternoon that the Federal Reserve may step in to bailout the government sponsored home lending giants. Both firms definitely fit the bill of being too big and too connected to be allowed to fail, and today's losses may be truly frightening to regulators and Fed economists. The biggest problem with this rumor, however, is that it would involve very quick action by the Fed, something many doubt the backward looking economist types at the Fed are capable of.

Freddie Mac, Fannie Mae Plunge on Capital Concerns