Freddie Mac and Fannie Mae, the key sources of funding which have kept lending to home buyers from completely drying up, were ordered by the government to cease trading their shares on the New York Stock Exchange to adhere to NYSE delisting rules. Freddie Mac and Fannie Mae stocks, which have already lost nearly all their value in the housing crisis, fell further when the markets got the news. After the delisting, which was ordered for neglecting to meet NYSE needs for maintaining price levels, the stocks of these two companies could be traded within the over-the-counter market.
Article Resource: Freddie Mac and Fannie Mae stocks delisted from NYSE, losses grow
NYSE delisting rules
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 Fannie Mae shares dropped 42 cents, or 46 percent to 50 cents, when Freddie Mac slid 55 cents, or 45 percent, to 67 cents. Within the year of 2007, both companies shares traded at a lot more than $ 60. As the housing crisis deepened, the stocks lost almost all of their value as they went below $ 1 by September 2008. The government took over Fannie and Freddie.
Losses for Freddie Mac and Fannie Mae
The companies guarantee 31 million home loans worth $ 5.5 trillion. 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 cover losses on the mortgage-backed securities they own or guarantee. During the housing crisis, the money has kept lending to home buyers alive, kept home sales and new home construction from falling further than it has, and kept homes from losing a lot more value than they have. But Freddie Mac/Fannie Mae losses totaled $ 93.6 billion in 2009 and another $ 18.2 billion within the first quarter this year. The Congressional Budget Office estimates that nearly $ 400 billion in tax dollars could be needed at some time to cover Freddie Mac/Fannie Mae losses, making it the most expensive 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 the NYSE delisting meets the goals of government conservatorship. By delisting, Fannie and Freddie should both conserve $ 500,000 a year. Both companies ended up paying the maximum amount.
Fanny Mae/Freddie Mac OTC stock
Fannie and Freddie stock could be traded over the counter after July 8. Brokers and dealers will negotiate directly with one one more for Fannie and Freddie stock over computer networks and by phone. OTC stocks are generally very risky because they’re the stocks that are not considered large enough or stable enough to trade on the New York Stock Exchange. It is hard to discover research on these stocks. With the delisting, David Lutz, managing director of equity trading at Stifel Nicolaus and Co. in Baltimore, explained to Business Week that "We lose some transparency into what is basically a large black hole that is eating up a large part of our bailout funds."
Citations
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
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