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, 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 within the over-the-counter market now instead of before.
NYSE delisting guidelines
Freddie Mac and Fannie Mae were delisted because NYSE delisting rules require that a business pull its stock if it can’t take action to keep shares from dropping below the $ 1 average price level for 30 trading days that is needed. The Associated Press reports that following the NYSE delisting announcement Fannie Mae shares dropped 42 cents, or 46 percent to 50 cents, while Freddie Mac slid 55 cents, or 45 percent, to 67 cents. Within the year of 2007, both companies shares 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 through the government.
Freddie Mac/Fannie Mae losses
The companies guarantee 31 million home loans worth $ 5.5 trillion. That’s half the mortgages in the US. CNNMoney.com explains to readers 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, 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 then totaled an additional $ 18.2 billion within the first quarter this year. The Congressional Spending budget Office estimates that nearly $ 400 billion in tax dollars will eventually be needed to cover Freddie Mac/Fannie Mae losses, making it one of the most costly of all the government bailouts.
Fannie Mae/Freddie Mac stock delisted 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 as they are trying to preserve and conserve assets. Fannie and Freddie will save $ 500,000 a piece in annual listing fees by delisting. Both companies ended up paying the maximum amount.
Freddie and Fannie OTC stock
Fannie and Freddie stock can be traded over the counter after July 8. Dealers will negotiate directly with one another 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 stable enough to trade on the New York Stock Exchange. These stocks have research that is hard to find. With the delisting, David Lutz, 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.”
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
