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Please begin with an informative title:

Do not have much time, so will keep this short.  Not much news on this breaking story, but yesterday was a big fecal storm for Freddie Mac and Fannie Mae.  Not only did their stock prices drop, or should I say collapse, 25% or more, they appear out of money.

Freddie Mac tumbled 29 percent yesterday, the biggest decline since its shares started trading in 1988, to $26.74 on the New York Stock Exchange. The shares fell 90 cents to $25.84 in early trading today.
Fannie Mae fell 25 percent yesterday and is down 43 percent since Nov. 13, when Fortune magazine said the company's accounting may have masked credit losses. Fannie Mae Chief Financial Officer Stephen Swad said the company's accounting methods are accurate. The shares fell 75 cents to $27.50 today.
Read The Story Here.

Why should you care? Join me below the fold.

Intro

You must enter an Intro for your Diary Entry between 300 and 1150 characters long (that's approximately 50-175 words without any html or formatting markup).

Freddie Mac and Fannie Mae are the two largest purchasers of mortgages, without either or both of them, obtaining a mortgages just got harder.  Read about it here.

Next, no one is talking apocalypse now, but it appears Freddie Mac is in deep shit, i.e, it has only 600 million excess capital to lend, purchase mortgages, which in the American mortgage market, teaspoon size.  

Freddie Mac's regulatory core capital was estimated to be just $600 million above the 30 percent mandatory capital surplus.
If you are concerned about the ongoing subprime mortgage melt down that will balloon during the first half of 2008 as the resetting of ARMs will peak/spike, allow me to suggest a melt down of Freddie Mac and/or Fannie Mae would be the equivalent of the 1906 San Francisco earthquake.

There are many individuals here at D Kos better qualified and more experienced, that can explain the potential fall out of this impending collapse of Freddie Mac and Fannie Mae and the impact on the broader economy, but I believe the news is not good.  

Happy Thanksgiving.

Extended (Optional)

Originally posted to brjzn on Wed Nov 21, 2007 at 07:02 AM PST.

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