Posted on 11/21/2007 5:12:52 AM PST by Hydroshock
Fortune) -- Freddie Mac and Fannie Mae can only make it through a prolonged credit crisis if they raise billions of dollars of new capital.
That, in a nutshell, is what the plunging stock prices of both mortgage buyers are saying Tuesday.
Freddie accounted for a sharply higher batch of bad loans in its third quarter earnings, a little more than a week after Fannie did the same thing. But Freddie said that it would move quickly to raise more capital through a large issue of preferred shares. It added that it was seriously considering cutting its dividend - another capital preserving action. When asked on a conference call if Freddie would have to raise as much as $4 billion by issuing shares, Chief Financial Officer Buddy Piszel declined to quantify the issue's size.
"It will be a large transaction," Piszel said.
Last week, Fannie raised capital in issuing $500 million of preferred shares, but the company will almost certainly have to raise more capital because its bad loan problem is at least as serious as Freddie's.
(Excerpt) Read more at money.cnn.com ...
Economy/Credit/Housing Issues Ping List
If you want on or off this list let me know.
Can you get 6 billion in new capital by shuffling bad paper?
It is getting worse quick.
Who knew a couple making 90K per year COULD’T afford a $500K home?
Let’s call a Harvard Math Wizard and ask!
They’re issuing new stock. Which will be hard to sell.
However...over time, IF they clean up their accounting standards (well Fannie anyway, I think Freddie’s accounting is a bit cleaner) then people may find it to be a good long-term investment.
Lending money to people you know can’t pay it back is never good business.
“They’re issuing new stock. Which will be hard to sell.”
No kidding!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.