Friday's Financial Winners & Losers

Financial stocks were stuck in the red yet again on Friday even as the rest of the market booked a modest recovery from yesterday's late downturn.

Among the losers was Fannie Mae (FNM Quote), whose shares slid as much as 12% a day after Fortune reported that the mortgage investor could be using shady accounting methods in order to cover up the full extent of its subprime-induced credit losses. According to the report, the company's third-quarter credit-loss ratio would have been 7.5 basis points under the old method -- amid an overall loss that more than doubled from last year -- whereas Fannie's disclosure had it at 4 basis points.

CFO Stephen Swad defended Fannie in a conference call today, intoning that the practice "has the effect of pulling forward losses well before they are realized," according to Reuters. He said Fannie expects to recover a portion of that quarter's $670 million credit-loss provision.

Shares fell $2.35, or 5.5%, to $40.69.

Wells Fargo (WFC Quote) also lost ground after Keefe Bruyette said the San Francisco bank might not be able to continue holding its ground as the housing market spirals ever downward. Wells CEO John Stumpf's own view, as expressed yesterday, is that the U.S. housing downturn is the worst since the Great Depression and should continue into next year.

KBW Bank cut Wells' rating to underperform, citing valuation as well. Shares of Wells fell 2.6% to $31.14 to help kick down the KBW Bank Index, which was recently down 1.6% at 92.69.