Financial Winners & Losers: Fannie Mae
08/18/08 - 03:28 PM EDT
Debra Borchardt
More dour investor sentiment for government-sponsored mortgage giants Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks)and Freddie Mac(FRE Quote - Cramer on FRE - Stock Picks) weighed on financial stocks Monday.
A Barron's article over the weekend said that the government expects the Treasury will have to bail out Fannie and Freddie, whose shares have suffered deep losses amid the continuing housing slump. Treasury Secretary Henry Paulson has on a number of occasions said a bailout would not be needed, but the report cited officials that don't see the companies being able to raise enough capital. Fannie plunged 18.8% to $6.42 and Freddie collapsed 20.5% to $4.65. The NYSE Financial Sector Index tumbled 159.71 to 6,181.54. Lehman Brothers(LEH Quote - Cramer on LEH - Stock Picks) shares fell 5.3% to $15.31 after The Wall Street Journal suggested the firm will post a loss in the third quarter. The investment bank has been under extreme pressure all year as investors worry about its viability. If the company records another losing quarter then it could need to raise more capital, possibly $6 billion, the paper reported. Huntington Bancshares (HBAN Quote - Cramer on HBAN - Stock Picks) fell 7.8% to $7.35 when it was unable to comfort investors with regards to Franklin Credit Management(FCMC Quote - Cramer on FCMC - Stock Picks). Franklin, which has ties to Huntington, told the Securities and Exchange Commission that it wouldn't file its second-quarter report on time and was expecting a loss. Huntington said it had a restructured agreement and it wouldn't affect the bank, but shareholders weren't buying it. SunTrust(STI Quote - Cramer on STI - Stock Picks) ticked up early on Monday after reporting it had sold its large holding in Coca-Cola(KO Quote - Cramer on KO - Stock Picks) stock, allowing it to show a profit for the second quarter. Unfortunately, net income dropped 20% from the second quarter in the previous year, with loan charge-offs being one of the main problems. Thus the stock lost its steam and lately was losing 4.2% to trade at $41.17.
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