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) -- An analyst report Monday didn't say anything new by calling

Fannie Mae



Freddie Mac


"worthless," but its proposal for recapitalizing the two mortgage-finance giants would have negative implications for the big banks that benefit from their guarantees.

Analysts at KBW downgraded Fannie and Freddie to underperform from a previous market perform rating, and cut the price target to $0, saying the common and preferred shares of both companies "should be worthless."

By noon, Fannie and Freddie's speculative stocks were trading down 15% at $1.24 on volume of more than 120 million and 14.5% at $1.46 on volume of more than 60 million, respectively. Over the past year, Fannie's shares have traded in a range of 30 cents to $2.13, and Freddie's stock has traded from 35 cents to $2.50. Turbulent trading in both issues reached its recent peak in August.

However, the most interesting and new information was not the analysts' valuation of the companies. Since federal regulators

put Fannie and Freddie into conservatorship

in September 2008, they've received nearly $100 billion in government support, will likely need additional funds in the quarters ahead, and don't look like they'll be able to repay those taxpayer debts any time soon.

What was new, however, was a proposal from KBW for the two firms to be restructured into a "cooperative of banks." Members would have to retain 5% of any loans that Fannie or Freddie purchase as an equity investment in the agencies, thereby indirectly recapitalizing the firms.

"For Fannie Mae and Freddie Mac to survive going forward, they need to be recapitalized through investments by the banks that benefit from their guarantee," writes lead analyst Bose George.

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The idea for banks to retain a portion of loans isn't new, but the idea of a cooperative hasn't been mentioned as an official proposal for Fannie and Freddie. A

reform proposal

outlined by the Obama administration in June suggested six options, with few specifics, and another

outlined by the mortgage industry

would keep them operating as public-private hybrids.

While not yet sanctioned by any regulatory or industry groups, the structure proposed by KBW analysts would be similar to the Federal Home Loan Bank system created by Congress after the Great Depression. The FHLBs are owned by thousands of lenders and insurers around the country and advance loans to members using housing assets as collateral. However, as the housing market sputtered out of control, some of the FHLBs have had trouble keeping up their own capital requirements.

The proposal would stand to have the largest impact on big issuers of home loans, like

Bank of America

(BAC) - Get Bank of America Corp Report


Wells Fargo

(WFC) - Get Wells Fargo & Company Report


JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report



(C) - Get Citigroup Inc. Report


U.S. Bancorp

(USB) - Get U.S. Bancorp Report



(PNC) - Get PNC Financial Services Group, Inc. Report



(STI) - Get SunTrust Banks, Inc. Report

, which would have to reserve more capital against the related assets' risk. But it would also force them to adhere to more prudent lending standards, which is the goal of the Obama administration's regulatory overhaul.

-- Written by Lauren Tara LaCapra in New York