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Monday, September 8, 2008

FANNY MAE and FREDDIE MAC STOCKS Tumble as US Government Steps in and takes control of the Morgtage Giant

Investors in Fannie Mae and Freddie Mac common stock saw their stakes in the mortgage giants plummet in value Monday, a day after the government announced a dramatic rescue of the two companies.

On Sunday, the U.S. government assumed control of the twin mortgage buyers to help shore up the ailing U.S. housing market.

That sent shares of the two companies, which had fallen more than 80% so far this year ahead of Sunday's announcement, into a tailspin just after the opening bell Monday.

Fannie (FNM, Fortune 500) shares plunged 80%, while Freddie (FRE, Fortune 500) stock was down 75% in morning trading on the New York Stock Exchange.

The exchange had suspended pre-market trading of both common and preferred stock of the two institutions Monday to allow investors to digest the actions taken by the government over the weekend.

The NYSE would not comment on whether Freddie or Fannie was at risk of being delisted from the NYSE, but said it was monitoring all the rules that apply to companies that have seen the value of their stock evaporate overnight.

Despite the big dip at the open, shareholders may not be wiped out altogether. The way the takeover was structured allows for Fannie and Freddie stock to recover in value once the two companies are no longer under the government's control.

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