View Full Version : Fannie and Feddie to Be Delisted From NYSE!!!

06-16-2010, 08:45 AM
This does not bode well.

http://online.wsj.com/article/SB10001424052748704198004575310443796994402.html?m od=rss_whats_news_us

A Wall Street Journal Roundup

Fannie Mae and Freddie Mac said they intend to delist their stock from the New York Stock Exchange as the U.S. government-backed mortgage companies continue to struggle amid billions in losses.

The Federal Housing Finance Agency, the companies' conservator, said it directed them to delist their stock because of stock-exchange requirements for maintaining price levels above $1 per share.

* Document: FHFA Release

"FHFA's determination to direct each company to delist does not constitute any reflection on either enterprise's current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," said Acting Director Edward J. DeMarco.

After the delisting, the companies' stocks will be traded in the over-the-counter market. Freddie said it expects the delisting of its common stock and the 20 listed classes of its preferred stock from the NYSE will happen around July 8. Fannie will delist from the NYSE and the Chicago Stock Exchange.

The crash in the U.S. housing market has pounded Fannie and Freddie with heavy losses on mortgage debt since 2007. Fannie shares have been below the $1 average price level for 30 trading days. NYSE rules require a company to take action to boost its shares or delist.

Shares of Fannie and Freddie closed at 92 cents and $1.22, respectively, on Tuesday. The stocks are down 22% and 17% this year.

In May, Fannie said its first-quarter loss narrowed on fewer write-downs and credit-loss provisions as it requested another $8.5 billion in aid from the federal government. Freddie posted a narrower first-quarter loss and said it would need a $10.6 billion injection from the Treasury—its first request for aid in four quarters.

The government established the Federal National Mortgage Association in 1938 to make mortgages more available to low-income families. The association later became known as Fannie Mae. In 1979, the government created the Federal Home Loan Mortgage Corp., which became known as Freddie Mac, to expand the market for mortgages.

For years, the shares were viewed as a fairly safe investment, based on their steady earnings and the assumption that the government would intervene if anything went wrong.

However, in 2003, Freddie acknowledged it had manipulated its books to make earnings growth appear smooth. In 2004, Fannie was also accused of improper accounting to massage earnings. Both Fannie and Freddie had to restate earnings as a result.

While the companies were still recovering from those scandals, the housing market collapsed, triggering the worst financial crisis since the Great Depression.

Both firms were put into government conservatorship in August 2008.