Under a sweeping plan, the two companies will be run by the government indefinitely, with the two current chief executives to be replaced and the government investing up to $100 billion in each firm to keep them solvent.
The Treasury said that stock in the company will continue to trade, although powers of stockholders will be suspended until government control ends.
In order to improve the availability of mortgages, Treasury will start buying Freddie and Fannie's mortgaged-backed debt in the open market. The companies will also end all lobbying of the government and eliminate dividends.
Together, Fannie Mae and Freddie Mac form the cornerstones of the U.S. mortgage market and own or guarantee almost half the home loans in the country's roughly $12 trillion mortgage market. Over the past year, the companies have recorded combined losses of around $14 billion.
The move puts the U.S. government at risk to lose tens of billions of dollars.
Here is the official release
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The eventual burden is on the US taxpayer.
Fannie is down 21% while Freddie is down 20% as of Sunday evening.
I had picked SSO -Ultra-long S&P 500 and QQQQ-OCT-48 calls last Thursday. Not the best entry price but good enough.
Will be selling this on Monday/Tuesday. I will post the S&P 500 chart soon comparing the Bear Sterns and Fannie/Freddie bailout.
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