As most of the market traded south Monday, financials took the most serious beating. The trouble cut deeper than just Lehman Brothers Inc., Wall Street's favorite whipping boy since the demise of Bear Stearns Cos., as mortgage lenders Fannie Mae and Freddie Mac took a severe hammering on news that the two government sponsored enterprises may have to seek a massive $75 billion in combined capital infusions. Interestingly, the source of the news was a Lehman analyst report.
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Fannie Mae so far has raised $6 billion in capital to offset write-downs on mortgages it owns or guarantees. Freddie Mac raised $13.5 billion since December and said last week that it plans to add $5.5 billion late next month.
However, the two mortgage lenders are facing two converging storm fronts. As mortgage delinquencies grow and home prices fall, the two lenders will have to take write-downs on those foreclosures. While some of those mortgages currently sit on off-balance sheet entities, a new accounting rule known as FAS 140 intended to stem that practice may force Freddie and Fannie to move mortgages back onto their balance sheets, leading Lehman analyst Bruce Harting to suggest Fannie would have to raise $49 billion and Freddie $26 billion. That's a lot of capital, hence the slaughter. Fannie was down 16.19% to $15.74, and Freddie slumped 17.31% to $11.99. - Matthew Wurtzel
| Troubled Wall Street |
| Name |
Open |
Last price |
Change |
Mkt cap |
| J.P. Morgan Chase & Co. |
35.5 |
34.01 |
-1.30 |
116539.73 |
| Lehman Brothers Inc. |
23.47 |
20.56 |
-2.29 |
11363.51 |
| Merrill Lynch & Co. |
31.65 |
30.35 |
-0.77 |
29904.82 |
| Goldman Sachs Group Inc. |
180.69 |
169.56 |
-9.33 |
66841.13 |
| Morgan Stanley |
36.02 |
35.04 |
-0.87 |
38855.86 |
| Citigroup Inc. |
17.05 |
16.38 |
-0.44 |
85992.26 |
| Fannie Mae |
18.76 |
15.74 |
-3.04 |
15352.90 |
| Freddie Mac |
14.53 |
11.99 |
-2.51 |
7754.20 |
| Bank of America Corp. |
22.61 |
21.49 |
-0.91 |
95690.33 |
|
Source: The Deal |
